FUNDING INFRASTRUCTURE : A SIMPLE SOLUTION

Private Sector in Infrastructure ?

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Business Line ( 27 July ) carries a report titled :

“ Niti Aayog Chief says , govt should exit infra , jails , schools “

At a summit organized by FICCI , Shri Amitabh Kant ( CEO – Niti Aayog ) said :

“ The government has done a lot of big projects but it is not good at operation and maintenance . Therefore , the government must start the process of Reverse BOT ( build , operate and transfer ), must sell out projects and let the private sector handle it

We must bring in the private sector

That is the fastest way to bring in private sector and bring private sector money back in infrastructure . These projects are fully de-risked

The country needs to move into new areas of PPP

There is no need where jails , schools , colleges should be run in government sector . At least experience of many countries like Canada and Australia shows that private sector is capable of doing very good work in creation of quality infrastructure “

Dear Shri Amitabh Kant :

There is no doubt that India’s private sector players would welcome such a move on part of the governments ( Central + States )

Private sector is better at delivery because it is driven by PROFIT MOTIVE ( - not expected of the governments ) and its officers are subject to INSTANT SACKING , if they fail to make profit ( unlike government servants who enjoy life-time job security , no matter , how much losses the projects make )

Even leaving aside jails / schools / colleges , India needs $ 1000 BILLIONS in the next 10 years , just for Railways / Roads / Ports / Airports / Renewable Power / Electric Cars ( to replace 200 million petrol / diesel cars by 2030 ) / Internet Broadband / Airlines etc

Shri Dharmendra Pradhan says , petroleum sector alone needs $ 300 BILLION over the next 10 years

And you have just cleared 6 proposals involving Mass Rapid Transportation Technologies , such as Hyperloop , Metrino, Pod Taxies , Stadler buses , Hybrid buses and Freight Rail Road, with a condition that the Transport Ministry conducts trial run of all these technologies ( - under experimentation even in advanced economies )

From where will Transport Ministry find funds for these “ Unproven “ systems , requiring thousands of crores of rupees , and little assurance for “ Profits “ ?

Then there are NPAs ( valued at Rs 10 lakh*crore , in Coal based power plants / Telecom etc ), haunting the banks ! 

Banks reeling under these NPAs , are unwilling to lend for :

·         Untried / Untested / Un-proven technologies ( even in other countries )

·         Restarting of hundreds of “ Stalled “ projects

·         Take over by the private sector of Govt projects ( divestment ) , with accumulated losses of thousands of crores , making “ Reverse BOT “ , a difficult proposition ( even if government writes of debt and give VRS to employees )

No wonder , Shri Arun Jaitleyji is complaining that the Private Sector is not investing enough in the Infrastructure Projects

Given this non availability of “ LOW COST / LOW RISK “ funds , I have serious doubts that our Infrastructure could witness a quantum jump , any time soon !

The only way out is :

AMNESTY SCHEME  for investment of  BLACK MONEY  in  INFRASTRUCTURE SPVs

Here is a hint on how India can raise that $ 1000 Billion for Infrastructure :

( Source : https://www.bloomberg.com/news/articles/2017-07-26/indonesian-parliament-passes-law-to-chase-tax-evaders-overseas )

Indonesia Passes Law to Chase Tax Evaders Overseas

Indonesia moved a step closer to hunting down tens of billions of dollars it believes its citizens have hidden abroad after political parties agreed to seek a parliamentary approval for a law that will give tax officials access to financial data held by other countries.

A meeting of various political parties on Wednesday agreed to seek the parliament approval to turn an emergency rule in lieu of law, known as perpu, into a law at a plenary session on Thursday, said Johnny G. Plate, a lawmaker and member of Commission XI.

The law will fulfill a requirement for Indonesia to participate under the Organisation for Economic Co-operation and Development’s Automatic Exchange of Information framework.

The law will pave the way for Southeast Asia’s biggest economy to ramp up tax collection by getting better access to information on any assets parked in jurisdictions such as Singapore and Hong Kong.

While a tax amnesty launched last year uncovered more than $360 billion

Finance Minister Sri Mulyani Indrawati has estimated another 185 trillion rupiah ( = $ 14 Billion ) in tax revenue could be unlocked under the AEOI framework. Indonesia, which has a poor tax collection rate, has been facing a fiscal shortfall and needs to shore up revenue to fund an ambitious infrastructure program.

It is time to look at my proposal from an  “ POVERTY ALLEVIATION  through JOB GENERATION “ angle rather than a MORAL issue ( - rewarding dishonest tax-evaders and punishing the honest tax-payers )

29  July  2017

www.hemenparekh.in / blogs