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Fiscal incentives, policy clarity likely to emerge

Infrastructure is likely to attract major attention from Finance Minister P Chidambaram in what would be the UPA govt’s last Budget, reports Samiran Saha.
By Samiran Saha | Hindustan Times, New Delhi
UPDATED ON FEB 21, 2008 09:26 PM IST

Infrastructure, the biggest bottleneck to sustaining 9 per cent growth, is likely to attract major attention from Finance Minister P Chidambaram in what would be the UPA government’s last Budget.

Fiscal incentives and policy clarity on power, ports and road sectors is also expected to emerge.

Estimates show that $500 billion will be required over next six years to make India’s infrastructure world class. In the last budget, Chidambaram had underlined the need for a greater public-private partnership in the creation and maintenance of infrastructure. “The pace is slow, and there is need to adopt a more aggressive approach for preparing a shelf of bankable projects that can be offered for competitive bidding,” he had then stressed.

Analysts feel the sector needs a regulator to make it risk free and wants unspent budgetary allocations of the previous years earmarked for infrastructure to be carried forward, besides pointing out that greater public private partnership is essential to meet India’s huge infrastructure needs.

“What we need is an efficient regulatory framework for implementation of infrastructure projects. The states governments should have standard contract documents for public-private partnership projects. This will allow speedy implementation of projects at the state level,” feels Harsh Shrivastava, senior vice president of Feedback Vnetures.

Analysts feel the government needs to increase its spend on the road and port to sustain the present growth momentum.

Chidambaram had hiked the spend on road infrastructure to Rs 10,677 crore in the last budget. Despite the economy slowing down marginally to 8.7 per cent in 2007-08 from an 18 year high of 9.6 per cent in 2006-07, observers feel the country’s fast accelerating trade will create huge opportunities in port infrastructure.

According to estimates, traffic at ports across the country is estimated to increase at an compounded annual growth rate of 7.7 per cent from 465 metric tonne now to 876.70 metric tonne in 2011-12.

The total investment required in major ports by 2012 is estimated to be $14 billion of which $3 billion for container terminals, $3 billion towards berths for petroleum and oil lubricants, $3 billion for other cargo berths and $2 billion for capital dredging.

However, the power sector has been among the laggards in the scheme of things. A total capacity addition in the power generation sector has been to the tune of a mere 56,722 mega watt in the last 3 five-year plans, but the government has set an ambitious target of 78,577 MW capacity addition during the 11th Plan.

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