NEWSLINKS
BUDGET 2000 LIVE!
BUDGET ON REDIFF
D&B BUDGET SPL
ECONOMIC SURVEY
RLY BUDGET
BUDGET: RUN-UP
BUDGET PROCESS
BUDGET HOTLINKS
Y2K BIZ FEATURES
INDIA & THE WTO
GOVT&ECONOMY
SPECIALS
INTERVIEWS
COMMENTARY
CREDIT POLICY
BUDGET 1999-2000
USEFUL INFO
ARCHIVES
SEARCH REDIFF

Reduce infrastructure sector's dependence on govt funds: survey

The Economic Survey 1999-2000 suggests drawing up of an organisational format to reduce the dependence of the infrastructure sector on government funds. This is to check the widening gap between demand and supply which threatens the sustainability of economic growth.

A series of measures suggested by the survey, placed in Parliament today, include privatisation of power distribution as part of reforming the loss-making state electricity boards and setting up of a statutory road cess to avoid a direct toll on road users.

Giving an overall view, the survey says the performance of most of the infrastructure and core industries has improved during the period, with electricity generation, petroleum products, transport and telecommunication ''doing well''. The steel industry is showing signs of recovery and the growth prospects of the cement industry look good.

However, the demand for infrastructure facilities and services continues to outpace supply.

''The signs of shortfalls in capacity are more clearly reflected in sectors such as roads, power and telecom. In aggregate sense, the widening gap between demand and supply of infrastructure continues to raise questions concerning the sustainability of economic growth in future.''

In order to sustain infrastructure growth, it is necessary to evolve an organisational format which will yield finances from the capital markets and result in generation of internal resources on a self-sustaining basis.

The potential for commercialisation and competition in infrastructure is more widespread than is commonly perceived, according to the survey.

It says private power projects cannot be sustained purely through credit enhancements like government guarantees and escrow mechanisms. This can only be done through reform of the SEB structure to bring efficiencies in generation, transmission and distribution operations.

While the potential for independent power projects is well known, the opportunities in power distribution are not so widely recognised. Privatisation of distribution would bring forth better monitoring of power supplied because the private entrepreneurs would have a stake in it. This, in turn, would be reflected in improved revenues by cutting distribution losses that originate from uncharged supplies.

On the road sector, it says a significant policy issue under consideration is on the desirability of shifting to annuity-based payments to operators and doing away with direct tolling. Annuity-based payments would imply that the government would have the advantage of deferred payments.

However, it is important to note that unlike direct tolling in a build-operate-transfer approach or the concept of shadow tolling, under annuity-based payments, the concessionaire assumes no revenue risk.

On ports, it says there is need to enhance productivity by developing a series of specialised minor ports, along the coastline in order to divert traffic from the congested major ports.

On railways, the surveys suggests that the sector needs to regain its share in freight traffic through qualitative capacity augmentation aided by corrective pricing policies and organisational changes.

Over the years, the railways have kept passenger fares low and the consequent losses are being met through cross-subsidy by the freight business. This cross-subsidisation needs to be contained.

UNI

Budget 2000 Live! | Budget on Rediff | Dun & Bradstreet Budget Special | The Run-up
Budget Process | Budget Hotlinks | NDA Government & Economy
Ministry of Finance: Economic Survey 1999-2000 | Budget 2000 document

Tell us what you think of this Budget 2000 coverage