No one better understood the importance of infrastructure—and implemented it—than the Former Prime Minister Late Atal Bihari Vajpayee. The country benefitted in ways more than one by the ‘Big Idea’ that he mooted that was supported by his Finance Minister Yashwant Sinha. The outcome was the audacious move – giving birth to Golden Quadrilateral or 7,000 km road project. Some may have made fun and scoffed at the Rs.54,000 crore project that was initially funded through an additional Rs.1 cess on fuel. Really audacious but it worked!
Prime Minister Narendra Modi is carrying on the legacy. And today we have Sagarmala, a port-led development project harnessing India’s vast coastline and navigable waterways at an investment of R8.4 lakh crore and Bharatmala—an enormously scaled up version of Golden Quadrilateral project, now targeting 50,000 km of roads and highways with an outlay of Rs.6.92 lakh crore. This will bring down supply chain costs, boost investments, speed up economic activity; at the same time create more than 3 crore jobs.
Truly speaking the new India will be built on infrastructure, which requires massive investments. This is currently in short supply. But there is a flip side of it. Legacy sub-optimal policy decisions, poorly drafted PPP contracts and unwillingness of the State Government agencies to pay up, even though they are contractually bound to bring to the table the ‘public’ part of responsibilities in PPP projects has created an impression of investments being high risk and a potential danger of infrastructure sector turning into another non performing asset. The socio-economic impact of infrastructure companies and concessionaires exiting the projects and leaving the government to deal with the debt and inoperative infrastructure can be devastating.
With the banking sector already in a serious NPA crisis and markets still skeptical on infrastructure, there are very few funding options left. In all earnestness, the Modi Government has taken steps to de-risk future investments in infrastructure and made the proposition attractive. Alas, the audacious move of yesterday of Rs.1 cess fuel will not work. So the big question is, what can be done to attract investments and where are these investments going to come from? It is imperative that institutions like LIC or pension funds invest in the critical infrastructure, both to spur project implementation as well to push slow moving projects. This coupled with speeding up the arbitration and award process to bring in a sense of urgency in all stakeholders to ease cash flows in existing infrastructure projects will help.
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