Infrastructure: Implementation is the key - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Infrastructure: Implementation is the key

Feb 28, 2001

One of the most critical factors for faster growth of the economy is to progressively increase investments in infrastructure. This is one of the areas where India has been lagging due to the dismal health of the central government finance and lack of second-generation reforms to boost such investments. Realizing the need to boost this, the finance minister has initiated a slew of reforms in Budget 2002. Higher allocation for road and electrification…
A central allocation of Rs 25 bn was provided for 2000-01, which has been increased to Rs 50 bn for the coming year. This additional provision is to be met through the 50% of the diesel cess. The government has also targeted the completion of electrification of bulk of the remaining villages in the next 6 years. Towards this, the ministry has earmarked a sum of Rs 7.5 bn out of Rural Infrastructure Development Fund (RIDF) for rural electrification works.

User charges to be levied…
On the infrastructure front, one of the main challenges lies in the imposition of appropriate user charges to provide adequate returns on investment for public utility service companies. Due to political reason, there exists huge cross-subsidisation of user charges. Non-merit subsidies in such low user charges have mounted to over 10% of GDP, a figure similar to the total fiscal deficit of the Central and State Governments combined. Hence, they are a major cause of the fiscal distress being experienced at all levels. Therefore, the government has plans to impose appropriate user charges in such a manner that the poor are protected while those who can pay are made to do so.

Power: T&D loses to be reduced…
Power is one of the key areas where the government plans to increase its focus because this has an indirect influence on economic growth. The total cost to the State Electricity Boards (SEBs) of implicit subsidies amounts to about Rs 360 bn this year. After accounting for cross subsidy and state subventions, actual commercial losses of all SEBs combined are estimated to be about Rs 240 bn. The Finance Minister pointed out the extremely higher Transmission and Distribution (T&D) loses, which should be regulated for better operational efficiency of SEBs.

The Finance Minister also pointed that the total dues owed to Central Government utilities by SEBs and others now amount to over Rs 250 bn. If these resources were available, the country would have no difficulty in investing adequately in power sector expansion to the benefit of all. So, theft of electricity must be stopped and economic tariffs should be levied to make these units viable.

The ministry has also envisaged a time bound programme for installation of 100% metering by December 2001. Besides, increase in plan allocation to the Accelerated Power Development Programme (APDP) has been proposed (allocation to go up to Rs 15 bn from Rs 10 bn in the current year).

Convergence bill proposed…
By March 2001, overall tele-density is expected to reach 3.5 per hundred from the existing level of around 2.5%. There are now almost 800,000 STD/ISD/calling booths around the country bringing telephone service within reach of almost all consumers, apart from generating considerable employment. To provide a impetus to this sector, the Government proposes to introduce the Convergence Bill to cover telecommunications, information technology, and information and broadcasting sectors in an integrated manner.

Ports to handle more tonnage…
Coming to the port sector, the policy initiatives designed to increase private sector participation in ports is expected to increase the port handling capacity in coming years. Overall, capacity in Indian major ports is expected to go up to 314 m tonnes this year and further to 376 m tonnes by the end of 2001-2002, along with substantial capacity addition in minor ports. Besides, Ennore port has already been corporatised and Jawahar Lal Nehru Port in New Mumbai is slated for corporatisation in FY02.

Implementation is the key…
There is no doubt that these measures would significantly accelerate infrastructure spending, which in turn would lead to higher GDP growth. But given the historic performance of various governments and promises Vs performance, it creates apprehension about implementation of these envisaged projects. Having said that, government should realise the need to achieve higher growth and adhere to its promises.

Equitymaster requests your view! Post a comment on "Infrastructure: Implementation is the key". Click here!


More Views on News

BSE Sensex Surges 510 Points; ONGC Among Top Gainers (Market Updates)

Sep 28, 2020 | Updated on Sep 28, 2020

The BSE Sensex Surged 510 Points; ONGC Among Top Gainers. Find the latest update, special reports and news on all time high gainers of BSE Sensex at

Data is the New Oil but It's Also the New Sugar. Here's How to Fight it (Profit Hunter)

Jun 1, 2020

Is too much data hurting your quest for market beating returns?

Quantum Mutual Fund: Hum woh nahi hain (The Honest Truth)

Apr 29, 2020

Ajit Dayal on how the mutual fund industry robs you of your wealth.

This One Trigger Could Turnaround Yes Bank's Stock Price (The 5 Minute Wrapup)

Oct 16, 2019

If Yes Bank manages to do this, it could be the start of a much-needed turnaround for the bank.

Gold could Hit 40,000 Sooner Than Expected (Profit Hunter)

Aug 16, 2019

Domestic gold prices are firing on both engines now. Gold prices could touch 40,000 faster than you could imagine.

More Views on News

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms