RBI stresses on pricing for infrastructure services

Says this is necessary so that the project is viable and is remunerative for service providers

The Reserve Bank of India (RBI) has stressed on pricing for infrastructure services so that projects were viable and were remunerative for the service providers. “There is a need to have an in-built mechanism in the services/pricing contract which provides for a pass-through of price hikes to the end-users on account of increase in input prices,” S S Mundra, deputy governor, RBI, had said.

Mundra also blamed  the lack of ‘enabling environment’ and the quality of demand for the infrastructure sector failing to live up to the expectations.

According to Mundra, the  pricing for using infrastructure services, which may be exclusively built by the private sector, in a public-private partnership or exclusively by the public sector, assumes utmost importance for the viability of the projects. While the prices cannot be raised too high, it is important that the realizations for the service provider/operator are remunerative and based on commercial considerations,” he said.

Mundra also blamed  the lack of ‘enabling environment’ and the quality of demand for the infrastructure sector to live up to the expectations. “ I would argue that if the infrastructure sector has failed to live up to the expectations, it is more on account of lack of an ‘enabling environment’ and the quality of demand rather than due to monetary policy actions that have some bearing on the availability of funds or the cost of borrowing,” he said. Estimates suggest that the lack of proper infrastructure pulls down India’s Gross Domestic Product (GDP) growth by 1-2 per cent every year.