India needs funds, policy for infrastructure

NEW DELHI (Reuters) - India's efforts to revamp its creaking infrastructure are constrained by shortage of long-term finance and policy initiatives are needed to speed up projects, the government said in a report on Thursday.

In an economy survey, ahead of an updated budget on Monday, the government said it was a "challenging task" to achieve $500 billion investment the Planning Commission estimated was needed over five years to 2012 to upgrade the country's overburdened roads, airports and other facilities.

Foreign borrowings for infrastructure projects fell to $6.92 billion in the fiscal year ended in March from $10.2 billion a year before, the survey said.

Equity offerings by private-sector infrastructure companies slumped to 147.2 billion rupees ($3 billion) in 2008/09 from 870.3 billion rupees a year earlier, it said.

The infrastructure sector has come into focus following a slowdown in the economy, which grew 6.7 percent in 2008/09 in its weakest pace in six years and well below the 9 percent and more seen in the previous three years.

Even when a project achieved financial closure further delays were caused by disputes over land acquisition, raw materials and capital goods shortage, environmental issues and inadequate availability of skilled workers, the survey said.

"These problems have wide ramifications," it said. "There is no option but to address them systematically as timely implementation of projects is critical for ensuring their financial viability," it said.

National Highways Authority of India (NHAI), which builds, maintains and manages highways, could receive bids only for 22 projects in 2008/09 as the bidders indulged in "cherry-picking" for want of funds, a NHAI official told Reuters in April.