Against the backdrop of global pandemic and a severe lockdown, government unveiled a road map with elevated capital investments of Rs 111 lakh crore in infrastructure over six years through FY25, with 71% of the expenditure for energy, roads, urban development and railways, and watermarking a key role for private investors.
The task force under DEA submitted its final report on the “National Infrastructure Pipeline” (NIP) to the Finance minister. An interim report of the task force was already released in December 2019, which had envisaged investments of over Rs 102 lakh crore between FY20 and FY25.
The latest report has called for a set of reforms and suggested ways of financing it by deepening the corporate bond markets (including those of municipal bonds), setting up development financial institutions for the infrastructure sector, accelerating monetisation of infrastructure assets and land.
According to an official statement, of the total expected capital expenditure of Rs 111 lakh crore, projects worth Rs 44 lakh crore (40% of NIP) are under implementation, projects worth Rs 33 lakh crore (30%) are at the conceptual stage and those worth Rs 22 lakh crore (20%) are under development. The highest investments are proposed for the energy sector (24%), followed by roads (18%), urban development (17%) and railways (12%).
The Centre (39%) and the states (40%) are expected to have almost equal share in implementing the infrastructure pipeline, followed by the private sector (21%).
The government aims to raise the share of the private sector to 30% in coming years. This requires reforms in the way the PPP model is designed, given the poor response of the private sector to such projects over the years.
Investments in infrastructure will be key to ensuring that India recovers from the Covid-19 crisis at the earliest. Already most of the agencies both domestic and international have projected negative economic growth for the country for FY21, with a fragile recovery is expected in the next fiscal.
The task force has recommended that three committees be set up: One panel will monitor the NIP progress and eliminate delays; a steering committee in each infrastructure ministry for following up implementation; and a steering committee in the department of economic affairs in the finance ministry for raising financial resources for the NIP.
A NIP project database will shortly be hosted on the India Investment Grid (IIG) to provide visibility to the NIP and help in its financing with prospective investors, both domestic and foreign. Each ministry/state would further add new projects and update their respective project details at pre-defined time intervals so that updated data are available to prospective investors.
While releasing the interim report in December 2019, the FM had said the proposed spending would be front-loaded and backed by concomitant reforms in various areas public-private partnership models, enforcement of contracts and dispute resolution to achieve intended results. These projects will on top of the Rs 51 lakh crore spent by the Centre and the states in the last six years.