PPP mode of infrastructure development must be revisited

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Published: March 1, 2015 2:25:34 AM

the Budget has given us a clear direction on what the government wants to do to address irritants. Overall, the Budget shows that the worst is behind us. From here, it is only the question of how good will it get

The finance minister has underlined the pressing need to increase public investment in infrastructure by R70,000 crore in 2015-16 over
2014-15 from the Centre’s funds. The present state of infrastructure does not match growth ambitions. He said he proposes increased outlays on both roads and gross budgetary support to the railways, by R14,031 crore and R10,050 crore, respectively. He said the capex of public sector units is expected to be R3,17,889 crore, an increase of approximately R80,844 crore over 2014-15. This is a welcome move by the government and overall it is an infrastructure-focused budget.

The government has to take maximum efforts in rebalancing risks in PPP projects. Obviously, that cannot be done by way of a budget. It has to be done through a more detailed programme over a longer period. The PPP mode of infrastructure development has to be revisited and revitalised.

Besides, the government is talking about a number of projects. They spoke about five UMPPs, ports, airports, 20,000 km of roads, etc. All of them can be big growth boosters. A proposal to establish National Investment and Infrastructure Fund with an annual flow of R20,000 crore, is a move in the right direction. He said he also intends to permit tax-free infrastructure bonds for projects in rail, road and irrigation sectors.
This will enable the trust to raise debt, and in turn, invest as equity, in infrastructure finance companies such as IRFC and NHB. The infrastructure finance companies can then leverage this extra equity, manifold.

Further, the government also proposes to set up five new ultra mega power projects, each of 4000 MW in the plug-and-play mode. People always find it difficult to invest in India because there are so many irritants. Now, the Budget has given us a clear direction on what the government wants to do to address these irritants. Overall, the Budget shows that the worst is behind us. From here, it is only the question of how good will it get.

By Sanjay Reddy, V-C, GVK Group

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