India needs over $40 bln for infrastructure financing

New Delhi, Oct 13 (UNI) India needs over 40 billion dollars for financing infrastructure requirement in the next five years, industry body Assocham said today.

The chamber also suggested that the role of long-term financial institutions such as insurance companies, provident and pension funds and NBFCs be enhanced for financing infrastructure projects.

''Targeted access to long term debt finance from overseas would help. As for intermediation, the committee observed that even though the bank credit to infrastructure has been growing rapidly, it would be neither feasible nor desirable for banks to finance the bulk of incremental financing needs,'' Assocham President Anil K Agarwal said.

Mr Agarwal said the role of long-term financing institutions such as insurance companies, provident and pension funds and NBFCs has to be enhanced. To do so, the corporate bond market needs to be strengthened by implementing the Patil Committee recommendations expeditiously, he added.

Mr Agarwal said priority needs to be given to the recommendations relating to the development of market for securitised assets. Some liberalisation is necessary in the investment guidelines of these institutions, matched by greater reliance on the judgement of the boards managing them.

Dr Rajiv B Lall, Chairman, Assocham Infrastructure Committee said that domestic savings need to be supplemented by limited access to foreign savings with priority for foreign equity capital as India would need foreign equity of 5-7 billion dollars per year in infrastructure.

Dr Lall said, ''in policy and regulation, the committee focused its attention primarily on road, urban and power sectors, while acknowledging the Government's increasing commitment to establish clear and stable regimes in all infrastructure sectors.

In the road sector, the committee noted that the state highways--which constitute four per cent of road network, but carry 40 per cent of traffic are grossly under-funded and recommended that the facilitating framework created by Madhya Pradesh should be replicated in other states.

The key components of the Madhya Pradesh model include a special legislation for state highways, a master-plan (including a comprehensive database, a schedule for implementation based on prioritisation and identification of corridors for PPPs) and creation of a state highway authority.

The Central Government needs to play a more active role in steering development of state highways and formulating a common framework.

The Infrastructure Committee of Assocham has identified some initiatives that would strengthen the three pillars of infrastructure: availability of long-term finance, policy and regulatory frameworks and capacity to implement those frameworks, said Dr Lall.

In the urban sector, it was noted that fiscal autonomy of urban local bodies is critical for efficient delivery of urban infrastructure services and that to promote autonomy, there is a need for a new (own) tax for ULBs.

The Committee recommended the introduction of a Local Benefit Tax (say 1 per cent of the sales turnover at the final stage), while reiterating the need to continue with the ongoing property tax reforms.

More UNI SBA DKS RS1951