Debroy panel to release infra-financing framework by Sep

New Delhi: A panel headed by Bibek Debroy, chairman of the Prime Minister's Economic Advisory Council, or PM-EAC, will come out with a framework for public and private infrastructure financing by September, a person with direct knowledge of the matter said.

"The Debroy-led expert committee, whose objective is to undertake a comprehensive assessment of the parameters defining infrastructure and the financing framework, has had a series of stakeholder consultations and is finalizing its recommendations," the person quoted above said on the condition of anonymity.

The panel, tasked with this job in 2023 by the ministry of finance, will release the framework by September and its recommendations will be out by the end of the year, the person said.

“The committee is looking at how financing for different sectors like roads, railways and ports can be done. What should be the approach for public and private financing, respectively," the person said.

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"The framework will come out with a broad approach for different sectors," the person said. “The committee will also look at ways the private sector can be incentivised to invest."

A spokesperson for the ministry of finance and Debroy didn’t respond to emailed queries.

Financing infrastructure difficult

Financing infrastructure, especially large projects and those operated by the private sector, is often difficult. Long gestation period and factors like litigation around land acquisitions are also major challenges.

“The recommendations and framework of the committee (Debroy committee) should cover all possibilities about how such fundings should take place," said Madan Sabnavis, chief economist at Bank of Baroda. “Typically, banks can't do long-term fundings, beyond five years, as technically speaking it could lead to asset-liability mismatch. We would need the corporate bond market and specialized financial institutions to pitch in."

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Sabnavis said financing for government infrastructure projects is taken care of by the budgeted allocations. “But, for the private sector innovative ways of financing are needed. We need to have more specialised financial institutions for infra financing."

Government's focus

Infrastructure development has been the key focus of the Bharatiya Janata Party (BJP) government led by prime minister Narendra Modi.

The budget for 2024-25 earmarked ₹11.11 trillion for the infrastructure sector. Finance minister Nirmala Sitharaman, in her budget speech last month, said the government will look at a market-based financing framework to address infra funding challenges.

The government also proposed to promote viability gap funding to encourage higher private participation and to optimise the working capital requirements. The Centre also proposed long-term interest-free loans for state infrastructure.

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Proposals on plug-and-play industrial parks, corridors, and roads are aimed at boosting the country's infrastructure, improving connectivity and generating employment.

Despite infrastructure being considered a vital component of the economy, India still lacks a uniform legal definition for the sector.

The central government over the years appointed various expert groups—including the Rakesh Mohan Committee (1996) and the Rangarajan Commission (2001)—to classify the sectors and activities that constitute infrastructure.