With slippages across sectors but quantitatively higher in telecom and electricity, India’s infrastructure investments in the 12th Five-Year Plan period (FY13-FY17) fell 32% short of target. The just-concluded Plan, which is the last in the series, saw investments of `38 lakh crore in 12 specified infrastructure sectors, compared with the target of Rs 55.75 lakh crore, according to official data reviewed by FE.
Of the amount invested in these sectors in the 12th Plan, the public sector contributed two-thirds. While investment data for 2016-17, the terminal year of the Plan, is provisional, sources said the shortfall could be less than 15% in the case of public investment (Centre, states and PSUs combined), but a sharp 53% for private investments.
Among the principal reasons for investments missing the target were high spectrum costs which constrained network expansion in the telecom sector and lower-than-estimated demand growth that forced private power developers to go slow on projects.
The other important sectors like roads and highways, ports and railways also had their set of sector-specific problems, apart form the overall economic slowdown during the Plan period.
Aggressive bidding and lower-than-projected toll receipts hit the highway sector and government’s efforts to salvage the sector by a series of steps like easier exists, rescheduling of premium payments and launch of the relatively risk-free hybrid annuity model were not sufficient to bring private investments back on track. In the port sector, the confusion that prevailed in the initial years of the model concession agreement for public-private partnership (PPP) projects and the huge rentals (upfront revenue sharing) demanded by port trusts adversely impacted private investments.
Infrastructure investments in the 11th Plan period stood at Rs 23.74 lakh crore, higher than the originally targeted Rs 20.56 lakh crore. These figures will be included in the 12th Plan appraisal report which will be placed before the Governing Council of NITI Aayog, headed by Prime Minister Narendra Modi, on Sunday.
Official sources said these infrastructure sectors saw fresh investments to the tune of Rs 19 lakh crore, or half the achievement during the entire Plan period, in the last two years of the Plan, reflecting the Modi government’s efforts to put several stranded projects back on track, especially in highways, railways and renewable energy.
Economic growth slowed to 5.6% in FY13, the first year of the 12th Plan period, making it even more difficult for stressed infrastructure 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 the debt market.
Realising the huge gap in investments, the Modi government had stepped up infrastructure investment and had taken a number of steps to mobilise funds from various sources for development of basic infrastructure. These included the 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.