Fund to give thrust to infrastructure development
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The Finance Ministry has finalised the setting up of Infrastructure Development Fund to support preparation of projects, which is expected to generate sufficient viable projects, writes K. Sukumaran
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At a high profile conference on Public-Private Partnerships (PPP) attended by the Chief Secretaries of States held in New Delhi on July 22, the Finance Minister, P. Chidambaram, declared the setting up of a Rs. 100 crore revolving fund to accelerate the preparation of projects announced in the 2007-08 budget as part of infrastructure programmes.
In his budget speech in Parliament, the FM had made a major policy announcement to the effect that a fund will be created to support the preliminary expenditure in connection with the preparation of high cost projects. While dealing with infrastructure, the budget proposals included power generation, both electric as also coal based; national highway development including the golden quadrilateral, north-south and east-west corridor projects; and a special plan for the north eastern region.
All mega infrastructure projects requires elaborate surveys, detailed drawings, cost estimates including escalation provisions, global tendering, awarding of execution works etc. The initial expenses itself will be high and sometimes the State Governments will have to fund them. But they are reluctant, at times. It is here that the Centre has to step in to support the States.
Globally, the PPP model has enabled greater private sector participation in the visualisation, evolution, creation and maintenance of infrastructure.
In India this model has been in operation for more than three years now.
The critical decision needed here will be the funding of viability study and other preliminary activities. It is here that the proposed Fund comes into operation.
The fund will be a revolving one and will get replenished from successfully-bid projects. “In case it needs to be topped up, it would be done through budgetary support”, as stated by the FM.
It will be called the India Infrastructure Project Development Fund, which could bear up to 75 per cent of the development cost of projects till the bidding stage.
Requirements
It is estimated that a sum of $ 475 billion will be required for infrastructure development in the country during the next five years, 18-20 per cent of which is likely to be contributed by the private sector annually. The Reserve Bank of India has agreed to set apart $ 5 billion from the forex reserves for the purpose.
Inadequacy of projects
The FM and the Deputy Chairman, Planning Commission, Montek Singh Ahluwalia, who also participated in the conference, expressed their dismay at the lack of adequate number of projects. State Governments appear to be not forthcoming in preparing and submitting many projects to the Centre. They also appear to hold the view that more flexibility in using the funds is necessary.
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