The 11 the Plan lays out exceedingly ambitious targets for increasing infrastructure investments to 9% of GDP by the terminal year. This would require raising Rs 20,56,150 crore (at 2006-07 prices) or $ 514 billion (at an exchange rate of Rs 40/$). Though the envisaged investments are still far short of the 11% share of infrastructure investments in GDP attained in some fast-growing emerging economies, the resource mobilisation efforts are still difficult to attain, given that only 5.9% of GDP was mobilised in the terminal year of the 10 th Plan.
Given the public sector?s resource constraints, the plan also provides for raising private sector participation in infrastructure projects by increasing its share by almost half, from around 22% of total funds to 30% during the plan period. The questions, then, are how realistic are these targets given trends in the 10 th Plan, when the private sector?s share in total infrastructure investments rose from 14.3% to 22.1%, and what needs to be done to raise private sector investments across the board.
Of the ten major infrastructure sectors, the one that attracted the highest share of investments in the 10 th Plan was electricity, which accounted for around a third (33.5%). Other sectors that attracted a major part of the flows include roads (16.6%), railways (13.7%), irrigation (12.85), telecom (11.9%) and water supply (7.4%). Important areas like ports and gas supply networks attracted investments of only slightly more than 1%, while in the case of airports and storage, the share was even lower.
However, the numbers also show that the flow of resources into the infrastructure sector varied sizably between private and public sectors, and even across central and state governments. In the case of the Centre, the infrastructure sectors that attracted the most funds was the railways and electricity, which together accounted for more than half. The Centre?s next three priority areas were roads, water supply and telecom, each of which attracted more than a tenth of total investments.
Irrigation and electricity were the focus of state investments, with each of the two sectors accounting for a third. Among other sectors, roads accounted for about a fifth, while the share of water supply came close to one-tenth.
Surprisingly, just one sector, namely, electricity, accounted for slightly more than half the private sector investments in infrastructure. The other two major claimants being telecom, with slightly less than a fifth, and ports, with a share of just above one-twentieth. So, raising the share of private sector infrastructure investments by more than half in the 11 th Plan will require a sizable push in laggard areas, especially roads, rail, irrigation, water supply, airports and gas networks.
Moreover, the myriad problems, which plague the regulatory framework in different sectors, make them less attractive to private investments.
In the case of power, telecom, ports and airports, where a bulk of private sector infrastructure investments was focussed, we see a steady increase in their share over the 10 th Plan. In the case of power, the share of the private sector increased from around a quarter to a third, while in the case of telecom and ports, it went up to almost three-fourths.
The gains were equally impressive in the case of airports, where the share went up from less than 1% to close to 75% over the plan period
Trends in private infrastructure investments in other areas were, however, not as spectacular. In the case of the roads, for instance, while the private sector?s share rose to about one-fifth in 2003-04 ?the last year of NDA rule?the trend has been reversed and declined to 3.8% over the next three years. The evolving policy regime has obviously dampened private investor sentiment here.
In the case of railways, too, the share of the private sector in total investments has slid by half to a bare 0.3% over the last three years of the plan. Another important area where the share of private sector investments has fallen is in gas supply networks, from a high of 45.3% in 2004-05 to just 8.7% in the terminal year. An increase in the share of private sector investments in the current plan would thus require a step up in reforms to increase private sector participation and improvements in the regulatory regime, especially in crucial sectors like railways and roads, to make them more attractive.