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Neglect of a vital task

Finance Minister P. Chidambaram’s proposal to set up a revolving fund, with an initial corpus of Rs. 100 crore, to help States develop infrastructure projects may help in getting at least some of them off the ground. This corpus, for which he has promised more budgetary support, is meant to assist the States in taking up preparatory work on infrastructure projects in the Public-Private Partnership (PPP) mode. The added advantage the proposal offers is that if the pro ject fails in the bidding process, the money drawn from the corpus can be treated as a grant to the State. If it goes through the bidding, it will be an interest-free loan which, when paid back, will replenish the corpus. Given this flexibility, the new fund will induce the States to take the crucial first few steps before the projects are brought to the bidding table. As Mr. Chidambaram noted at a conference on PPP in infrastructure, funding in itself is not the real problem. There appears to be no dearth of funds available from institutions, special funds, domestic or multilateral agencies, and to some extent even from the State governments. The recent trend seems to be for the States themselves wanting to take up implementation of the projects, without going for a PPP, Build Operate Transfer or any such arrangement. Just 224 infrastructure projects are now being implemented, with another 76 in the pipeline. Unfortunately, the lack of a well thought out policy, effective and clear rules and procedures in such areas as environmental clearance and land acquisition, as also the sensitive issue of user charges or tolls only serves to delay the projects inordinately.

The $5 billion fund launched by a consortium of Citigroup, Blackstone, IDFC, and IFCL has not been utilised satisfactorily. Similar initiatives are waiting to be launched in India by foreign agencies and funds. A dozen States showed interest last year in signing MoUs with the Asian Development Bank to utilise funds for technical assistance to PPP projects, but only two of them actually inked an agreement. The idea of utilising India’s ballooning foreign exchange reserves for funding infrastructure projects has raised concerns because of its potential to fuel inflationary pressures. The reserves can possibly be used to import technology or equipment needed for mega projects. Even for such imports, there seems to be no dearth of funds. The basic challenge now is to get the State governments to realise the urgency of formulating and implementing major infrastructure projects. Unless that is done, the current growth rate of the economy may begin to drop sooner rather than later.

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