Vinayak Chatterjee: 12th Plan - Back to the future

A trillion-dollar-plus planned infra outlay proposes 48% from private participation

Vinayak Chatterjee / Jan 17, 2013, 00:40 IST

Planning Commission-bashing is a favourite national pastime. Yet, India is one of the few countries that takes the planning process seriously and offers plans for public participation, scrutiny and accountability. For the infrastructure sector, particularly, the Planning Commission has had an impactful role in pushing the boundaries, playing the role of an ombudsman and attempting to change the established ways of doing things. A review of the results of the Eleventh Plan (2007-12) and the Twelfth Plan (2012-17) projections provides some very useful insights.

Here are 10 key takeaways:

Eleventh Plan target met 93 per cent success: Despite major shocks to the system in the Eleventh Plan period, in 2008 and 2011-12, the infrastructure target of Rs 20.56 crore ($514 billion) has been achieved at an admirable level of 93 per cent. This surely deserves a round of applause for the planning process. Most infra-watchers were sceptical of this level of achievement considering the familiar infrastructure bottlenecks, logjams and policy-paralysis. GCFI beyond reach: However, a key ratio is still beyond reach. The gross capital formation in infrastructure (GCFI) as a per cent of the gross domestic product (GDP) was planned at 7.6 per cent for the Eleventh Plan period. India has been able to achieve only 7.2 per cent, whereas a country like China achieved levels of 1112 per cent half a decade ago. The expectation for the Twelfth Plan was nine per cent overall. That, too, has been pegged at 8.3 per cent now. Even with a slowing economy (assumed at eight per cent GDP growth

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against the original plan vision of nine per cent), this reduced level of GCFI does not augur well for reducing historical backlog in infrastructure creation much less create conducive conditions for a more competitive economy.

PPP beyond expectations: The good news is on the participation of private capital, loosely referred to as public-private partnership (PPP). Even till the mid 1990s, it was negligible; and the socialist hangover, particularly relevant for public utilities, made private investments and operations unthinkable. Switch to the Tenth Plan with telecom and the early power plants, PPP hit 22 per cent. The Eleventh Plan optimistically pitched for 30 per cent. Lo and behold, India got 37 per cent! And this has given the requisite confidence to target 48 per cent, (almost half the nations infra) to be built by private capital in the Twelfth Plan. Much of the credit for this historic shift must go to the Planning Commission that has constantly and consistently rooted for PPP as a historical inevitability. States yet to pick up: Worry lines remain with regard to state governments. In a federal structure, with much of infrastructure creation mandated at the provincial level, it was expected that the states would pick up the gauntlet, emulate Central policies and get going with their own infra creation. That has not happened. Shares of states have fallen to a sub-30 per cent level in the Eleventh Plan and targeted for only 23 per cent in the Twelfth Plan. While it is indeed true that private capital has moved into the space vacated, enthusiasm, commitment and capacity-building at the level of the states is imperative. Emergent sectors: The inclusion of new sectors in the planning framework is reflective of the infra march from traditional to modern. Two sunrise sectors have found independent recognition in the Twelfth Plan they are mass rapid transit systems and renewable energy. Together, they constitute eight per cent of the Twelfth Plan target. Aam-aadmi areas get neglected: Inclusive growth was the governing mantra of the Eleventh Plan. In infrastructure, the sectors that can be called inclusive are those that touch the daily lives of the aam aadmi. These are railways, irrigation, water supply and sanitation and electricity. The electricity story is well known. All the other inclusive activities have demonstrated poor achievements. Water supply and sanitation is way off. Conversely, sectors considered relatively elitist like highways, telecommunications and airports have shown good progress. Investment in ports critical: It is, however, the ports sector that stands out as the poorest performer. Clearly, ports need extra-special attention, reform and rejuvenation in the next five years. We cannot continue to live with the 40 per cent achievement of the Eleventh Plan. More than a trillion-dollar outlay: Overall, the Twelfth Plan envisages a Rs 56.32 lakh crore infra outlay at current prices. (At 2006-07 prices, it is a 137 per cent increase over the Eleventh Plan achievement. The Eleventh Plan itself was a 108 per cent jump over the Tenth Plan). There were many non-believers when the $500 billion target was presented in the Eleventh Plan. This time around it is a $1.13 trillion target. Largest PPP market in the world: Importantly, of this $1.13 trillion, 48 per cent is expected to be funded by private capital largely through various PPP formats. Therefore, this $542 billion private portion makes India the largest PPP market in the world. Getting the enabling conditions right: Finally, all these need to take place in a socio-economic-political landscape where a huge amount of energy is required to be expended in getting the enabling conditions right. These include land, coal, environment, clearances, independence of regulatory authorities, long-term finance availability, natural resources market clean-up and a new burst of confidence to PPP players.

How does the Twelfth Plan propose to handle these issues? Watch this space. Have a Happy New Twelfth Plan: 2012 to 2017.

The writer is the Chairman of Feedback Infrastructure vinayak.chatterjee@feedbackinfra.com; Twitter: @Infra_VinayakCh

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