Planning Commission Deputy Chairman Montek Singh Ahluwalia, on Monday, made it clear to India Inc. that the GDP (gross domestic product) growth target of 8 per cent set for the XII Plan (2012-17) period would have to be scaled down if the private sector failed to contribute half of the estimated $1 trillion investment in infrastructure development.
Inaugurating Federation of Indian Chambers of Commerce and Industry’s (FICCI’s) ‘India PPP Summit 2013’, Mr. Ahulwalia pointed out that while private sector participation in infrastructure projects in public-private partnership (PPP) mode had grown substantially from 10 per cent of the required funding during the X Plan to 37 per cent in the XI Plan, no less than 50 per cent of the estimated investment would have to necessarily come from the private sector during the XII Plan.
“This [8 per cent annual average economic growth rate in the XII Plan] will not happen if roughly 50 per cent [of investment target of $1 trillion] cannot come from private sector…We should be clear about it that there is no prospect or zero prospect of the government being able to finance such projects. If it can’t be done, then we had better lower the growth projection,” Mr. Ahluwalia said while pointing out that the possibility of a significant increase in government contribution towards investment in infrastructure simply won’t be there as the demand for resources for health and education was huge.
Mr. Ahluwalia maintained that the economy would have to grow at 9 per cent in the last few years of the Plan period to achieve the 8 per cent average growth target. “If the intention is to put the economy on to a path which is outlined in the XII Plan that you would have average of 8 per cent [growth rate] in the five-year period, then you have to put the economy on 9 per cent growth rate in the last couple of years,” he said.
The private sector, Mr. Ahluwalia said, should share and absorb the risks that were normally associated with model concession agreements under the PPP mode, and expressed his regret that very little thinking had been done by the private sector on such agreements.
In his special address, DEA (Department of Economic Affairs) Secretary Arvind Mayaram underlined the need for adequate resources to maintain the existing infrastructure even while scouting for funds for creating new assets. Both the government and the private sector, he said, were beset with the problem of lack of institutional capacities to manage concession agreements over a 20-year period, and called for an urgent re-look at such capacities for managing and maintaining PPP projects. Dr. Mayaram pointed out that after construction and stabilisation of a project, there should be easy exit for the developer and an easy entry process for a competent facility manager to come in. He also stressed the need for more regulators of different infrastructure sectors with clearly defined terms of reference.