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Build it later, define it first
June 18, 2007
What is infrastructure?
If you think this is a strange question, you may wish to consider the following: there are six official entities that attempt to define 'infrastructure,' statutorily or otherwise.
First off the block is the Income Tax Department which defines infrastructure under section 80IA. The Department of Economic Affairs in the ministry of finance has its version that relates to the viability gap funding (VGF) mechanism. Next is the RBI, through various circulars.
There is then the Insurance Regulatory and Development Authority (IRDA) which takes a shot at it. Finally, there are the groupings that emerge in outputs from the Planning Commission and the Prime Minister's Committee on Infrastructure.
While we are at it, do not forget that elements from the private sector wake up from time to time (most noticeably in February, before the Budget announcements), and demand that various projects in tourism, healthcare, education and real estate be declared officially as infrastructure.
Why, you may well ask, do these differing lists and versions exist? Remember, India is a pluralistic society and every governmental outfit has an ostensible reason to come up with its own list.
The finance ministry has the strongest reason, as always! It gives tax breaks and dishes out VGF. The IRDA has to define infrastructure as it seeks to deploy 15 per cent of the long-term funds available with insurance companies as its contribution towards alleviating the asset-liability mismatch inherent in this sector.
The RBI is the mai-baap of the banking sector and has its definition of infrastructure to circumscribe commercial banks' exposure to infra-projects, as well as define conditions for External Commercial Borrowings (ECBs) by infrastructure companies.
The Prime Minister's Committee on Infrastructure and the Planning Commission have their hands full monitoring the progress (or otherwise) of this sector, evolving policy and configuring interventions, and therefore, have their own groupings and long lists.
The private sector, as usual, salivates for tax breaks, tax holidays and access to funding under the 'official' definition. And indeed, based on representations and prevailing wisdom, the list does get widened from time to time. In this year's Budget, for example, the FM added port steerage and dredging services as well as cross-country gas pipelines to be within the ambit of the Income Tax definition of infrastructure.
But why should a single, scientific, unified list and definition be desirable? Here are seven reasons why:
Economists have written voluminous tomes on how to define infrastructure. Two quick points are in order:
Using a combination of these perspectives, a possible unified and harmonised list for the country can begin to get structured across the five groups suggested below:
Such an initial classification, duly modified after debate and discussion, could lead to targeted policy pronouncements as well as a long-listing of projects/services/enablers under each group that could be the beneficiaries of governmental support and largesse. Ideally, this task of preparing a harmonised universal classification should be done by the finance ministry which gives tax breaks as well as administers VGF. It could equally well be done by the Planning Commission.
"The time has come to get on with it," says my young friend and colleague, Joseph Akkarapatty, who has done significant work in this area and helped me think through this issue.
The author is the Chairman of Feedback Ventures. He is also the Chairman of the CII's National Council on Infrastructure. The views expressed are personal.
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