Saurabh Gupta | 04 Nov, 2009
Higher investment in infrastructure sector is a powerful counter cyclical measure to fight economic slowdown in the South Asian countries, the Finance Minister said.

Infrastructure development can enhance the economic capacity of the region, boost internal demand and strengthen intra-regional trade and commerce, remarked Pranab Mukherjee, Union Minister of Finance, Government of India, while inaugurating the "South Asia Conclave on Enabling Regulation for Investment in Infrastructure" on Tuesday in New Delhi, along with Sushilkumar Shinde, Union Minister of Power.

Removing infrastructure gaps in the region is essential for building a sub-regional framework, which will provide a seamless market, facilitate effective exploitation of synergies, and generate billions of dollars of new output, thus making South Asia the new powerhouse of global economic activity, Mukherjee added.

He also emphasized on the need to undertake Public-Private Partnership (PPP) approach in infrastructure development, as such projects are highly capital intensive and public funds alone can not meet entire requirement. PPP would forge a collaborative relationship between the public and private sector with a view of bridging the financing gap and maximizing output.

The success of PPP models depends on a suitable policy and regulatory framework, which responds to the challenges, such a model throws, said Mukherjee.

Infrastructure regulators have a critical role to play, in terms of ensuring that user interest are not prejudiced, and contracts between sponsoring agencies and private parties are honored. Sectoral regulators should create ground-rules, which mimic conditions of competitive markets, so that resources are utilized optimally, user charges are fixed in a reasonable manner and standards of efficiency are maintained at high level. Regulators should also ensure adherence to universal service obligations, emphasized Mukherjee.

The two-day long conclave is being organised under the aegis of South Asia Forum for Infrastructure Regulators (SAFIR) by the Central Electricity Regulatory Commission (CERC) which presently extends administrative support to SAFIR, in partnership with Confederation of Indian Industry (CII).

Mukherjee also noted the evolution and growth of SAFIR, which provides an excellent forum, where regulators members from various South Asian countries can share experiences and best practices in meeting regulatory challenges and evolving coherent and co-ordinated responses.

Sushil Kumar Shinde, Union Minister of Power, in his address emphasized that rapid investment in infrastructure sector in South Asian countries is pre-requisite for the region's socio-economic development. Suitable regulatory regime is crucial to the development of infrastructure.

Shinde, while referring to Indian energy sector, mentioned that the cost plus approach would be adhered to only certain limited cases of natural monopoly such as gas-supply and electricity transmission sector. In other sectors, market based competition would be promoted. He also highlighted the success of Ultra Mega Power Projects (UMPP) model in India.

The success of UMPP was due to very supportive regulation and policies and provision of transmission linkages, third-party sale facility and access to fuel resources.