The government will have to increase user charges or provide budgetary support for utility services to attract private investment into infrastructure, Planning Commission member Montek Singh Alhuwalia said.
Alhuwalia, who was speaking at a conference organised by the Infrastructure Development Finance Company Ltd yesterday said, "If you do not have viable user charges or provide budgetary support for infrastructure services, no private investment will come into the sector."
Collectively consumers would be willing to pay higher charges to get better quality services, but unfortunately the price issue has been linked to entry of the private sector, he said.
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However, the opening up of infrastructure sectors had produced results on the ground though not to the extent one would have expected it, he said. While independent power producers had added or were in the process of adding about 9,300 mw of power, addition of capacity in the port sector had already crossed the Ninth Plan target, he said.
There was need to back up the reforms with an independent regulator with enough legal powers to regulate infrastructure sectors. Admitting that there were problems with the legal powers of the Telecom Regulatory Authority of India, the former finance secretary said the government may amend the TRAI Act to give it more teeth.
Speaking later, Mieko Nishimizu, vice-president, South Asia region, World Bank, said while India had huge potential for private participation in infrastructure, it was unutilized. Without accelerating investment in infrastructure, a poverty free India was not possible, Nishimizu said.
Governments need to decrease public sector deficit so that high interests do not crowd out private sector involvement in infrastructure. They also need to build up their credit worthiness she added. Responsible fiscal policy and fiscal management, lowering of business risk, clear separation of policy and management, and transparent regulatory functions were other areas on which governments need to concentrate.
Speaking earlier, IDFC chairman Deepak Parekh said the stage of action has shifted to states now and away from the Centre.
The states need to get out of their traditional role of planner, financier and manager and assume the role of a facilitator and regulator of infrastructure services, he added. The time had come to revisit "our development strategies" as many of the postulates on which it was based have turned out to be wrong, he added.
He said earlier demand projections in almost all sectors, including power, ports and telecom, were now considered to have been overestimated or likely resistance to projected end-user tariffs had been glossed over. There was need for a complete paradigm shift in the reform process from generation of revenues to cost-effective provision of services to the final user.
Sen called for a change in the outlook towards urban development from one of being an elitist approach to that of a grass roots approach.
Speaking on the occasion, Meera Mehta, urban specialist at the World Bank said the bank's agenda for urban reform involves making the cities livable and competitive through good
governance and management as well making them more bankable.
She called for incentives for institutional reform by leveraging limited government resources and benchmarking the performance of local authorities.
Leveraging of limited government resources can be achieved by creating special grants or incentive funds for improving revenue, accounting reforms, supporting time bound tariff reforms and sustainable credit enhancement opportunities.
Benchmarking can be achieved through developing citizens charter, service benchmarks and comparative assessment.
"Availability of financing requirements is not a problem and capacity building has to be demand led," she said.
Criticising the Indian score card on financial intermediation in the urban finance, Mehta said most of the municipal development funds continue to be wholly owned by the government and were not market driven.