Financial Daily from THE HINDU group of publications
Friday, Nov 26, 2004
Industry & Economy
`Govt keen on public-private partnership'
New Delhi , Nov. 25
THE UPA Government is taking all possible steps to enhance public-private investment for promoting economic growth and poverty reduction in the country, the Finance Minister, Mr P. Chidambaram, has said.
Chairing the first meeting of the Parliamentary Consultative Committee attached to the Finance Ministry here on Thursday, Mr Chidambaram said that an enabling environment was necessary for attracting investment along with proper infrastructure and larger investible resources.
Asserting that revenue deficit meant dissaving, he emphasised that both the Government and the public sector must save and public expenditure should be reduced so as to free resources for investment.
Reiterating that the Government was committed to promoting public-private partnerships (PPP) for infrastructure development, Mr Chidambaram pointed out that the recent developments in the infrastructure sector, including roads and ports, were good examples of such partnerships. To support such projects, the Government has proposed to set up a special `viability gap funding' facility.
"Most of the infrastructure projects have a long gestation period and may not be fully viable on their own. Financial viability can be ensured through a mechanism that provides Government's support to reduce project costs," he said.
He said that to qualify for viability gap funding, the projects must be implemented with at least 40 per cent private equity in these specific sectors, namely, roads, railways, sea-ports, airports, power, water supply, sewerage and solid waste disposal in urban areas and international convention centres.
Responding to issues raised by the members during discussions, the Finance Minister stated that bank credit was very important for investment in different sectors. He, however, stressed that the Government, as the owner of the public sector banks, should only play an indicative role.
On the infrastructure front, Mr Chidambaram admitted that there have been some bottlenecks in ports, particularly at the Jawaharlal Nehru Port Trust. He however, indicated that this was because of a 35 per cent growth in imports and a 25 per cent growth in exports in the current year. This, according to him, was a healthy sign for the economy.
The highways sector was slack in the first quarter and is now picking up.
The slackness was because of the delays in awarding contracts in the first quarter due to the operation of the electoral code of conduct, he clarified.
The Finance Minister stated that a healthy debate is going on for the utilisation of foreign exchange reserves. Some respected economists have argued that the foreign exchange reserves should be used for infrastructure investment, while others are not in favour of it.
He assured the members that a final decision would be taken only in consultation with the Prime Minister, Dr Manmohan Singh.
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