Dont waste time on implementation

Written by Amrit Pandurangi | Updated: Jan 29 2008, 03:52am hrs
For P Chidambaram, this years Budget as far as the infrastructure sector is concerned should be relatively straight forward and easy. There are many concrete proposals pending before the government and all he has to do is, commit to a time table to implement them and not bring in anything that is likely to have any kind of a negative impact on creation, rehabilitation, maintenance and operation of infrastructure assets. The Prime Minister and the finance minister have made it abundantly clear that development of infrastructure is extremely important. That there is direct support has been indicated by a recent document brought out by the Planning Commission. The document pretty much captures the scale of support the government plans to lend to infrastructure over the next 5 years. And then, there are several indirect measures that have been announced measures that push the infrastructure agenda to the fore.

What is now, therefore, required is bringing in a sense of urgency in implementation. For example, take the subject of infrastructure financing. There are recommendations clearly articulated by the Deepak Parekh Committee and the Patil Committee (relating to corporate bonds). We need to get on with a clear articulation of implementation timelines for each of the accepted recommendations. The earlier we implement them, the faster we will achieve the ambitious infrastructure goals.

Last year, many infrastructure players sought the finance ministers attention in addressing the issue of the cascading taxation for companies (the holding company-special purpose vehicle issue). This is particularly important for infrastructure companies because it is quite common that holding companies control a series of SPVs set up for managing a specific concession or project either in the same sector or across many infrastructure sectors. Some times, there could even be a 3-layer arrangement. These are required for business reasons. This issue is still awaiting to be addressed. Then there is the issue of the use of a small part of the forex kitty towards infrastructure development. We need to speed up the implementation of this recommendation that has already been accepted by all concerned. There continues to be some unclear application of tax concessions during implementation of a brownfield project. These need to be clarified. The list goes on.

In the new Five-Year Plan, the government has already indicated substantially enhanced budgetary provisions for rural infrastructure, urban infrastructure, the roads programme, and the water and sanitation sectors. This is good but can easily slow down if states and cities are not helped in preparing themselves well from a financial point of view, building capacities and setting up projects While the Centre is not necessarily the agency responsible for doing all thisnor is the Budget, the main instrumentit is extremely important for the government to realise that if it does not get seriously involved in a much more direct way in pushing states to get ready, these can easily become the main bottlenecks for slow progress. Another important thing that the finance minister can do is to publicly state which are the flagship infrastructure projects we have achieved, as committed during the year, and why have we not made progress in the others. The Budget time can also become the right platform to recognise good work done.

Last year, the Budget made a provision of a Rs 100-crore fund for getting enough projects into a fast pipeline. Unfortunately, the low utilisation of the fund is a clear indication that making funds available is not enough. The Centre needs to prod states, particularly the ones that need infrastructure the most, as they are also the ones that need pushing for groundwork. For the finance minister and the Planning Commission, a radical thought would be to tell states that they cant get money for infrastructure programmes next year if states cant show project-programme preparation this year (somewhat akin to the current practice of looking at utilisation certificates before releasing all future installments).

Another important issue is this whole business of bringing in a sense of urgency in reforms. It has always been important for the finance minister to directly link the financing of infrastructure through various programmes and schemes to major reforms and a change of mindset in tackling the far deeper issues in each of these sectorsdistribution reforms in power, focus on operations, maintenance and safety of highways, cost recovery and a willingness to charge in the water sector. We know by experience that financial assistance is a strong instrument to kick-start such a change of mindset. We can at least begin with an output-oriented Budget if not an outcome oriented one that the finance minister had talked about earlier.

The writer is executive director & leader, infrastructure practice, PricewaterhouseCoopers. These are his personal views