The government anticipates the ambitious infrastructure financing target for the 12th Five-Year Plan will not be difficult to meet, despite credit growth in the infrastructure sector turning negative in the current year. According to the Economic Survey 2011-13, tabled in Parliament on Thursday, at Rs 70,155 crore, net credit to the infrastructure sector during the April-December 2011 period was nearly 61 per cent of the amount advanced during the same period last year, with a significant reduction in credit to the power and telecom sectors.
The total foreign direct investment inflows into major infrastructure sectors during April-December 2011, however, registered a 23.6 per cent growth over the previous year.
The government has projected a $1-trillion (Rs 49-lakh crore) investment in the infrastructure sector during the 12th Plan period, with at least 50 per cent of this amount coming from the private sector, compared to 36 per cent anticipated in the 11th Plan. The Survey says an environment conducive for private sector participation with a transparent and credible regulatory mechanism, therefore, could reduce the pressure on public sector funding. It underscores the need to identify hurdles and weaknesses in the regulatory, financing, and incentive structures — both taxation and debt — and project-implementation-related issues that may be inhibiting private investment in these sectors.
In view of the massive fund requirements, all efforts need to be made to attract big investors, private equity funds, pension funds and sovereign funds. Strengthening domestic financial institutions and development of a long-term bonds market may be critical.
On the issue of coal pricing, though the government has not been permitting an increase in prices, the Survey has called upon Coal India Ltd to adopt a pricing policy that is transparent, credible and based on global norms, and, at the same time, throw up the issue of introducing competition in the sector.
Although the power sector, within infrastructure, is considered laggard, the Survey points out to 9.2 per cent growth in power generation in April-December 2011, compared to 4.6 per cent growth in the same period the previous year. The sector was marred by problems in production of coal and natural gas.
Production of both coking and non-coking coal fell during the period, compared to a growth of eight per cent in 2009-10. “The lower growth in production in the current year and last year is primarily due to environment restrictions, application of the comprehensive environmental pollution index, non-availability of forestry clearance for some projects, poor law and order situation in some states and excessive rainfall in coal-mining areas,” the Survey points out. Lower domestic production increased dependency on imports and, in 2010-11, the country imported 11, 68.9 million tonnes of coal.
The Survey also sees the need to upgrade the national highways to two lanes, build expressways in high and dense traffic segments and urgently improve the riding quality of the road network in general. Similarly, in the port sector, it points out that the real challenge is to build vibrant, efficient and safe ports and provide a strong base for the shipbuilding industry.
So far as the loss-ridden aviation sector is concerned, the Survey notes that the high growth rates for the past few years in the sector, particularly in the passenger segment, are not getting reflected in the financial health of carriers in India. The airline industry in India has a debt burden of close to $20 billion, half of which is aircraft-related and the rest are working capital loans and payments to airport operators and fuel companies.
