Poor infrastructure

Poor infrastructure impedes growth

A question that often comes to one’s mind is whether India would be able to reach a stage where it can provide adequate infrastructure in time. We have seen government setting targets that are time-bound and well-spelt in achievable phases with proper allocation of funds set aside in every Budget. But when we compare the progress of proposed infrastructure projects with the targets set, one sees large gaps. Out of 552 mega-projects being executed, 280 are running behind schedule. Whatever the reason, delay in completion of projects causes serious impact on the exchequer due to cost escalation resulting in huge losses.

In addition to financial implications, such projects result in shortage of infrastructure facilities at any given point of time. The current shortage of infrastructure is the result of lack of a definite process to guide us on planning ahead so that they are completed well within the set time frame. If we take a look at the current scenario, India lacks adequate infrastructure facilities in basic infrastructure (education, health, potable water, irrigation, power) and national security or secondary infrastructure (roads, ports, airports, industrial hubs, stadiums, hotels, railways, dedicated freight corridors etc).

The way we are developing our infrastructure will never match our requirements. Due to global warming and change in weather conditions, water level in northern parts of India has come down from 60 feet to 300 feet during the last ten years. After few years it may become very difficult to make available drinking water and food to our huge population. India needs to take corrective actions on urgent basis to overcome the shortages being felt in every field of infrastructure.

The most important step is of having a national policy on population. With a population of 35 crore at the time of independence, we currently stand at 120 crore and are expected to surpass China by 2030. This will put tremendous pressure on the current and future available infrastructure. It will also widen the gap between funds available and the funds required.

State authorities need to act fast to do whatever needed to make available funds to these ongoing projects. In case there is a need to change the legislation, the same must be done without any further delay. Another solution to the problem of making available funds to the infrastructure projects is to involve more and more private parties through the pubic-private partnership (PPP) route. No doubt, the government is doing every sincere effort to build infrastructure projects through the PPP model, but till now the response from the industry has not been up to the mark.

There are certain hurdles that need to be addressed immediately. Government must encourage companies like Infrastructure Finance Company Ltd to help provide long-term debt financing and refinancing to infrastructure projects. Funds at reasonable rates of interest, if made available, can further boost the speed at which these projects are being completed. Allowing banks to raise long-term funds through different schemes for reinvestment in infrastructure projects or extending long-term debts to infrastructure sector can help a lot to complete the projects without delay. Since India’s infrastructure sector needs about $700 billion over the next five years, allowing foreign direct investments with liberal regulations will help Indian companies to raise funds for further investment in the infrastructure sector.

An authority may be created with a responsibility to publicly advertise the details of all mega-projects awarded to different authorities/agencies with complete details as to the cost of the project availability of finances and the time limit for completion. The said authority must be asked to make public the progress of such projects periodically, to update the status of the projects under execution, and the cost overruns due to the delay in completion of projects, if any.

A law to protect the existing infrastructures from being damaged due to whatever reason needs to be enacted. Often roads and canals constructed by spending huge funds are damaged by different agencies. It should be the responsibility of the concerned department or any authorised officer to ensure that the damage so done is repaired and the asset is reinstated in its original form. Fixing of responsibility needs to be automatic. Similarly, there should be well-set time frame for the movement of files from one department to another with respect to infrastructure projects identified critical for development. In short, the government must act fast to overcome the shortages being felt in the infrastructure sector by ensuring that projects are completed well in time and by safeguarding the existing available infrastructure from getting damaged due to poor maintenance or any other means.

DILIP K RAINA –Chartered Accountant

B.Com; FCA (ICAI); PGDFM; PGDCA; DBM; Cert. IFRS (ICAEW); Microsoft Certified IT Professional: Application for Microsoft   Dynamics NAV.

The Financial Express

http://www.financialexpress.com/news/poor-infrastructure-impedes-growth/530611/

 

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