It’s Time For Northeast to Take PPP Route to Growth

By Sanjay Krishna

Despite becoming the second fastest growing and the fourth largest economy of the world, India continues to face large gaps in demand and supply of essential social and economic infrastructure and services.

Rapidly growing economy, increased industrial activity, burgeoning population pressures have led to greater demand for better quality and coverage of infrastructure services. In order to bridge the gap between supply and demand, the Government of India has taken up the public private partnership (PPP) mode of investment for providing services to the populace within a reasonable time frame.

The approximate requirement of infrastructure investment in the Twelfth Plan is estimated at $1 trillion and 50% of this is proposed to be met through the PPP mode. This has become a great challenge to a state like Assam which needs huge investments to catch up with the national growth rate by 2020.

North Eastern Region (NER) Vision 2020 aims at bridging the yawning gap between NER and the rest of the country. The document estimates that investments worth Rs 13 lakh crore are primarily needed for development of infrastructure.

This investment requirement can not be met by the government alone and shall need involvement of private partners. However, considering the present scenario of inadequacy of infrastructure and location disadvantage, it would be a challenge for the state government like Assam to attract private investment of such colossal magnitude.

The Assam government with the help of the Centre has taken up physical and social infrastructure development programs through initiation of various measures like infusion of capital from World Bank, ADB, JICA and Central government pool.

Mobilising government resources to fully meet the fund requirements would put a huge tax burden on the people of the state. The Assam government proposes to bring in private sector investment with PPP mode as one of the preferred routes.

Many infrastructure projects may not be financially viable, at least in the short run. Financial viability of such projects can be improved by availing viability gap funding from Government of India.

Assam is blessed with abundant water resources, huge hydrocarbon, large quantities of low ash coal, limestone and dolomite, granite as well as deposits of a few other unexplored important minerals and oils etc.

It offers ideal climatic conditions for growing tea, rubber and forest resources like bamboo, medicinal herbs etc. Assam is packed with number of tourist hotspots which offer vast potential for tourism.

Therefore, the state offers a congenial investment atmosphere with comprehensive central investment policy for Northeast Region and liberalized state industrial policies, both providing attractive incentives or subsidies.

Availability of skilled and cheap manpower, a large pool of English-speaking manpower and vast natural resources have the potential to translate the state into a suitable destination for major investment hub.

Some national and international investors may shy away from investing in Northeast citing geographical distance and the so-called turbulence in the area but many PPP projects are being unfolded in Assam in particular, indicating investors’ interests.

Many projects—numbering 45 in total and worth of over `8,350 crore—have been identified and are being taken up for development by the state government across sectors ranging from urban development to power, health and education.

The political stability coupled with the state’s incentives for industries have turned out to be key drivers for the new PPP story in the Northeast. It’s only a matter of time that Northeast India may script major success stories in private sector investments as well.

(**The writer has served as joint secretary in PMO and finance ministry)