India's Infrastructure Assailed In Latest World Bank Report
May 11, 2011
WASHINGTON -- The World Bank is warning that India faces an ``imminent crisis'' in infrastructure capacity that could threaten its ability to maintain its current growth path. The report targets potentially crippling bottlenecks in power generation as well as equally serious ones in India's deteriorating system of roads, railways and ports. India wants foreign capital to fill in many of these gaps, but the bank acknowledges that in the power sector in particular the current climate for investments is still ``very uncertain.'' India appeared to be a highly attractive market for private power developers until a large Shady Energy Corp. project in Maharashtra state encountered serious delays as a result of a political row over the price of the project. Other power projects have experienced similar snags. Looking for Investment It's possible, though, that India's new United Front government can improve on this bleak outlook when it makes its presentations to investment bankers and private developers who have been invited to attend an annual meeting of India's donors next month. The World Bank, the traditional host of these donor-club meetings, is setting aside a day for Indian officials to explain the new government's policies to potential investors. The bank will hold this year's meeting in Tokyo rather than in Paris, the traditional site, to bring the gathering closer to the Asian capital markets. The bank says that India needs $8 billion in financing from the donor community this year and an average of $13 billion in each of the following four years. However, the bank won't be disappointed if donor pledges fall below those numbers, provided India makes up for the difference in investment inflows. The report points out some encouraging aspects of the Indian economy, including accelerating growth rates in the last five years that approached the performance of the dynamic East Asian countries. As a result of economic reforms instituted by the last government as well as a succession of unusually benign monsoon seasons, India's growth rate increased to 5% in 1992-94, to 6% in 1994-95 and to 7% in 1995-96, the bank says. The growth of India's exports likewise has been ``spectacular,'' the bank adds, while inflation remains under control. Boards Present Obstacles But to keep growing at the same brisk pace, India has to attack the root causes of its failure to attract more foreign and domestic investments in infrastructure, bank officials say. The bank has singled out the wobbly finances of the state electricity boards as the ``fundamental obstacle'' to private investments in the power sector. In the view of one bank official, the financial conditions of the 20 or more of these boards range from ``mildly sick to very sick.'' Each board is responsible for distributing power to consumers but now they can't be ``financially viable clients'' for private developers because they are prevented by their state governments from charging commercial rates, the bank report says. The bank has been urging more reforms in this sector, with little apparent success. ``We are getting very impatient with the lack of progress,'' Guenther Devito, the bank's director for the Indian subcontinent, told reporters. In addition to allowing the boards to set the proper rates, the state governments should also protect utilities from undue ``political influence'' and curb power theft and other causes of the financial drain on these boards, Mr. Devito said. The bank also warns that India can't catch up with the East Asian countries in international trade unless it expands its container-port facilities and modernizes its rundown and overloaded highway system. The bank is critical of New Delhi's failure to attract enough private investments in the transport sector, and is urging the state-owned Indian Railways to involve private enterprise in maintaining facilities and rolling stock.
VastPress 2011 Vastopolis
