The deceleration has been due to the constraints on government's ability to raise financial resources and due to delay in the inflow of private investment in infrastructure, Icra said in its `Outlook for 1998-99'. Public enterprise in the business of infrastructure services has always had an ever-increasing appetite for fresh resources and an inability to generate operating surpluses to service this capital.

The inability derives in part from the institutional weakness inherent in such organisations and in part from the business environment that these operate in.Reform of the latter is an essential precondition for the viable and sustained operation of service providers, whether they be private or public entities, Icra says.

The incomplete reform agenda in keyinfrastructure business environments such as the sale process of power and other infrastructure services has unconscionably delayed the materialisation of private investment. Icra said in the case of power, some medium and large projects promoted by independent private producers achieved financial closure in 1997-98 and more are poised to do so. However, since structural reform in power is still incomplete, governments at the centre and the state have leveraged the process through guarantees -- at best a temporary solution, the rating agency said.