Growing infrastructure deficit requires innovative solutions

The Economic Survey 2010-11 has called for innovative solutions to address the growing infrastructure deficit that is hurting economic growth. It said financing infrastructure would be a big challenge: India needs to invest $1,025 billion in the Twelfth Plan (2012-17) and half of this should come from the private sector.

To channelise domestic savings and foreign investment, there’s a need for policy interventions to balance growth and stability objectives. ‘’There’s a need to channelise retail savings into infrastructure and bring in private sector-annuity model in irrigation, water, power and rural roads,’’ said Vinayak Chatterjee, chairman, Feedback Ventures.

The survey also highlighted the need to address non-financing constraints — like tendering of unviable projects, bad quality of engineering and planning, lack of standardised and sub-optimal contracts, land acquisition delays and slow clearances — to avoid time and cost overruns.

Highlighting the shortfalls in capacity additions in sectors like power and roads, the survey underlined the need to finish these projects on time. At the same time, there’s a need to ensure that these projects are affordable and sustainable.

According to the survey, there is a need to streamline land acquisition and environmental clearances for infrastructure projects. To enable faster land acquisition, there’s a strong case for bringing in parity between the compensation package offered under the Land Acquisition Act, 1894, and that applicable to land acquisition under the National Highways Act, 1956.

Shortfall in capacity additions and delays continue to mar infrastructure projects. Barring a few like telecom, rural electrification and rural road projects, capacity additions were lower than targets in power, roads, and railways during 2007-08 to 2009-10. Of the 559 projects monitored by the Centre, 77 per cent were delayed, and only a fourth of them were on or ahead of schedule.

To further power reforms, the survey stressed on the need to strengthen regulation, improve distribution and open up bulk supply and raise tariffs to more economic levels.

Source: BS, Feb 26, 2011