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Deepak Parikh Panel Lowers Infrastructure Investment Target by 40 Percent
Oct 08, 2014

A high-level committee on financing of infrastructure opined that India is set to miss its ambitious infrastructure investment target of $1 trillion for the 12th Five-Year Plan (2012-17) after dismal performance in the first two years.  The committee chaired by Deepak Parekh, set up by the previous UPA government, has scaled down the infrastructure investment projections for the 12th plan by nearly 40 percent to Rs 30.90 lakh crore from Rs 51.46 lakh crore it projected in an interim report in 2012. 

The committee noted that the anticipated investment in infrastructure during 2012-13 has reached a level lower than 2008-09 while the pace of investment has not picked up even during 2013-14 and several bottlenecks and barriers have continued to persist. In view of the above, it is unlikely that the 12th plan projections made earlier would materialize. 

The scaling down of infrastructure investment targets has come on the back of severe decline in projected private sector investment due to virtual collapse of public-private partnership projects in the country. According to the report, the share of private investment is now projected at 39.19 percent of the total investment during 2012-17, down from 48 percent envisaged earlier. 

During the 11th Plan period, share of private money in total infrastructure investments was 36.87percent. The Planning Commission under the UPA government in 2012 had projected an infrastructure investment target of Rs 55.74 lakh crore, or $1 trillion, during the 12th plan period, after the Parekh panel had recommended it to be Rs 51.46 lakh crore. And the National Development Council had approved the plan panel's target. 

The revised investment projection of Rs 30.9 lakh crore is only about 10 percent higher than Rs 27.3 lakh crore investments made in infrastructure sectors in the country during the 11th Plan period. Total infrastructure investments in 2012-13 at Rs 4,93,725 crore was only 66 percent  of the earlier estimated Rs 7,47,976 crore. Investments in 2013-14 are estimated at Rs 5,40,170 crore, 62.8 % of the original target of Rs 8,60,067 crore. 

Highlights of the Report:

  • An investment of Rs 51.46 lakh crore in the 12th Plan. Private sector share is projected at 47%, as compared to 37% in the 11th Plan.

  • Regulatory structure needs to be more responsive to investment and the needs of the sector.

  • Sustainable pricing of commodities and services, especially energy

  • Privatisation and disinvestment in state-owned monopolies to foster competition

  • Privatization of state-owned monopolies

  • Issues related to the General Anti-Avoidance Rules (GAAR) and delays in environmental clearances and land acquisition should be resolved to attract investment in the infrastructure sector.

  • Public-private partnership (PPP) as the means of achieving target levels of investment. A time-bound plan for the implementation of its recommendations to create an enabling environment for the private sector.

  • In the power sector, Government should adopt PPP in distribution.

  • Import of coal through STC/MMTC or directly through power producers should be allowed. Adoption of PPP in coal mining should be explored while setting up a state-run undertaking for engaging in PPP.

  • Increase in foreign direct investment in telecom to 100 percent  from the current 74%

  • Gas allocations and pricing should be raitionalised within two months

  • Gas imports should be undertaken with the objective of increasing power generation and utilize idle capacity. Gas-based power should only be used in peak hours.

  • The India Infrastructure Finance Company (IIFCL) should substitute its direct lending operations by guarantee operations to enable the flow of non-bank long term credit for infrastructure projects, particularly insurance and pension funds. 

  • The Government should encourage investment through public private partnership mode in redevelopment of railway stations, building of elevated suburban corridors in Mumbai.

  • An Expressway Authority should be established for overseeing development and regulation of expressways.

  • Railway Board should be restructured.

  • Low-traffic two-lane highways should be developed through EPC (turnkey) contracts

High-Level Committee on Financing Infrastructure: To ensure there is no slippage in reaching the target of $1 trillion infrastructure investment, in July 2012 the government had revived the High-Level Committee on Financing Infrastructure. Deepak Parekh, then chairman of the Housing Finance Development Corporation (HDFC) was appointed as the new chairman of the committee. 

The committee was formed in November, 2010 under the chairmanship of former deputy governor of Reserve Bank of India, Rakesh Mohan, to review existing infrastructure policies and suggest necessary changes in the investment framework of the high-priority infrastructure sector. The committee has been mandated to assess infrastructure financing requirement by the central government, state governments and the public sector undertakings in the 10 key physical infrastructure sectors—electricity, roads and bridges, telecom, railways, irrigation, water supply and sanitation, ports, airports, storage, and oil and gas pipelines. 

The high-level panel had constituted five sub-committees to look into various critical issues pertaining to infrastructure financing such as availability of debt and equity, sourcing of overseas funds, estimates of the infrastructure investments and formulation of comprehensive data. 


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