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Infrastructure
Development through PPPs Route Increases Employment Opportunities for India |
| Employment opportunities on Upswing in Infrastructure: ASSOCHAM With huge private and government investments lined up for infrastructure projects in the Indian economy, so has the pace of employment generation in the sector risen significantly as evident from a share of 12 per cent in the total employment opportunities generated in the first three months of the fiscal (April-June 2008-09), according to an ASSOCHAM Placement Pattern (APP) Study. The APP Study titled 'Job trends in infrastructure sector' has also revealed that the infrastructure sector comprising Aviation, Construction, Energy, Core infrastructure and Metals & Mining, have jointly contributed a significant share of 12 per cent to the job vacancies posted in first quarter of this fiscal (April-July 2008-09). Removing the infrastructure
bottlenecks is seen as a good business opportunity by the private players.
The sector is emerging as a potential employment generator with its
share set to leap further, according to Sajjan Jindal, President, ASSOCHAM. The construction segment had the maximum share of 24.32 per cent in the total employment generation in the infrastructure sector. The number of job openings in the segment remained buoyant on account of a rise in the construction activities of different projects running under progress. With metal prices going high in the recent times, the mining activities have gone up at an increased pace. The segment had the second largest share in the infrastructure sector job openings with a total of 3047 newly created jobs. Energy, one of the key drivers of the infrastructure sector, had a share of 18.80 per cent with the number of job openings in the segment totalling to 2365. The scope of a healthy increase in the contribution of the segment towards the total job opportunities in the overall infrastructure sector remains robust as the sector seems to be one of the thrust areas for India Inc with huge investments lined up in the near future. Despite being under tremendous pressure of the boiling fuel prices reflected in the losses of domestic airlines, the aviation sector had a share of 17.89 per cent in the infrastructure sector with 2251 number of job openings. Core infrastructure has been the least contributing segment in terms of the number of jobs generated in the quarter. The increased cost of finance might have taken its toll on the segment with 1857 newly created jobs and a share of 14.76 percent. Cornering more than two-third share in the job creation, Tier I cities generated a total of 8506 job openings in the infrastructure sector. Among the Tier I cities, the financial capital of India, Mumbai generated the maximum employment opportunities in the sector with a share of 29.31 per cent in the total number of job openings in the Tier I cities. Delhi and Chennai followed next at second and third spot with share of 15.53 per cent and 12.90 per cent respectively. Similarly among the 14 sample Tier II cities analyzed by the APP, only two cities namely, Pune and Ahmedabad captured the biggest chunk out of the total job opportunities generated in the Tier II cities with a share of 37.28 per cent and 22.22 per cent respectively. Vadodra (9.03 per cent), Surat (6.18 per cent) and Chandigarh (3.50 per cent) occupied the third, fourth and fifth position respectively. Among the Tier III cities, Ankleshwar (13.01 per cent), Bhopal (8.70 per cent) and Guwahati (7.41 per cent) acquired the first three positions with their collective share of 29.11 per cent in the total job openings in Tier III cities. Amongst the other cities from a sample of 34 Tier III cities; Cochin (6.98 per cent), Indore (4.91 per cent), Coimabatore (4.82 per cent), Aurangabad (4.48 per cent), Gwalior (4.13 per cent), Meerut (4.05 per cent) and Raipur (3.79 per cent) found their places in the top ten employment generating Tier III cities in the infrastructure sector. On the concentration front, of the sample 14 Tier II cities the top three cities accounted for almost three fourth of the new job creations. Tier III cities fared slightly better in terms of equitable proportion of job creation across the 34 cities with top five cities accounting for 41 per cent of the newly generated employment opportunities in the infrastructure sector. However, Tier I cities had a fairly equitable job creation scenario with top three cities accounting for 57.74 per cent and the rest four cornering 42.26 percent of the new openings in the sector. Infrastructure Development through Public-Private Partnerships In order to achieve the targeted growth rate of 9 per cent for the 11th Five Year Plan, India requires enormous investment in physical infrastructure. At 2006-07 prices, infrastructure investment requirement has been estimated at over 20,60,000 crore (about US $ 515.5 billion). This amount cannot be met by public sector alone. Moreover, investment in the social sectors is the priority charge on the Government's own resources as they are not amenable to private investment in a big way. Therefore, it is necessary to explore avenues for increasing investment in infrastructure through a combination of public investment, Public-Private Partnerships (PPPs) and also, exclusive private investments wherever feasible. PPPs offer a number of advantages in terms of leveraging public capital to attract private capital and undertake a larger number of infrastructure projects, introducing private sector expertise and cost reducing technologies and bringing efficiency in operations and maintenance. Constraints While encouraging PPPs main constraints identified are policy and regulatory gaps; inadequate availability of long term finance; inadequate capacity in public institutions and public officials to manage PPP processes; inadequate capacity in the private sector - both in the form of developer/investor and technical manpower; inadequate shelf of bankable infrastructure projects & inadequate advocacy to create greater acceptance of PPPs by the public. Initiatives to promote PPPs The Government has taken several initiatives to create an enabling framework for PPPs by addressing issues relating to policy and regulatory environment. Progressively more sectors have been opened to private and foreign investment, levy of user charges is being promoted, regulatory institutions are being set up and strengthened and fiscal incentives are given to infrastructure projects. Approval mechanism for PPPs in the central sector has been streamlined through setting up of Public-Private Partnership Appraisal Committee (PPPAC) in the Ministry of Finance headed by Finance Secretary. An Online database on PPP projects in the country is being developed to provide comprehensive information on the status of infrastructure sector PPPs. Funding of PPP Projects The Government has taken various steps to address the financing needs of these projects. India Infrastructure Finance Company Limited has been set up to provide long tenor debt to infrastructure projects and a scheme for Financial support to PPPs in infrastructure has been launched to provide Viability Gap Funding to PPP projects. Multilateral agencies such as Asian Development Bank have been permitted to raise Rupee bonds and carry out currency swaps to provide long term debt to PPP projects. Setting up of dedicated infrastructure funds are also being encouraged to increase the flow of equity investments. The 'India Infrastructure Finance Initiative' facilitated by the Ministry of Finance, is one such collaborative effort to deploy approximately US$ 5 billion in capital for infrastructure projects in India. The Fund is structured as a Venture Capital Fund, with about US$ 2 billion in equity capital and US$ 3 billion in long term debt financing with maturities exceeding ten years. Initial steps have been taken to use Foreign Exchange Reserves for building Infrastructure. The Reserve Bank of India has given 'in principle' approval to invest upto US $ 5 billion in the securities of the Special Project Vehicle (SPV) and these would be fully guaranteed by the Government. PPP Projects in India Analysis based on study of 221 PPP projects in the country reveal that development and use of PPPs for delivering infrastructure services has now at least 10 years of precedence in India, with the majority of projects coming in line since the last five years. Participation as well as innovation with different structures has met with varying degrees of success. Some sectors like telecommunications, power, ports and roads, have shown very good progress compared to limited success in other sectors. Some states have undertaken far more PPPs than others, and a much heavier use of PPPs in some sectors than others. As per the survey of the 221 PPP projects in the main sectors of focus, undertaken at the instance of Department of Economic Affairs for preparation of the Online Database on PPPs, - where a contract has been awarded and projects are underway - the total project cost is estimated to be about Rs. 1,29,575 Crore. The road projects account for 78 percent of the total number of projects (36 percent by total value) because of the small average size of projects. Ports, with a much larger average size of project, account for 17 percent of the total number of projects (47 percent by total value). It is noteworthy that if ports and central road projects are excluded from the total, there is a relatively small value of deal flow, in basic infrastructure PPPs till date, suggesting a significant potential upswing for PPP projects across sectors where states and municipalities have primary responsibility. The potential use of PPPs in e-governance, health and education sectors remain largely untapped across India as a whole, though of late there have been some activities shaping in these sectors. Almost all contracts have been of the BOT/BOOT type or close variants. Since its constitution in January 2006, PPPAC has granted approval to 65 projects, with an estimated cost of Rs. 53,284.95 crore. These include Highways (Fifty-six projects), Ports (six projects), Airports (two projects) and Tourism Infrastructure (one project). Outlook The Central Government is working with the State Governments and all other stakeholders to expand the horizon of PPPs in infrastructure development in the country. It has created a favourable atmosphere, provided fiscal incentives and facilitated funding of PPP projects. The Government now allows FDI in most infrastructure sectors to the extent of 100 percent. The time is ripe for the foreign strategic investors for taking greater interest in PPP Projects for infrastructure development. Author: B.S. Chauhan, Addl. Director General (Finance), PIB, New Delhi |