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Infrastructure is the key
The meeting of state power ministers in New Delhi over the weekend was an important step in getting the policy initiatives taken in the union budget off the ground. Unless the new funds made available by the finance minister for the infrastructure sectors, especially power and roads, are invested the economy will not be able to deliver the higher rate of growth that it desperately needs. While the `supply-side' initiatives taken by the finance minister are important and useful, these have to be matched by demand-side initiatives as well. Key to this is new public investment in power and roads. The success of this is entirely contingent on policy reform. This is where the power ministers' meeting and its results becomes critical. Success here presages the overhauling of the entire structure of user charges and tariffs to ensure efficient utilisation of the colossal resources that have been poured in. The FM's budget speech rightly points out that "a key issue here is the imposition of appropriate user chargesnecessary to provide adequate returns on investment". The state electricity boards, stuck into huge losses, have not been able to make even the stipulated 3 per cent return on capital. The task, therefore, is more of toning up functional efficiency than merely stepping up allocation. Low user charges account for over 10 per cent of GDP, almost equal to the total deficit of the central and state governments.The power sector suffers from the losses of the state electricity boards, amounting to Rs 36,000 crore, including implicit subsidies. Policy measures that touch on 100 per cent metering (for completing which an unrealistically ambitious target has been set by the finance minister), energy audits, reduction of power theft, tariff determination by the State Electricity Regulatory Commissions, commercialisation of distribution and SEB restructuring are essentially of a long-term nature. Yet the investment needs of infrastructure are massive. Interestingly, despite a higher allocation to individual sectors, the revised estimate of the central plan outlay for all sectors is lower by Rs 8,747 crore at Rs 108,587 crore for 2000-01, while that on infrastructure such as energy, transport and communications is lower by Rs 2,980 crore at Rs 67,260 crore in the same year. The budgeted outlay for 2001-02 for these infrastructure sectors is Rs 76,647 crore, up 14 per cent over the Rs 67,260 crore revised estimate for2000-01. The share of infrastructure outlay in total central plan outlay is lower at 58.9 per cent for 2001-02 budget estimate than the 61.9 per cent in the 2000-01 revised estimate. These allocations are small. Policy reform can deliver more than fiscal allocations. Copyright © 2001 Indian Express Newspapers (Bombay) Ltd.
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