Most investments to be made in initial part of 5-year period: Sitharaman
Encouraging more private investment in infrastructure can create additional fiscal space for the government
NEW DELHI :
Finance minister Nirmala Sitharaman on Tuesday unveiled a plan to invest ₹102 trillion over five years to develop social and economic infrastructure to boost India’s sagging growth.
The projects will be implemented under the National Infrastructure Pipeline (NIP) mechanism. A task force for the purpose, set up under economic affairs secretary Atanu Chakraborty, submitted its first report after consultation with infrastructure-related ministries, lenders, states and companies over the past four months.
The task force was set up after Prime Minister Narendra Modi, in his Independence Day speech, promised to roll out an ambitious infrastructure push worth ₹100 trillion over the next five years to make India a $5 trillion economy.
Sitharaman said much of the infrastructure investments will be implemented in the initial part of the five-year period. “We have a compilation of projects worth ₹102 trillion. In the next couple of weeks, we will add projects worth another ₹3 trillion, taking the total to ₹105 trillion," she said.
The government has taken a raft of measures to address a slowdown in the broader economy, including a massive corporate tax cut and sector-specific steps.
However, a renewed thrust on infrastructure projects is expected to increase economic activity, generate employment and boost demand. Encouraging more private sector investment in the infrastructure space can create additional fiscal space for the government.
“This exercise, the first of its kind, is expected to be followed up by a periodical review process. NIP will enable a forward outlook on infrastructure projects, which will create jobs, improve ease of living and provide equitable access to infrastructure for all, thereby making growth more inclusive," read a statement by the finance ministry.
Greenfield and brownfield projects worth more than ₹100 crore per project that may be at the conceptualization stage, under implementation and under development would be part of NIP, the ministry said.
The projects will be spread across 21 ministries and 18 states and Union territories. While the Centre and states will contribute 39% each of the project cost, the private sector will contribute 22%. “By 2025, we expect the private sector contribution to rise to 30%," said Sitharaman.
Out of the projects in the pipeline, 42% are under implementation, 33% are at the conceptual stage and 19% are under development. The projects are in sectors such as power, including renewables, railways, urban development, irrigation, mobility, education, health, water and the digital sector.
Suggestions for reforms made by various working groups under the task force will be taken up with all earnest, Sitharaman said. This will include reforming the contracts based on the public-private partnership model, enforcement of contracts and the dispute resolution process. “A robust monitoring mechanism will also be established," said the minister.
Between FY20 and FY25, sectors such as energy (24%), roads (19%), urban (16%) and railways (13%) amount to around 70% of the projected capital expenditure in infrastructure in India, according to the finance ministry statement.
For the current fiscal, annual investment of ₹13.6 trillion has been estimated. According to projections, ₹19.5 trillion will be spent in 2020-21, ₹19 trillion in 2021-22, ₹13.8 trillion in 2022-23, ₹12.8 trillion in 2023-24 and ₹11.1 trillion in 2024-25.
The figures exclude those for the power sector and data from some states.
Out of the total expected capital expenditure of ₹102 trillion, projects worth ₹42.7 trillion (42%) are under implementation, which includes expressways and the national gas grid.
Projects worth ₹32.7 trillion (32%) are in the conceptualization stage and the rest are under development, which includes urban, roads and renewable energy.
“It is expected that projects of certain states that are yet to communicate their pipelines, would be added to the pipeline in due course," said the ministry.
To boost investment in the infrastructure sector, the NIP report released by the finance minister also suggested general reforms and updating sector policies.
The report said it is critical to have a robust project preparation framework consisting of a transparent policy and legislative framework, presence of guidelines, model bidding documents and standard procedures, design, multistage reviews and audits.
“Inadequate attention to project planning may lead to avoidable delays in the implementation of the project or may even lead to scrapping of projects prior to its implementation," said the NIP report.
The report also called for robust private sector participation in the infrastructure sector and optimal risk sharing between the public and private sector entities, such that the risks are allocated to entities best equipped to handle them.