The government is working on tapping into new and innovative ways to fund the massive infrastructure investment requirement to boost the economy's growth cycle.
This was among the key themes of the ministerial address at the Business Standard National Infrastructure Summit 2015.
Financing infrastructure would need bold measures that made instruments more important than institutions, Railways Minister Suresh Prabhakar Prabhu said while inaugurating the summit on January 15 in Delhi.
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"When we create infrastructure it is not for tomorrow, not even for today, but it takes care, partly, of yesterday. That is why the deficit keeps rising," Prabhu, who is among the principal policy formulators for the infrastructure sector in the National Democratic Alliance government, said.
Elaborating on the theme to adopt new ways to rapidly build infrastructure, Petroleum Minister Dharmendra Pradhan pointed out if the power sector had not been opened up through reforms initiated in 2003, India would still have been in "darkness".
"Had independent power producers not set up projects, public sector undertakings (PSUs) alone might not have been able to shoulder the responsibility," he said.
Infrastructure investment, as percentage of the gross domestic product, is estimated to gradually increase from 6.9 per cent during the terminal year of last Plan period (2011-12) to eight per cent by 2018-19. It is estimated that India's infrastructure investment will go up from from around Rs 24-lakh crore in the 11th Plan period (2007-12) to Rs 64-lakh crore between 2014-15 and 2018-19.
According to Prabhu, a new and changed approach could include opening up funds available with the Employees' Provident Fund Organisation (EPFO) for use in infrastructure.
EPFO is a body under the ministry of labour and employment that implements the compulsory PF scheme, apart from pension and insurance schemes for employees.
Prabhu's suggestion found support from Santosh Nayar, the chairman and managing director of India Infrastructure Finance Company Ltd (IIFC), who was part of the panel discussion for chief executive officers (CEOs) on infrastructure at the summit.
"Two-three per cent of the incremental corpus of the EPFO could be used to meet the needs of the core sector of the economy," Nayar said.
Prabhu also made a case for tapping into the pension funds of other countries, including Australia and Canada, apart from attracting sovereign funds from China and West Asia.
"Australia's GDP is less than its $2-trillion pension fund corpus. China has foreign exchange reserves of $4 trillion, which is being put into US Treasuries at one per cent interest rate," the minister said.
Prabhu also stressed the need for PSUs in the infrastructure sector to free up assets by capitalising them and borrowing money for new projects.
He cited the case of state-owned power generator NTPC Ltd to argue its existing assets, which were free from debt, could be capitalised to raise more funding. "All of this is possible. We really need to make sure that we bring a paradigm shift in our approach."
However, the idea did not find favor with NTPC Chairman and Managing Director Arup Roy Choudhury, was also part of the CEOs' panel.
He said the company had provided the government returns of Rs 40,000 crore. "This quantum might be reduced if existing equity in old and operational projects was to be divested," he said.
Nevertheless, the railway minister stressed the idea of turning around PSUs as engines of growth.
"The Japanese economy is contracting but the private sector is not investing there. In India, PSUs have huge cash flow but they are depositing money in banks for five-six per cent interest. Why can we not use PSUs as engines of growth?" the minister said. He, however, also said relying on public sector institutions alone might not suffice and the newly crafted NITI Aayog, which replaced the Planning Commission, could create a framework for facilitating such new-age investments.
"India has enough private-sector ability and growth could take off from there. For the first time, we are developing a model. Let us not get overawed by the challenge. All stakeholders, including regulators, banking systems, developers, policymakers and the state governments, must be aligned," Prabhu said.