Building world-class infrastructure for competitiveness

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: work towards rapidly creating an appropriate institutional mechanism, modernisation of the policy framework, efficient regulatory framework for implementation of infrastructure projects, standardisation and streamlining of contract and other documents, processes and procedures, model concession agreements, etc.

At the same time, public expenditure on infrastructure development has to be substantially increased, including through viability gap funding and long term debt. A new focus must also be given to making existing investment in public infrastructure more productive, improving the quality of governance and thereby, making public services more effective and efficient.

Land acquisition and consolidation takes a very long time. Since infrastructure projects require land which may necessitate displacement of people, it is essential that the interests of all stakeholders are factored in the policies on land acquisition and resettlement & rehabilitation (R&R). The land auctioned by government authorities should have inbuilt clearances and approvals so that the developer can start the project immediately. The high cost of land, especially in urban areas, adds tremendously to the project cost and ultimately to the final price paid by the users.

While sustainable development is the only way forward, the long time taken in obtaining multiple environmental clearances for infrastructural projects negatively impacts the developmental process. Impractical procedures, and abnormal delays caused in the entire process, lead to additional cost and impinge greatly on the viability of the projects. There is need for putting in place a new single window system for all, including environmental, clearances which relaxes the procedures for developers and tremendously reduce the transaction cost.

For encouraging greater private investment in the infrastructure sector, there is an urgent need for standardisation and streamlining of contract documents and model concession agreements in line with best international practices, and with inclusion of an institutional arbitration clause. The entire process of allotment should be made more transparent, with laid down specified timelines for DPRs (detailed project reports) and financial closures and milestones to be achieved by the developers.

The RBI should further ease lending norms for infrastructure projects to provide access to long term credit. The banking sector should be motivated to provide easy and soft loans to the infrastructure sector for capital expenditure. Financial closure of infrastructure projects in pipeline should be expedited and apart from expediting the flow of finance to infrastructure projects through traditional channels, new innovative sources of finance should be put in place.