19-02-2013, 04:01 PM
ACHIEVEMENTS IN SOME INFRASTRUCUTRE SECTOR ‘REMARKABLE’
NEED TO ATTRACT LARGE SCALE INVESTMENT INTO INFRASTRUCTURE
ABSTRACT
The Economic Survey 2011-12 tabled in Lok Sabha today by the Finance Minister
Shri Pranab Mukherjee, says that the overall performance in creation of infrastructure in
physical terms, in some sectors, during Eleventh Five Year Plan, have been remarkable as
compared to the previous Five Year Plan, though there have been slippages in some sectors.
The success in garnering private sector investment in infrastructure through the public-private
partnership (PPP) route during the Plan has laid solid foundation for a substantial step in
private-sector funding in coming years. PPPs are expected to augment resource availability as
well as improve the efficiency of infrastructure service delivery. The Planning Commission
has projected an investment requirement of over Rs. 45 lakh crore (about US $ 1 trillion)
during the Twelfth Plan (2012-12). It is projected that at least 50% of this investment will
come from the private sector as against the 36% anticipated in the Eleventh Plan and public
sector investment will need to increase to over Rs.22.5 lakh crore as against an expenditure of
Rs. 13.1 lakh crore during the Eleventh Plan. Financing infrastructure will, therefore, be a
big challenge in the coming year and will require some innovative ideas and new models of
financing, says the Survey.
The Survey has pointed out that the performance of broad sectors and sub sectors in key
infrastructure areas in the current year presents a mixed picture. There was improvement in growth
in power, petroleum refinery, cement, railway freight traffic, passenger handled at domestic
terminals and upgradation of NHAI. Coal, Natural Gas, Fertilizers, handling of Export Cargo at
airports and number of cell phone connections show negative growth. Steel sector witnessed
moderation in growth.
According to the Survey, the performance in core and infrastructure sector is still to a large
extent dependent in public sector projects the flash report for the month of October 2011 tracks the
progress report of 583 projects in different sectors of which-only 7 are a head of schedule, 166 are
on schedule, 235 are delayed and remaining 175 projects have been sanctioned without specifying
any commissioning schedule. This has implied of cost over run of 15.3%. The Survey says that such
delays increase project risk and cost, and could be minimized.
As per to the Survey, credit growth to the infrastructure sector turned negative in the
current financial year. The incremental credit flow to the infrastructure sector during April-
December 2011 was nearly 61% of the credit to this sector during April-December 2010. A significant
reduction in credit flow was observed for the power and telecom sectors. The total FDI inflows into
majors infrastructure sectors during April-December 2011 however, registered a growth of 23.6% as
compared to the FDI inflows during April-December 2010. Power (43.6%), Non Conventional Energy
(338 %) and Telecommunications (499%) were the preferred sectors for foreign investors. Other
sectors, however, failed to share the buoyancy in FDI inflows.
The Survey has commented that in the coming years, financing of infrastructure also need to
consider the plateauing of the domestic savings and macro availability of resources. There is need
for introducing more innovative schemes to attract large-scale investment into infrastructure. In
view of the massive requirements of funds, all efforts need to be made to attract big ticket longterm
investors such as strategic investor, private equity funds, pension funds, and sovereign funds.
Strengthening domestic financial institutions and development of a long-term bonds market may be
critical. Besides financing, the infrastructure sector has also suffered due to a time lag in physical
capacity creation and time over-run. These not only delay availability, but also raise pricing and
affordability issues. Infrastructure costs as these are often non-tradable may also affect
competitiveness of economy in long run. The Survey has stated that a harmonized list of main
sectors and sub-sectors of infrastructure approved by the Government to serve as a guide for all
agencies responsible for supporting infrastructure, is a welcome move.