Govt should pick up equity in select infrastructure projects: CII

Government participation in projects could also come by way of providing specific guarantees to the projects though CII has cautioned that indiscriminate issuance of guarantees could lead to a situation of it being loaded with a significant amount of contingent liabilities.This has been one of the issues highlighted in the case Gujarat and Maharashtra, the report said.quot;The practice of giving guarantees should be restricted to the early years of privatisation of infrastructure projects and government could withdraw this facility once the process gains momentum,quot; the report said.

Inareas where user costs are unlikely to be fully covered, the government can play a decisive role in attracting private investments by one-time grants in the form of capital or land, it said.However, there is need to restrict this form of government support to projects where private participation is otherwise not viable. Giving a grant to a private project that would come up in any case would be a waste of resources.

However, it should be kept in mind that one-time grants are a better alternative as compared to the guaranteed return on capital that is prevalent in India as guaranteed returns do not provide any incentive for economy in investment or efficiency in operation, according to the report.