The Economic Survey has pointed out the lack of private capital expenditure in key infrastructure sectors, stating that the level of capital expenditure (Capex) from the industry has not been “to the extent desired.”
Between FY19 and FY23, the central and state governments contributed 49 per cent and 29 per cent of the total investments, respectively, while the private sector contributed 22 per cent, the survey noted.
“For India to continue down the path of building quality infrastructure, a higher level of private sector financing and resource mobilisation from new sources will be crucial. Facilitating this would not only require policy and institutional support from the central government, but state and local governments would have to play an equally important role,” the Centre said in its segment on the way forward for infrastructure growth.
International experience shows how initiatives at the sub-national level can facilitate resource mobilisation for infrastructure development, the report noted.
“Examples include pooled financing mechanisms for municipal projects, specialised municipal intermediaries, asset recycling programmes, tax increment financing, and land sales and development rights, among other innovative approaches. Each of the measures witnessed broad-based implementation, succeeding in mobilising finances for critical infrastructure projects,” it said.
The government also noted that new, industry-friendly modes of infrastructure development such as the Hybrid Annuity Model (HAM) have been introduced, but their application has only been limited to sectors like roads and water.
The Centre said that lumpy capital investment, long payback periods, and difficulty in mobilising large equity and debt at affordable costs are bottlenecks hindering private sector investments.
Project structuring issues related to risk estimation, allocation and mitigation, delays in getting clearances and land acquisition, lack of an independent regulator for infrastructural sectors, contractual issues, and inadequate arrangements for dispute resolution and arbitration, leading to prolonged litigation, were also factors pointed out.
First Published: Jul 22 2024 | 7:42 PM IST