In view of the acute financial constraints being faced by the state governments, they could enter into joint ventures with leading Indian and foreign companies which have adequate expertise in this field and give them management autonomy, the chamber has suggested in a discussion paper.

Such corporations can provide credit-enhancement to private companies engaged in infrastructure development in the respective states. These can also provide for long-term investments, equity participation, refinance, senior loans, mezzanine capital and financial guarantees to new private infrastructure projects, while enjoying a line of credit from Infrastructure Development Finance Corporation and other FIs and banks. This will also improve the credit deposit ratio of the northern states, the chambernote said.

Expressing concern over slow pace of infrastructure development in the country, the chamber has called for greater participation by the private sector in these projects for their speedy and timely implementation.

It has also suggested that tax-free bonds may be floated to raise revenues for land, acquisition, development or construction of the infrastructure projects. Infrastructure development fund should be set up to finance projects like roads and highways. Loan guarantees may be provided to owners of the bonds, the note suggests.

Also, the private sector projects would need support by way of subsidy or inexpensive credit. The debt burden on such projects should be kept low either by providing moratorium on interest or repayment for the initial years or providing cheap credit through pension funds and provident funds to finance at least a part of the debt. Adequate tax incentives should also be extended to attract investors, the paper has suggested.

With the government channelising thelarge sums collected by RBI's Resurgent India Bonds for infrastructure projects, the states should make their infrastructure corporations operational early. States like Uttar Pradesh (UP) have made Budgetary provisions for infrastructure corporations, but have not started to actively finance private infrastructural projects.

``It is all the more important to develop infrastructure in the northern states since a large part of India's exports emanate from this region.

However, their growth has stagnated due to inadequate infrastructure. The state governments should coordinate with industry associations to identify potential infrastructure projects and new opportunities in this sector,'' the note said.

It has suggested that the states should create appropriate legal, regulatory and administrative framework to support such efforts both in the private and public sectors so that repayment of infrastructure loans and success of infrastructure projects is assured. Current estimates indicate that gross domesticinvestment in infrastructure is expected to increase from the current level of 5.50 per cent of gross domestic product to about 7 per cent in 2000-01 and 8 per cent in 2005-06. Infrastructure investment in India is going to rise to Rs 1,007,000 crore in 2000-01 and 1,80,000 crore in 2005-06.

Tolls will be the main revenue for privately developed highways. However, keeping in view people's perception, it is highly unlikely that many people will be ready to pay high tolls, the chamber said. Since toll by itself will not bring sufficient returns to the investors, land development rights for commercial exploitation along the roads and highways is essential and should be allowed, it felt. Private sector involvement is envisaged in specific projects on the national highways such as bypasses, bridges, railway overbridges, elevated sections to avoid congestion, widening of roads and expressways.

The national highways network needs to be expanded to 66,000 km by the year 2002, according to estimates. This impliesthat over 32,000 km of new roads or state highways will have to be upgraded to national highway standards at a minimum cost of Rs 200 billion. In addition, a study undertaken with the assistance of the Asian Development Bank has identified that there will be a need for an expressway network of about 10,000 km by the year 2015 to meet the traffic demand adequately. The total cost will be a minimum of Rs 800 billion.

Other necessities like repairs, modernisation and widening of existing roads will cost over Rs 520 billion. Total resource requirements for upgradation and expansion of national highways will therefore, be to the tune of Rs 1,528 billion.