As the Centre is able to spend less than 15 per cent of its entire expenditure budget on creating capital assets, the only way left for India to build infrastructure such as roads, ports and airports is to push the public-private partnership (PPP), an ASSOCHAM study pointed out.
Of the total expenditure of Rs 14.90 lakh crore budgeted for the current financial year, only Rs 2.04 lakh crore would be spent on building the capital assets, under the head ‘capital expenditure’.
This is almost near about the money the government would end up paying for major subsidies. Although Rs 1.80 lakh crore has been provided for the major subsidies like food, fertilizer and oil, the initial trends show that the government will end up paying more than this amount.
The money earmarked for the capital expenditure is much less than the Central Government has to pay for interest on its borrowings. As much as Rs 3.19 lakh crore would be paid for the interest payments. In fact, the interest payments would claim more than half of new borrowings of Rs 5.14 lakh crore that the government would resort to in the current fiscal of 2012-13, as per the Budget estimates.
Of the total expenditure of Rs 14.90 lakh crore as much as Rs 9.69 lakh crore is the non-plan expenditure. Even out of the Plan expenditure of Rs 5.21 lakh crore, Rs 4.20 lakh crore has been earmarked for the revenue account.
“That leaves a big question as to where the resources are going to come from for building roads, hospitals, colleges, ports and airports. If we have to achieve our aspiration of reviving and maintaining plus eight per cent GDP growth, we desperately need this basic infrastructure. Otherwise, our manufacturing, service and the social sectors would suffer from high rates of inefficiencies and cost escalations,” the ASSOCHAM study said.
It said the only option left is to go in aggressively for the PPP model of development for which a greater clarity is required in terms of assuring transparency, reasonable return to investors and a fair deal to the users of infrastructure like highways, airports.
Looking at the PPP framework, the sectors that have been largely tapped under the Public-Private mode are Roads, Urban Infrastructure, Ports, Tourism, Highways and Railways. Of these, the projects under PPP have been the highest in the Roads Development Sector. Whereas, PPP projects should be further explored in sectors like Education, Healthcare and E-Governance. Further, there are many PPP models in various sectors, which are in the pipeline and have to be implemented.
The Government of India at present needs to focus on PPP capacity building, though there are states and municipalities which have encouraged capacity building programmes under the PPP mode. The potential to work in a public-private framework has been encouraged in many states of India.
As per the study, the Southern states, Karnataka and Andhra Pradesh account for the highest number of PPP projects, followed by Madhya Pradesh, Gujarat and Rajasthan. This depicts that state governments at their level are implementing the PPP projects to undergo extensive transformation to create capital assets.
Press Release, October 16, 2012