Suggesting big-ticket reforms to attract investment in the infrastructure sector, a high-level committee, on Wednesday, recommended increasing electricity charges and rail fares.
The high-level committee on financing of infrastructure, which is headed by HDFC Chairman Deepak Parekh, also pitched for 100 per cent foreign direct investment (FDI) in the telecom sector. The limit at present is 74 per cent.
The panel also suggested raising prices of natural gas.
These recommendations are aimed at attracting Rs.51.46 lakh crore for funding the infrastructure sector during the XII Plan (2012-17), according to the report, which was presented to Prime Minister Manmohan Singh earlier in the day.
The government, the report says, should draw “a time-bound action plan...with a view to improving the enabling environment for private investment, which is expected to finance about 47 per cent of the projected investment during the XII Plan.’’
The share of private sector in infrastructure funding was 37.53 per cent during the XI Plan, the report says, adding that the contribution of public sector is estimated to decline to 53.32 per cent during the XII Plan from 62.47 per cent in the previous Plan.
Reforms in many sectors suggested
Suggesting a slew of reforms in various sectors, including rail, power, coal, gas supply and telecom highways, the report says that the projected investment of about Rs.51 lakh crore during the XII Plan should not be taken for granted.
“...it is likely to fall short significantly if a number of measures necessary for removing policy and implementation impediments are not taken within a short time-frame,” it said.
Sustainable pricing of commodities and services, especially energy, would be necessary, it says, while underlining the need for promoting the Public-Private Partnership (PPP) model of development for projects in sectors such as rail, ports, airports and highways.
In order to maintain flow of investment in the power sector, the report says, “Tariffs will have to be set at sustainable levels, while also improving the collection efficiency and reducing losses.’’ The report further says that the increase in fuel cost should be passed on to the consumers to prevent piling up of losses of the power distribution companies.
The committee has suggested rationalisation of gas allocations and pricing policy within the next two months as further delay would impact the viability of gas-based power stations.
With regard to rail fares, the report calls for “rationalisation of the prevailing uneconomic rail fares, which have not been revised for a decade”.
It has suggested greater involvement of private sector in rail projects and revamping of the Railway Board on commercial lines.
As far as the telecom sector is concerned, the committee has made a strong case for raising the FDI cap to 100 per cent from 74 per cent now, arguing that it may be difficult for Indian partners to provide 26 per cent capital to companies seeking pan-India presence.
The Committee has suggested that the progress of projects and award of contracts in the infrastructure sector should be monitored on a monthly basis by the Cabinet Committee on Infrastructure (CCI).
Elaborating on the need for power sector reforms, the committee has suggested that the government should operationalise the open access system to introduce competition.
“This will not only introduce competition, but (will) also help in attracting the much needed private investment in power generation as producers will be able to sell directly to bulk consumers in a competitive market as against the present reliance on financially unviable discoms,” the report adds.
With regard to highways, the committee suggested that the National Highways Authority of India should draw a month-wise plan to award contract for 10,000 km during 2012-13.
The government, it adds, should expeditiously set up the long-awaited Express Authority of India, and ensure that engineering procurement and construction projects for 5,000 km are awarded in the current fiscal.
With regard Kolkata and Chennai airports, which are being constructed by the Airports Authority of India (AAI), the committee says, “The operation and management of these airports, including the airside and city side facilities, may be undertaken through PPP...”
In the case of telecom sector, the report underlines the need for rationalisation of the mergers and acquisitions policy to encourage consolidation in line with the international experience.
It wants the government to permit 2G licencees to raise funds through external commercial borrowings (ECBs).
The committee recommends that future metro rail projects should be taken up through the PPP mode so that available budgetary resources could be put to better use.
The PPP model, it adds, should also be taken up for development of projects in irrigation, water supply, sanitation and food storage.