Warring ministries, inconsistent policies have brought India's road sector to its knees

New Delhi: Lack of consistency in policies needs urgent redressal apart from removing procedural bottlenecks to keep India’s infrastructure ball rolling, the government said today.

“Removing procedural bottlenecks, improving governance, and above all maintaining consistency in government infrastructure policies are some issues that need to be urgently addressed” for sustainable infrastructure development, the pre-budget Economic Survey tabled in Parliament by Finance Minister Arun Jaitley said.

The key document expressed concerns that as many as 110 out of 239 central sector infrastructure projects, each costing Rs 1,000 crore or above, have reported delays, which range up to 26 months in case of steel, coal, power and petroleum projects.

“The total original cost of implementation of these 239 projects was about Rs 7,39,882 crore and their anticipated completion cost is likely to be Rs 8,97,684 crore, implying an overall cost overrun of Rs 1,57,802 crore (21.3 per cent of the original cost,” it said.

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It said: “Infrastructure will continue to be a bottleneck for growth and an obstacle to poverty reduction” unless sectors particularly transport, energy and communication, putunder enormous burden due to recent years rapid economic growth, are significantly improved.

Also, it stressed the need for tackling on war-footing issues like problems in land acquisition, delays in regulatory approvals and environment clearances.

Pinning hopes on revival of investment it said, “Need has been felt to kickstart stalled infrastructure projects by stepping up infrastructure investment and increased privateparticipation will usher in desired funds”.

Government is promoting public-private-partnership for bringing private sector efficiencies in creation of economic and social infrastructure assets and for delivery of quality public services.

By end of March 2014, there were 1,300 projects in the sector with the total project cost of Rs 6,94,040 crore, it said adding to promote PPP, government is providing viability gap funding, support for project development, capacity building programmes and other tool kits, the survey said.

The survey mentioned that while growth in power and fertilisers segments was higher, sectors like coal, steel, cement and refinery witnessed lower growth.

“In the road sector, the National Highways Authority of India (NHAI) posted negative growth of 33 per cent during 2013-14 as compared to the 26.5 per cent growth during2012-13,” says the Survey.

As the survey highlights lack of consistency in government policies, the Transport Ministry last week had also blamed inconsistency in policies as well as warring ministries for bringing India’s road sector to its knees.

Stressing on the present model of infrastructure contracting and financing needs to be reexamined, the Survey said infrastructure projects are best financed through corporate bonds but “in the absence of a vibrant corporate bond market, projects have resorted to borrowing from banks and in foreign currency”.

It said in a sound financial system the leverage of a project should be determined by financial terms but here they were mechanically set using rules such as 70:30 for debt equity.

Giving details of financial infrastructure, the survey states that the latest available data on gross deployment of bank credit to major infrastructure sector shows that the rate of growth of bank credit moderated from an average 44.8 percent in 2011-12 to 17.7 percent in 2013-14.

Power sector had an over 50 percent share in total credit flow to infrastructure while both in terms of share in total credit to infrastructure and rate of growth, the telecomsector witnessed consecutive decline in the last three years.

It said the government has put in place a liberal FDI policy, under which FDI up to 100 percent is permitted under automatic route in most sectors/activities.

“As a result, total FDI inflows into major infrastructure sectors registered a growth of 22.8 per cent in 2013-14 as compared to the contraction of 60.9 per cent during 2012-13,“the Survey added.

The Survey recognising the need for streamlining environmental clearances of infrastructure projects, it said, “There is a need for better and more effective coordination amongst various central ministries/institutions regarding integration of environmental concerns at he inception/planning stage of a project”.

The Survey said a score of measures have been initiated to develop the sector including formation of a harmonised master list of sub sectors besides setting up of a Cabinet Committee on Investment (CCI) under the Prime Minister to expedite clearances and decisions on mega projects.

The CCI has cleared 303 projects with an aggregate investment to the tune of Rs 6,95,437 crore by February 2014.

About Highways sector it said over-leveraged firms made mistakes in bidding on over-exuberant traffic projections and only 1901 km length could be added in 2013-14.

“National Highways Authority of India posted negative growth of 33 per cent during 2013-14 as compared to the 26.5 per cent growth during 2012-13.

Performance of coal sector has been subdued and to meet the deficit country resorted to imports of 169 MT in FY 14.

It said power generation fell short by nearly 8 billion units of the target of 975 billion units in the last financial year but it was 6 per cent higher compared to 2012-13. It has added 38,583 MW capacity till April 2014 as against a target of 88,537 MW for the 12th Five Year Plan, it said.

Telecom sector, it said, has registered phenomenal growth during the past few years and has become the second largest telephone network in th world, next only to China.

PTI