National Infrastructure Pipeline (mint)

Mains Paper 3: Economy
Prelims level: National Infrastructure Pipeline
Mains level: Infrastructure projects

Context:

• The Union government has announced its plan to invest Rs 102 lakh crore in infrastructure projects across India that will be implemented between fiscal 2020 and 2025. This would be a significant increase over the last six years, when the Centre and States together spent Rs. 51 lakh crore on infrastructure.
• The new pipeline consists of 39 % projects each by the Centre and states and the balance by 22 % by private sector.
• Of the total project, capital expenditure sectors such as energy (24 %), urban (16 %), railways (13 %) and roads (19 %) are estimated to account for more than 70 % of the projected investments.

Key challenges:

• Identifying the projects to be put on the pipeline is the easy part, however, there are a few hurdles that the NIP task force needs to watch out for.
• Going by the present fiscal situation, it will be no small challenge for the Centre to raise Rs. 39 lakh crore, even if it is over the next five years, while the State’s fiscal capacity faces a crunch (more than 20 states already have a debt-GSDP ratio of above 25 per cent) to even meet already committed state expenditure.
• The Rs. 22 lakh crore expected from private investment also looks steep considering the lack of appetite for fresh investment by the private sector in the last few years. In fact, this factor has been a major drag on economic growth.
• Infra-based investments have to deal with extra-market factors involving delays in land acquisition processes, enforcement of contracts and delay in court-case resolutions and they take years, sometimes decades, to be actualised.
• This is precisely why many major banks, even in case of credible borrowers, remain cautious with long-term supply of loans. If not managed well, a private public working model may accentuate some of these worries, exacerbate debt ridden projects and crowd-out investments from private players.

Way ahead:

• A critical step in addressing dwindling private sector participation in infrastructure can be
  institutionalising dispute resolution mechanism to efficiently resolve disputes related to PPP projects.
• Investments must be made in the institutions created under the Commercial Courts Act 2015, the Specific Relief (Amendment) Act 2018 and the New Delhi Arbitration Centre Act 2019 for speedy resolution.
• The task force has suggested contract enforcement and asset monetisation among other reforms for achieving infra investment targets.
• Asset monetisation can be undertaken through sale of land, non-operational assets through long-term lease with significant upfront lease payment, toll-operate-transfer (TOT) model for operational road assets, infrastructure investment trusts (InvITs), sale of portfolio of assets to strategic/financial investors and loan asset monetisation through securitisation and value capture financing (VCF).
• All this will come to naught if there is no review mechanism, hence, a periodic review is paramount if this is not to degenerate into a mere collation and listing of projects.

Conclusion:

• While there are genuine obstacles that the task force needs to manage, these should not detract from the need for a concerted effort to invest in infrastructure.
• A well-planned NIP will enable more infra projects, grow businesses, create jobs, improve ease of living, and provide equitable access to infrastructure for all, making growth more inclusive and have a strong multiplier effect in giving a much-needed boost to the economy.

  Online Coaching for UPSC PRE Exam

  General Studies Pre. Cum Mains Study Materials

Prelims Questions:

Q1. With reference to the Farmer Producer Organizations (FPOs), consider the following statements:
1. The Cabinet Committee on Economic Affairs (CCEA) has approved a scheme for "Formation and Promotion of Farmer Producer Organizations (FPOs) " to form and promote 10,000 new FPOs.
2. FPOs will be promoted under "One District One Product" cluster to promote specialization and better processing, marketing, branding & export by FPOs.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: C
Mains Questions:
Q1. What is the National Infrastructure Pipeline? Highlight the challenges in the execution of National Infrastructure Pipeline along with the paths to work around the challenges.