Tuesday, 22 October 2019
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State governments should use ppp projects for infrastructure development : FM

Parlimaentary consultative committee meets

Finance Minister has urged the Members of Parliamentary Consultative Committee attached to his Ministry to persuade their State Governments to mainstream Public Private Partnership (PPP) in infrastructure development and to take full benefits of the various schemes and initiatives of the Ministry of Finance. Addressing the Consultative Committee Meeting, here today, Shri P. Chidambaram said, since many of the State Governments have not caught up with the PPP idea and most of the projects are confined to a few States only, help can be taken from a panel of 11 expert Transaction Advisors. He stated that the PPP issue has been discussed in detail at the two national and four regional level conferences organized by Ministry of Finance. Shri Chidambaram said that India’s economic performance in the past few years - particularly in the last three years - has been commendable on many counts. Economic growth has accelerated and we are now averaging an annual growth in excess of 8%. As per the revised estimates released by CSO on May 31, 2007, GDP at factor cost at 1999-2000 prices was estimated at Rs 28,482 billion. National income aggregates in net terms had a higher rate of growth (9.4) in 2006-07. Alternate measures of national income at current prices yielded a growth of 15.2 to 15.8 per cent in 2006-07. The Finance Minister stated that our infrastructure deficiencies have become more visible because of high growth. The most visible indicators of overstretched infrastructure are India's congested highways, airports and ports. He added that traffic at Ports has grown over 2005-06 at 13%; Air Passenger movement (25%) and Air Cargo (10%) growth over the last 2 years has exceeded expectations; Railways has clocked a growth of 9% in freight, 8% in passenger traffic over the last 3 years. He said to meet 11th Plan growth requirements, 40000 km of Highways need to be developed by 2012, present capacity of traffic handling (2006-07, 737 million tones) at Ports need to be developed to meet the projected capacity requirements at 1500 MT, the momentum of growth in Freight Traffic and Passenger Traffic needs to be maintained at 8-9% p.a. and 6% p.a. respectively during the Plan period, 60,000 MW needs to be added to the power generation capacity during the Eleventh Plan. Shri Chidambaram informed that the gross capital formation in infrastructure, as a proportion of GDP, has remained at around 4% from 1997-98 to 2003-04. To sustain 9% GDP growth, investment in infrastructure should be increased from 4.6% to around 8% of GDP over the Eleventh Plan period. He said that the Planning Commission has estimated that investment in infrastructure - defined broadly to include road, rail, air and water transport, electric power, telecommunications, water supply and irrigation - will need to be of the order of about Rs. 14,50,000 crore or US$ 320 billion during the Eleventh Plan period. Breakup amongst various sectors is: Power (Rs. 6,16,500 crore), Railways (Rs. 300,000 crore), National Highways (Rs. 220,000 crore), Civil Aviation (Rs. 40,000 crore), Ports (Rs. 50,000 crore) and Residual sectors (Rs. 2,23,500 crore). He further informed that the Committee on Infrastructure Financing, chaired by Shri Deepak Parekh in its report of May 2007, has projected investment requirement of US $ 384 billion (Rs. 17,40,000 crore) at 2005-06 prices by revising the demand in some of the sub-sectors, which is equivalent to US $ 475 billion (Rs. 21,52,000 crore) at current prices. Since the investment requirements are enormous and cannot be met from the public sector alone, Shri Chidambaram stated that it is imperative to explore avenues for increasing investment in infrastructure through a combination of public investment, public private partnerships and occasionally, exclusive private investments wherever feasible. He opined that among the various options available, the Public Private Partnership (PPP) approach is best suited for the infrastructure sector. In addition to freeing Government resources to expand investments in other sectors, PPPs bring in private sector expertise and efficiencies in operation and maintenance leading to increase in quality of public services delivered. Shri Chidambram said that the Government is actively pursuing PPPs to bridge the infrastructure deficit in the country and to address the identified constraints. Several initiatives like Viability Gap Funding (VGF), Public Private Partnership Appraisal Committee (PPPAC) and India Infrastructure Finance Company Ltd. (IIFCL) have been taken during the last few years to promote the PPPs in sector like power, ports, highways, airports, tourism and urban infrastructure. He said that the appraisal mechanism for the PPP projects has been streamlined to ensure speedy appraisal of projects, eliminate delays, adopt international best practices and have uniformity in appraisal mechanism and guidelines. Since its constitution in January 2006, PPPAC has granted in-principle / final approval to twenty-eight projects, with a total project cost of Rs 16,729.28 crore. Under the Viability Gap Funding Scheme so far, 23 proposals have been granted in-principle/ final approval with a total project cost of Rs.10, 097.45 crore and an estimated viability gap funding of Rs.2,571.97 crore, he informed. So far, term loan, amounting to Rs 12,487.0 crore, for 57 infrastructure projects (with a total project cost of Rs 90,612.53 crore) have been sanctioned, of which 42 (Total Project Cost of Rs 45,409.31 crore; loan amounting to Rs 7,025 crore) are PPP projects, he added. Shri Chidambaram informed that for providing financial support for quality project development activities to the States and the Central Ministries a corpus fund titled 'India Infrastructure Project Development Fund' (IIPDF), with initial contribution of Rs. 100 crore is being set up. It would be a revolving fund that would get replenished through the refund of 'investment' through success fee earned from successful bid projects. The Finance Minister told the members that an online database and a website have been developed on PPPs, www.pppinindia.com with all necessary information relating to PPP initiatives in India. The meeting was attended by S/Sh. K.C. Baba, Mohammad Salim, M. Ramadass, Narsingrao H. Suryawanshi and Tarit Baran Topdar from Lok Sabha and Shri Bimal Jalan and Dr. Mahendra Prasad from Rajya Sabha. Ministers of State for Finance, Shri S.S. Palanimanickam and Shri Pawan Kumar Bansal apart from senior officers of the Finance Ministry also attended the meeting.

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