The target for infrastructure investment during the 12th Five-year Plan, probably the last one in the series, would fall short of the target by 30%, with huge slippages in telecom, electricity, renewable energy, ports and railways, according to an internal estimate by the government. While the goal was to spend Rs 55.7 lakh crore (around $1 trillion when the Plan was formulated), between 2012 and 17, the actual investments could be not higher than Rs 39 lakh crore, given the progress on the ground so far and the projects in the pipeline, sources privy to the assessment told FE.
The infrastructure sectors, identified to be the growth drivers of the economy given the huge deficit in these basic facilities in the country, saw fresh investments to the tune of Rs 19 lakh crore in the first three years of the current Plan period, against the target of Rs 27 lakh crore. If that was again a 30% slippage, the Modi government has of late put several stranded projects back on track, especially in highways, railways and renewable energy.
But investment famine during the last leg of the UPA government, attributed often to a “policy paralysis” that prevailed then, has had a lingering impact on most of these sectors. Yet, the new estimate actually reveals a pick-up given that the last two years of the Plan period is expected to witness Rs 20 lakh crore investment, higher than achieved in the initial three years.
Realising the huge gap in investments, the Modi government has taken a number of steps to mobilise funds from various sources for development of basic infrastructure. These included establishment of infrastructure debt funds, relaxation of the rules for external commercial borrowings and foreign direct investment and mainstreaming of public-private partnerships by changing concession agreements wherever required.
In the case of the roads sector, for instance, the exit policy has been made easier while the National Highways Authority of India has focussed on engineering, procurement and construction contracts as the PPP segment is in a limbo. It also liberalised lending norms for banks and made available provident and pension monies for investments in these sectors. Establishment of the National Infrastructure Investment Fund and issuance of tax-free bonds are among the other major steps taken while a project monitoring group in the Cabinet secretariat has managed to revive many stalled projects, both in public and private sectors.
The sources said the slippage from the target would be more in the case of private investments.”There will be a shortfall in the achievement of public sector but not as much as in the private sector,” one official acknowledged.
In the 11th Plan period, the private sector contribution to infrastructure investment was 36% of the total investment, compared with 30% originally projected. The overall achievement was 94% of the Rs 20.6 lakh crore projected. Encouraged by the over-achievement of the private sector in the 11th Plan (FY08-FY12), the erstwhile Planning Commission had set a target of Rs 26.8 lakh crore, or 48% of the total investment for the private sector in the 12th Plan period.
However, economic growth slowed to 5.6% in FY13, the first year of the 12th Plan period, making it even more difficult for companies to tap funds from the debt market. Of the total Rs 55.75 lakh crore total investment in the Plan period, half was projected to be from debt markets.