Infrastructure departments have received a directive from the finance ministry to identify potential projects for private partnership, according to a report. The objective is to enhance private investment in public infrastructure and expedite project execution. The focus will extend to bolstering fund inflows in sectors like urban infrastructure, railways, and roads, where private involvement has remained limited.
In the ongoing fiscal year, the ministry is set to introduce a fresh architecture for public-private partnerships (PPPs) and a standardized model concession agreement (MCA) framework across various infrastructure domains.
In order to address the substantial funding demands in infrastructure, a source quoted in the report, highlighted the need to increase participation of private entities despite the government’s continued efforts to augment capital expenditure.
The planned MCA framework will function as a uniform guide for infrastructure departments and state-owned entities, allowing them to integrate specific sector-related clauses as necessary. The emphasis is on creating attractive and viable projects to attract private investors.
This development coincides with a growing trend of increased private investments, with industry leaders anticipating a widespread resurgence in the forthcoming year.
Additionally, the source noted that the government is encouraging central public sector enterprises (CPSEs) to promptly enhance their capital expenditure.
In April 2020, a government-appointed task force on the National Infrastructure Pipeline (NIP) had outlined a capital investment projection of Rs 111 lakh crore until 2024-25. The NIP implementation was anticipated to involve nearly equal contributions from the Center (39%) and the states (40%), followed by the private sector (21%).
However, the COVID pandemic postponed the revival of private investments as companies postponed expansion plans.
Consequently, the government significantly raised its capital spending to stimulate economic growth, relying on its substantial multiplier impact.
Budgetary capital expenditure by the Center surged to Rs 7.28 lakh crore in 2022-23, more than double the pre-Covid-19 levels of 2019-20. This upward trend in allocations led to a 37.4% increase in the capital outlay for 2023-24, reaching a historic Rs 10 lakh crore.
Concurrently, the Center has prompted various infrastructure departments to adhere to timely expenditure, resulting in a substantial utilization of annual allocations within the first half of the year.
The central government capital spending saw a 59% year-on-year surge at Rs 2.78 lakh crore. Notably, 28% of the budgeted capital expenditure for the entire year was spent during this quarter, marking a five-year high.
Roads and railways, allocated half of the total budgetary capex for the current fiscal, dominated spending in the initial quarter.
A Crisil report indicates that 38% of the allocated funds for roads and 33% for railways in this fiscal year were expended during the first quarter.
