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10/10/2020 - Infrastructure

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October 10, 2020

Reviving private investment in infrastructure will be key in post-COVID recovery in the country. Discuss  (200 Words)

Refer - The Indian Express

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IAS Parliament 1 year


·       Currently, the quantum of private financing flowing into the infrastructure sector has ebbed to around 20 per cent of the total funding, for reasons that are well known — the crisis in the non-banking finance sector, the financial challenges faced by infrastructure companies, and the inadequately developed Indian market for infrastructure financing.

·       The Economic Survey 2017-18 has assessed India’s infrastructure financing needs at $4.5 trillion by 2040. Reviving private investment flows into infrastructure creation to more sustainable levels of around 40 per cent will be key to attaining this threshold.

·       The challenge of ramping up private investments in infrastructure will need action on two fronts: Refreshing institutions and policies for channeling financing; and providing a stable, durable, and empowering ecosystem for private players to partner with government entities in the task of infrastructure-creation.

·       The Vijay Kelkar committee had put out a timely, practical, and balanced report in 2015 on overhauling the PPP ecosystem, including governance reform, institutional redesign, and capacity-building

·       Among the most difficult, but necessary initiatives, is the need to overhaul the culture and attitude towards the conjoining of government entities and private partners for creating specific pieces of infrastructure.

·        This attitudinal change can be facilitated if laws like the Prevention of Corruption Act are further amended to encompass modern-day requirements, including factoring in the need for government agents to take calibrated risks while engaging with the private sector.

·       Infrastructure projects typically have long-duration profitability cycles. The key to a successful PPP is to provide stable revenue flow assurances and a settled ecosystem to investors over long periods by means of policy stability, assurances possibly secured by law.

·       PPP contracts also need to provide for mid-course corrections given that the ecosystem surrounding the infrastructure piece, including utilisation patterns, as well as the creation of competing infra assets may necessitate a dynamic approach to aspects like risk and revenue sharing.




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