The Hindu Business Line : `Provide microfinance to pep up rural infrastructure'

RURAL BETTERMENT: The Prime Minister, Dr. Manmohan Singh, with Dr Bimal Jalan, President, NCAER, and Mr Suman Bery, Director-General, at a meeting in the Capital on Sunday. — Ramesh Sharma

New Delhi , Dec. 17

The India Rural Infrastructure Report 2006 has come up with a slew of suggestions for expanding rural infrastructure coverage in the country.

The suggestions include providing microfinance to build local demand, better targeting of subsidies, encouraging private providers and the need to dismantle entry barriers to small service providers, as there are legal hurdles that prevent local investments in rural areas.

The report noted that major gaps exist both in infrastructure coverage and needed investments in the four sectors — power, telecom, roads and transport and water and sanitation — that have been studied.

For non-poor, the new approach mooted in the report would involve limiting access to the infrastructure sector to only those who are willing to pay for such services. The consumption of infrastructure services by the poor would, however, continue to be free or largely subsidised.

While noting that rural infrastructure provisioning may always have to be subsidised, the report called for better targeting of subsidies and suggested that public transfers could be used to attract other sources of funding into the sector in the form of interest subsidies to small service providers or as microfinance to consumers. Alternatively, it mooted a one-time subsidy in the competitive bidding process to attract private providers to set up services.

"In a changing environment that includes multiple providers of service, public transfers can no longer be monopolised by the incumbent public service provider," the report, released on Sunday by the Prime Minister, Dr Manmohan Singh, said.

On the gaps in infrastructure coverage, the report said that nine-tenths of rural households do not own telephones. Half do not have domestic power connections, and even the connected households are without power because of outages for almost 17 hours a day in monsoon months and 13 hours a day in other months.

Moreover, half of all people living in habitations away from a main village do not have access to all-weather roads. Almost eight-tenths of rural households have no access to sanitation facilities.

The NCAER report has given a broad idea that the expected investment required for full coverage on rural infrastructure is Rs 1,58,313 crore (at 2002-03 prices). In the telecom and power sectors, the investments required for full coverage are Rs 92,690 crore and Rs 55,243 crore respectively.

The total investment of Rs 1,58,313 crore for new asset creation is actually small percentage of the total amounts needed.

While the Central Government provides capital for initial investment, the States are responsible for operations and maintenance of these assets.

The report has recommended that micro-finance be offered to build demand.

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