Infrastructure sector, especially economic infrastructure, projects are facing a variety of problems, which are to be addressed in order to realise the full advantage of infrastructure investments in the country. These are:
a) Cost and Time Overruns: Cost and time overruns of infrastructure projects in general and projects managed by public sector enterprises in particular, still remain at very high levels. These arise due to the delays in obtaining clearances like environmental clearances from the concerned Government bodies, land acquisition problems, financing problems and problems arising due to the poor management practices of the agencies involved.
b) Huge Inter-State Variations: Considerable inter-state variations of infrastructure development exist in the country. This is owing to the situation of State governments having major role in developing economic infrastructure. Many of the critical development subjects are added to the 'State' list. In India, National Plans are prepared for the country as whole and do not specify state specific growth targets. Some states, owing to their increasing revenue expenditure and inefficient economic management are not able to develop the requisite infrastructure.
c) Cross Subsidisation: Cross subsidisation practices followed in different infrastructure segments like railways, telephones, and electricity, though they have been reduced drastically in sectors where agencies are in position, still call for major tariff rebalancing exercise.
d) Regulatory Mechanism: In the liberlised policy environment, designing suitable regulatory environment, which prohibits the exploitation of natural monopoly nature of infrastructure services by the private operators is necessary. Designing, an efficient regulatory system, specifying their scope, roles and responsibilities, has become a major problem associated with the development of infrastructure sectors.
e) Huge Project Risks: Private investments are not forthcoming as the private operators are deterred by the huge risks and low returns in the initial years associated with infrastructure projects. Availability of long tenor loans and risk insurance policies need to be designed.
f) Policy on Private Participation: Suitable sector specific policies for private investments in the identified aspects need to be put in place.