There has been no dearth of policy pronouncements and re-engineering of processes aimed at improvement in the investment climate for infrastructure projects. However, there seems to be little headway insofar as achievement on ground is concerned. Let me highlight some disconcerting facts:
nOut of 576 SEZs that have received formal approval, only 172 are operational.
nAgainst a target of awarding road projects aggregating 50,621 kms during 2008-13, only 10,690 kms have been awarded. Many of the projects awarded have yet to see commencement of work due to problems in achieving financial closure, delays in land acquisition and obtaining environmental clearances.
Out of 16 Ultra Mega Power Projects planned, contracts for only 4 were awarded. Out of this only one has become operational and another is nearing completion and that too much beyond the scheduled dates. Even the one project that has commenced operations is running much below capacity. Lack of clarity on coal import, forest clearances and land acquisition delays are creating impediments.
Under the New Exploration and Licensing Policy for exploration of crude oil and natural gas, of the 251 blocks allotted, 110 have reported discoveries but only 6 are actually operational.
Having set the backdrop, let me begin by responding to an issue which has been made out to be a very crucial challenge in so far as financing of infrastructure projects go. Has bank finance been a constraining factor for infrastructure development?
It is pertinent to note that outside of budgetary support, that accounts for about 45% of the total infrastructure spending, commercial banks are the second largest source of finance for infrastructure (about 24%). Historically, contrary to popular perception, it is the commercial, more particularly, the public sector banks that have supported the infrastructure requirements of a growing Indian economy. It is worth highlighting that outstanding bank credit to the infrastructure sector, which stood at R72.43 billion in 1999-2000, has increased steadily to R7,860.45 billion in 2012-13, a compounded annual growth rate (CAGR) of 43.41% over the last thirteen years against an overall CAGR of bank finance to all industries at 20.38% during the same period. This apart, credit has also flown into infrastructure sector via NBFCs, mutual funds and capital markets, the source of bulk of which is bank finance. It may not, therefore, be correct to argue that lack of finance from banks has constrained the development of the infrastructure sector.
Banks have been substantially financing infrastructure projects in the country