Centre mulls infrastructure development fund for states

New Delhi, February 18: | Updated: Feb 19 2002, 05:30am hrs
The Centre is contemplating to set up a reform-linked infrastructure development fund for states and come out with a new legislation to ensure time-bound approvals to foreign direct investments (FDI) for infrastructure projects in states.

According to sources, keeping in mind the urgency of stepping up investment in the sector, finance minister Yashwant Sinha may announce these proposals in the forthcoming Budget itself.

Mr Sinha had pointed out in his Budget speech for 2001-02 that rapid development of the economy depended on adequate investment in infrastructure, and stressed on the need for appropriate user charges to ensure adequate returns on investments in the sector. However, the investment situation in the sector has failed to witness any improvement.

Sources said that cash-strapped states are not in a position to spend on infrastructure development and in the absence of repaying capacity, funding agencies want a reforms guarantee from the states for providing money for this critical sector.

Creation of a reform-linked fund at the Centre, which would be available to the states for infrastructure development, will facilitate speedy allocation of funds to the states.

The conditionality-based infrastructure fund is likely to be set up on the lines of Accelerated Power Development Programme (APDP), which provides money to the states for renovation and modernisation of power infrastructure. The states are required to sign memorandum of understanding (MoU) with the power ministry promising time-bound reforms in the power sector to avail APDP fund.

Sources said that while the Centre has provided Rs 1,500 crore for APDP in the current fiscal, which has an equal amount coming from the banks and financial institutions, the modalities of generating resources for infrastructure development fund are expected to be worked out in due course. Another area on which the government is working to boost investment in the infrastructure sector is speedy clearance to the FDI proposals in the sector by the states.

Sources said that the Planning Commission steering group on FDI for the Tenth Plan is in favour of a central Law for speedy clearance of proposals in the sector by the states. They added that Andhra Pradesh on its own has already put in place such an enactment and the states had the option of following the Andhra model. However, a central legislation in this regard will provide a basic framework for speedy clearance of FDI proposals for the infrastructure projects, according to them.

Sources said that as the finance ministry was also a part of the deliberations in the steering committee, which is slated to submit its report to the government soon, Mr Sinha may accommodate the proposal for enactment of a central legislation in 2002-03 Budget.