The government is trying to work out various innovative funding options, including relaxing commercial borrowing (ECB) norms, to fund infrastructure projects. Sources indicated that with domestic interest rates remaining on the higher side, the government might relax ECB norms to make infrastructure projects more attractive to the private developer. Funds can be raised through the ECB route from various sources including from overseas commercial banks, multilateral financial institutions as well as export credit agencies. Liberalizing the end use of ECB will help construction companies raise cheaper finances. India would need an estimated $500 billion over the 5 years for the infrastructure sector. The government feels that lack of credible and bankable infrastructure projects along with absence of long-term financing instruments as the major weaknesses affecting the growth of the infrastructure sector in the country. “ECB scores over FDI in the above regard, as Indian companies raise ECB strictly to meet their specific requirement, while flow of FDI is on a selective basis, at the discretion of the foreign investors,” said an official. The government is also examining various options for active management of the country’s burgeoning foreign exchange reserves for infrastructure projects. A committee felt there is a need to find out suitable structures “that can effectively help in channeling these reserves for investment in infrastructure projects without the risk of monetary expansion.” Analysts feel the sector needs a regulator to make it risk free. Derisking is one of the critical issues the government should look into in the forthcoming budget. This will make the sector make attractive and allow the entry of many more players to make it attractive. In his last budget the finance minister had upped the spend on National Highway Development Programme Rs 10,667 crore. However, of the 7,300-km of North-South- East-Corridor connecting Kashmir to Kanya Kumari and Silchar to Porbandar, only 1,635 km was completed till December 31, 2007. Over 4,686 kilometers is under implementation and the government is yet to award contracts for completion of 821 kilometers. The Golden Quadrilateral connecting four metros is nearing completion. Of the planned 5,846 km, about 5,600 km has been completed. An unspent budgetary allocation from previous year for infrastructure spending to be carried forward is recommended. To sustain the targeted GDP growth, we expect the momentum of spending on infrastructure to be increased to 8 per cent of GDP.
Archive for March 4th, 2008
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FAITH FORWARD
March 4th, 2008 
krishna For decades now, moderate Islamists have spared no effort to convince the world that Islam and violence are incompatible. But so far, they have been preaching to the converted. After 9/11, Islam has come to be viewed with greater hostility than ever before, in great measure helped by acts of terrorism across the world in the name of the great religion. So it has come as a breath of much-needed fresh air that the influential Darul Uloom seminary in Deoband, long known for its hard line stand, has come out in no uncertain terms against the outrages being committed in the name of Islam. Its rector Maulana Marghoobur Rahman has said, “Killing of innocents is not compatible with Islam. It is anti-Islamic.” This is the first time that a religious institution has so strongly condemned violence in the name of Islam. Hopefully, the seminary’s statements will reverse the trend of equating Islam with the misguided actions of fanatics. Coming as it does from scholars and men who are held in high esteem in the community, it will be difficult for hotheads to challenge these statements. It is clear that there has been considerable internal debate and discussion before the Darul Uloom made its pronouncements. This will prove a shot in the arm for moderate Muslims not just in India but in the region who have been uncomfortable with the new jehadi Islamic tradition that has been promoted by certain sections. So far, the Indian Muslim community has been reactive in its public position, normally articulated after some terrorist outrage or the other. Now the Deobandis have broken that mould and assumed a proactive role. This will not only take the wind out of the sails of those within the community who have chosen to interpret Islam to serve their own nefarious ends, but also fundamentalists within the Hindu fold who have always been quick to equate Islam with terror. This provides a golden opportunity for clerics of other faiths to engage in dialogue with their Muslim counterparts in the true spirit of secularism as envisaged in our Constitution. India could well provide a framework to resolve inter-faith conflicts across the world if it can build on these positive developments and those in our region like the complete rejection of fundamentalist parties in Pakistan’s recent elections. If all concerned play their cards well, the ‘clash of civilizations’ could become an [...]
Will infra sharing lower telecom tariff?
March 4th, 2008 Tejinder The Indian telecom sector, consistently adding more than seven million monthly subscribers, is well on its way to reaching the 500-million subscriber mark by the end of the decade. To maintain the pace of this booming growth, operators need to invest towards network expansion and improved coverage in an effort to acquire newer subscribers. According to the Indian regulator, the country in order to reach its targets would need over 300,000 telecom towers, which is almost twice as many as those that exist today. Wire money online to India with Xoom.com for as low as $4.99. However, such proportions of network roll-outs translate into huge expenditures on part of the operators, who have come together to realise that the biggest way of reducing costs is by way of sharing passive infrastructure components. This not only immediately brings down capital and operating expenditures but also positively impacts their margins. The effects of sharing can be further highlighted by the fact that roughly two-thirds of the incremental subscriber acquisition cost of $90-100, is accounted for by the elements of passive infrastructure alone. Therefore, assuming a 550-million mobile subscriber base by 2012, an average tenancy of 1.8 per telecom tower, and an average cost of $62,500 (Rs 2.5 million) per tower, sharing arrangements can help the industry save a whooping $8.4billion (Rs 33,516crore) in capital expenditures. Apart from the lower capex, the savings on operating expenses at the same levels of sharing is expected to be in the region of $ 1.28 billion (Rs 5, 1 32.4 crore), indicating an industry saving of $ 3 billion in the year 20 12. The overall success and confidence in this business model has today led to the proliferation of several independent and operator -owned tower companies. With the downward trend of average revenues per user (ARPU), the wider aspects of such savings will be critical for the existing as well as the newer operators. The overall benefits of lower costs and increased competition will enable them to further lower tariffs, leading to the acquisitions of low value users of rural India. All said and done, better times are ahead for the millions of existing and potential Indian mobile subscribers. It will impact positively costs and tariffs. Telecom infrastructure sharing will have a positive impact on costs and tariffs – the extent and how soon the benefits are realized depends on the underlying environment and business [...]
CLARITY ON FISCAL INCENTIVE POLICY
March 4th, 2008 krishna In an effort to attain 9% growth, the biggest bottleneck is infrastructure. Also it is likely that it may attract the attention from Finance Minister P.Chidambaram in what would be the UPA government’s last Budget. Fiscal incentives and policy clarity on power, ports and road sectors is also expected to emerge. Estimates show that $ 500 billion will be required over next six years to make India’s infrastructure world class. Wire money online to India with Xoom.com for as low as $4.99. The need for a greater public- private partnership was under lined by the finance minister in the last budget. He under lined the need for a greater public-private partnership in the creation and maintenance of infrastructure. “The pace is slow, and there is need to adopt a more aggressive approach for preparing a shelf of bankable projects that can be offered for competitive bidding,” he had then stressed. There is a need for a regulator for the sector to make it risk free and wants unspent budgetary allocation of the previous year’s ear-marked for infrastructure to be carried forward, besides pointing out that greater public private partnership is essential to meet India’s huge infrastructure needs. What we need is an efficient regulatory framework for implementation of infrastructure projects. The states governments should have standard contract documents for public-private partnership projects. This will allow speedy implementation of projects at the state level. The government is required to increase its spending on the road and ports to sustain the present growth momentum. Chidambaram had hiked the expenditure on road infrastructure to Rs 10,677 crore in the last budget. Despite the economy slowing down marginally to 8.7 per cent in 2007-08 from an 18 year high of 9.6 per cent in 2006-07, observers feel the country’s fast accelerating trade will create huge opportunities in port infrastructure. There is one more sector ignored badly by the government. The power sector has been among the laggards in the scheme of things. A total capacity addition in the power generation sector has been to the tune of a mere 56,722 mega watt in the last 3 five-year plans, but the government has set an ambitious target of 78,577 MW capacity additions during the 11th Plan.
