With India’s growth predicated on infrastructure development, Planning Commission member B K Chaturvedi believes that the 12th Plan (2012-2017) would be decisive for the sector. The former cabinet secretary, who has chaired numerous committees framing policies associated with the sector, states that India is in a position to achieve the ambitious investment target of $1 trillion by 2017. In an interview with Devika Banerji and Mihir Mishra, Chaturvedi speaks at length about various bottlenecks in infrastructure and the public private partnership (PPP) experience. Excerpts:
The Planning Commission expects investment in infrastructure to be around $1 trillion during the 12th plan. That looks like an ambitious target, how do you think we can achieve it?
It is ambitious but achievable. In the power sector itself, we are planning capacity addition of 100,000 Mw. If we assume an investment of even Rs 5 crore per Mw, that roughly means an investment of around Rs 5,00,000 crore, or around $100 billion. Similar investments are expected in distribution and transmission in the next plan, so the total investment will be around $300 billion in the power sector alone, including generation work in progress. Then there will be investments in roads, irrigation, airports, ports and railways. The railways will have huge investments owing to freight corridor projects. These projects may cost Rs 40,000 to Rs 50,000 crore each. It is an ambitious target but necessary for us, and is definitely achievable.
What do you think of the PPP experience in India?
I would consider PPP a moderate success. I would say so because it is still in its initial stages of expansion. I was at a World Bank Conference in Washington recently; there they consider India’s PPP programme one of the biggest successes all over the world. If you take the overall investment through PPP that has been approved till date, the numbers are huge. PPP is a new concept in India. The government does not have money to invest in all projects so we need to increase PPP funding. To that extent it is a good and successful programme.
But PPP has not really picked up. No sector has met the targets set out by the Planning Commission.
True, but we need to explore ways to improve the programme. There have been many problem areas. First, there were difficulties over land acquisition. Then there were problems with the Model Concession Agreements (MCAs). When they were sorted out, there were differences of opinion between the Planning Commission and the road transport and highways ministry on the way projects should be structured. Whenever there are differences, there must be discussions, which delays decision making. Even then I will say the entire programme is in a transient stage and we will get over it. An Empowered Group of Ministers under the finance minister considers all the issues that come up and tries to suggest solutions. Therefore, even if the progress has not been what we had wished, we do have all the mechanisms in place and we are moving ahead at a much faster pace now. Going ahead, we will definitely see improvements.
You have said investments in power projects will pick up but the performance has not been that great in the 11th plan.
If you take into consideration only investment, then, as mentioned in the mid- term appraisal, investment targets have been fully met. It is in capacity creation that we have fallen behind. It is the fructification of the investments that has lagged. However, even in capacity creation the power sector has done really well compared to earlier plans. The one sector in which there has been little progress as far as PPP is concerned is transmission lines. It is only now that we have started to address the issue — the first three projects have been awarded and three more will be awarded, against 14 projects that were planned in the 11th plan. We expect more projects to be implemented in the 12th plan. The major share of investments in the 12th plan will be from the power sector.
On the Planning Commission’s recommendation, the finance ministry is working on ways to establish an infrastructure debt fund. But we already have IIFCL with a similar objective and it has not really picked up yet. Do we need another debt fund?
One bank cannot really substitute for other banks. We have a whole host of banks. The fact is that there is a huge requirement for funds for infrastructure. It is true we can step up our investment in the India Infrastructure Finance Company Ltd (IIFCL) and expand the kitty. However, it is not a bad idea to have an infrastructure debt fund that may be able to get greater confidence from pension funds and the like. We need a lot of funds for all the infrastructure sectors. The private sector also needs funds. For all those requirements we need debt funds and multiple funding services.
The finance ministry, in its mid-term analysis, has proposed amalgamating the existing build, operate and transfer (toll) and BOT (annuity) modes to ensure contractor’s accountability even after the project is complete? Do you think this mode can work?
I do not think any such new mode is a very good idea. The other suggestion in the analysis by Kaushik Basu (Chief Economic Adviser to the Finance Ministry) of awarding road projects the way 3G licences were to ensure transparency is a good idea and should be taken into consideration.
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In aviation, no PPP project after Delhi and Mumbai airports has taken off. What is the way ahead?
It is true we have not really taken that up. We will do so in the 12th plan and explore ways to expand PPP and also get more investments in airports in Chennai and Calcutta by the Airports Authority of India. New airports, like Itanagar, will come up in the states. Itanagar is a greenfield airport project. There are other proposals from different state governments. We are all for allowing state governments to come forward with projects.
The Planning Commission was also working on a national electricity fund. When can we see that taking shape?
It is expected to come to Cabinet anytime.
You were also heading a working group to formulate norms for coal blocks in lieu of mines that have been denied environment clearance. What is the status?
We have sent our recommendations to Cabinet which is expected to discuss it shortly but the broad approach is that the requirements of the energy sector and environment need to be balanced. One cannot take precedence over another. Therefore, we have suggested a policy that takes care of both these things in a balanced manner.
You talked about a review of all the infrastructure sectors at the end of this year. The Planning Commission is monitoring the performance of these sectors. What do these reviews and monitoring reports seek to achieve?
The idea behind the review is not to belittle any particular ministry or sector but to see where things are, identify bottlenecks, and see how things can move faster and better.
Which sectors have been the best and which have been the worst?
No sector has met its targets but civil aviation has definitely come the closest because airports are coming up and all the investments that have already been made are yielding results. The power and rail sectors have also done well in some areas. Roads have also done reasonably well as far as actual construction is concerned; however, in awarding projects it has not done well. Ports have yet to show results.