The finance ministry has instructed infrastructure departments to locate projects that have the potential for execution through private partnership, as conveyed by an informed individual.
The intention behind this action is to attract a larger amount of private capital into public infrastructure and to minimise the setbacks in project execution. The individual mentioned that there will also be a focus on enhancing the flow of funds into sectors like urban infrastructure, railways, and roads. In these sectors, private participation is either minimal or falls short of being impressive.
For the current financial year, the ministry is planning to introduce a new architecture for public-private partnerships (PPPs) and a standard model concession agreement (MCA) framework for various infrastructure sectors.
As per the anonymous source, "Although the government has taken significant measures to increase capital expenditure in recent years, it is also important to involve private entities more, given the substantial funding requirements in the infrastructure sector."
The proposed MCA framework will function as a standard reference document for different infrastructure departments and government-run entities. It will provide them with the necessary flexibility to incorporate clauses that are specific to their respective sectors. The main focus will be on ensuring that the projects are financially viable and attractive to private investors.
This move comes at a time when there is a gradual resurgence in broader private investments, with senior industry executives anticipating a widespread recovery in the year 2023-24.
The government is also encouraging central public sector enterprises (CPSEs) to increase capital expenditure without any delays.
In April 2020, a government task force working on the National Infrastructure Pipeline (NIP) had projected capital investments amounting to Rs 111 trillion by 2024-25. The distribution was expected to be almost equal between the Centre (39%) and the states (40%), followed by the private sector (21%).
However, due to the pandemic, the revival of private investments was postponed as companies deferred their expansion plans. Consequently, the government significantly increased its capital expenditure to stimulate economic growth, banking on its substantial multiplier effect.
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