FM announces panel to streamline private

participation in infrastructure
Expects $350 b investment in Infrastructure in 11
th
Plan

The Finance Minister today announced the constitution of a high-powered
committee under the chairmanship of Deepak Parekh to examine critical issues
concerning private investment in infrastructure. Mr. P Chidambaram announced
this at a National Conference on Private Investment in Infrastructure organized
by the Confederation of Indian Industry (CII) here on Wednesday. The committee
will submit its report in six weeks.

PPP is an attempt to marry the skills of the private sector with public interest,
Mr. Chidambaram said. Public-Private Partnerships are key to raising resources
for investment in Indian infrastructure.

The Planning Commission has set a target of $350 billion of investment in
infrastructure during the 11
th
Five Year plan, the Minister said. There is no room
for wasteful expenditure for high sounding programmes, which do not deliver
results.

India Infrastructure Finance Company Ltd will soon be entering the market to
raise funds, the Minster said. The government intends to provide a sovereign
guarantee of Rs 10,000 crore annually. A total of 13 projects have already been
approved under the PPP route, with a total investment of $1.25 billion.

The private sector should have an appetite for working on long-term projects with
the public sector. Concerns about affordability and the ability to pay must be
reconciled. PPPs need clearly defined roles to cater to the needs of the people,
he said.

The Ministry of Finance is also working to build capacity measures along with the
critical issue of funding. What we need is the total involvement of state
governments in creating large infrastructure projects, Mr Chidambaram
mentioned.

Economic regulators need to be more independent of the government and other
players in the market, he said. In addition, there is a need to get a fix on the total
investment expected from the private sector. The government and its private
partners need to do more to work out long term financing needs.

Managing Director, IDFC Ltd, Dr. Rajiv B Lall said the allocation of risk is a
critical issue. For a successful PPP, the government needs to shoulder its share
of responsibility instead of passing it onto the private sector. The role of a
regulator is also very important, as it is the natural monopoly that dominates.

Equity funding can contribute about Rs 20 billion. We need to generate as much
foreign equity financing, Mr. Lall said. Insurance companies and pension firms
should be allowed to take on these projects. The government is required to make
securitization in domestic market and offshore more attractive. IDFC and CII
should jointly sponsor a series of institutes in creating the PPP mindset.

President, CII, Mr. R Seshasayee said the focus of the discussions were to
identify the roadblocks to achieving the target of $350 billion. Investments need
to flow easily in order to achieve global infrastructure. The perception and
management of risks is a critical issue.

Private sector is alone the solution for infrastructure development, Mr.
Seshasayee said. Water as an infrastructure is a key to development. CII
intends to sectorally sit with the stakeholders and work on a time bound plan.
Also, CII shall visit different states and put more projects on the shelf.

Chairman of CIIs Infrastructure Council Vinayak Chatterjee said of the $350
billion, the private sectors contribution would be 22 percent, or $77 billion. The
rest would come from the government.


New Delhi,
20 December 2006