Govt in a fix over new core investment plan

NEW DELHI: The government may find it difficult to come up with a fresh plan to boost infrastructure investment in the next budget, as the two significant ongoing initiatives for the sector have not found many takers. Government officials said there has been negligible offtake from the Rs 40,000-crore fund set up by several banks as the Inter Institutional Group in budget '04-05, and an equally poor response to the Rs 2,000-crore viability gap funding, established in '03-04. The officials also said, with interest rates hardening in the economy, the shelf of viable infrastructure projects have begun to thin out even more. According to them, this is one of the reasons why the plan to use foreign exchange reserves to finance infrastructure projects, has not got an enthusiastic response from the MoF. Corporate lawyers, specialising in drawing up concession agreements for infrastructure projects, said the picture could change once the modernisation projects for metro and non-metro airports take off. They are also hopeful of action on construction picking up steam in railways' version of the golden quadrilateral project, as clients have approached them to work on both these sectors. But it is the slowdown in the pace of road projects that has hurt the infrastructure sector the most, they said. FM P Chidambaram, has recently said that the schedule for completion of the golden quadrilateral has been pushed back to December '05. In his maiden budget, Mr Chidambaram had set up the IIG with IDBI, IDFC, ICICI Bank, SBI, LIC, Bank of Baroda and Punjab National Bank. They will pool their resources on a callable basis, and a sum of Rs 40,000 crore will be made available as and when necessary, he had said. The minister had stated that IIG will ensure speedy conclusion of loan agreements and implementation of infrastructure projects, especially in airports, seaports and tourism. The earlier budget of '03-04 had established a mechanism for viability gap funding. Since infrastructure projects usually have a risk element for which banks are reluctant to provide cover, the mechanism was expected to finance such components, to make them bankable. Latest monthly growth figures for the infrastructure sector bear out the problem. The rate has slipped to 5% in November '04, recording a 1% lower rate compared with last fiscal. However, this is slightly better than the index for October, which was lower at 4.6%. The cumulative growth rate for the current fiscal year has dropped to 5.8%, which is just above the 5.4% logged by the economy for the same eight month period of '03-04.

Govt in a fix over new core investment plan

The government may find it difficult to come up with a fresh plan to boost infrastructure investment in the next budget, as the two significant ongoing initiatives for the sector have not found many takers.

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