Multinational corporations investing in India want the Indian government to allow only targeted subsidies to enable recovery of user charges.
"There is a distorted tariff structure and foreign companies find it very difficult to align their cost with the tariff structure. There should be changes in the system to allow cost-reflective pricing and only targeted subsidies in certain infrastructure areas should be allowed," Nigel Shaw, CEO of British Gas India, said at the OECD global forum on international investment.
Speaking on the MNC perspective on investment in India, Shaw said it was dominant public sector companies that at times created a conflict of interest and the government must ensure a level playing field for both private and public sector units.
He added that the legal and regulatory institutions should be independent.
"The MNCs find it difficult to decipher the legal structure in the country. They should simplified as well as strengthened to create an enabling environment for MNCs," Shaw said. He also asked the government to improve infrastructure, ensure sanctity of contracts and proper support for the reforms process across the political spectrum.
"Many MNCs are looking at increasing investment into India and British Gas India, which has already invested $500 million, will like to increase it to $1 billion if the regulatory framework is improved," he said.
Ken Davies, principal administrator, OECD Secretariat, pointed out that there is an immediate need to increase foreign direct investment investment in infrastructural facilities.
"The major concern in the FDI trend is that most OECD countries get only 9 per cent of their total FDI into infrastructure activities and it is this sector where there should be more inflow," Davies said.
The government should alter and fine tune their FDI strategies to get greater inflow in this sector, he added.
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