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Stress on PPP model in infrastrure
States asked to explore investment avenue
Finance Minister P. Chidambaram on Thursday stressed that the country’s needs of a developed infrastructure could only be met through public private partnership (PPP) as the investment to achieve this is required to be raised to eight per cent of the GDP from the current 4.6 per cent during the XI Plan (2007-12) period. Addressing the Parliamentary Counsultative Committee attached to his Ministry here, Mr. Chidambaram urged the States to adopt the PPP model in view of the enormous investment needs which could not be met by the public sector alone. He said it was, therefore, imperative that avenues for increasing investment needs which could not be met by the public sector alone. He said it was therefore, imperative that avenues for increasing investment in infrastructure through a mix of public investment, PPPs and through exclusive private investments, wherever feasible, be explored. Apart from freeing government resources for greater investments in other sectors, Mr. Chidambaram pointed out that PPPs would usher in private sector expertise along with efficiencies in operation and maintenance, thus leading to better quality of public services.
In this regard, the Minister asked the committee members to persuade their home States to join the mainstream PPP in infrastructure Project Development Fund (IIPDF) with 100crores as the initial corpus to provide financial support to the States’ developmental activities. The fund, he said, would be a revolving one that would get replenished through the ’success fee’ earned from successfully bid projects. However, he suggested that as many State governments had not caught up with the PPP idea and most projects were confined to just a few States, help could be taken from the panel of 11 expert transaction advisers. Explaining the importance of the PPP approach, Mr. Chidambaram pointed out that the gross capital formation in infrastructure, as a proportion of the country’s GDP, had remained at about four per cent from 1997-98 to 2003-04. “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 said.
To achieve the growth targets of the XI Plan, he said the country would have to develop 40,000km of highways by 2012, increase traffic handling capacity at ports from 737 million tonnes to 1,500 million tonnes, maintain the growth momentum in freight and passenger traffic at 8-9 per cent annually and enhance power generation capacity by 60,000 MW. According to estimates by the Planning Commission, infrastructure development would need an investment of about Rs. 14,50,000crore ($320 billion) during the Plan period. To promote PPPs infrastructure, Mr. Chidambaram informed members that his Ministry had launched a Viability Gap Funding(VGF) scheme while setting up a Public Private Partnership Appraisal Committee and India Infrastructure Finance Company Ltd.