global experience indicates that ppps work well when they combine the efficiency and risk assessment of the private sector with the public purpose of the government sector. however, they work poorly when they rely on the efficiency and risk assessment of the government sector and the public purpose of the private sector. the development finance model has to be characterized by good planning, strong commitment of the parties, effective monitoring, regulation and enforcement by the government. 28. the government has tried to address some major impediments like lack of transparency and accountability in procurement in order to ensure that ppp projects are procured and implemented by observing principles of transparency, competitive bid process, affordability, and value for money. but, the impact of these efforts on the ground level implementation is yet to show. bis central bankers ’ speeches 29. while there has been a lot of debate around the lack of a vibrant corporate debt market and constraints faced by the banking sector in financing infrastructure requirements, it needs to be highlighted that there has been an over reliance on debt. the infrastructure companies are highly leveraged and the flow of equity in the infrastructure project funding has been very minimal. in my view, the ‘ public - private partnership ’ has, in effect, remained a ‘ public only ’ venture. lack of equity investment in the project means that the promoter - developer has little ‘ skin in the game ’ and the motivation for the success of the venture is that much limited. pricing of infrastructure services 30. a major underlying factor in the success of such partnerships is the pricing aspect. the issue of pricing is crucial in view of the political sensitivity, while also simultaneously ensuring the viability of the project. managing the transition from state - subsidized services to market based pricing is crucial as the prices cannot be raised suddenly and indiscriminately, but the realizations have to be remunerative and based on commercial considerations. further, as the infrastructure projects are long duration projects, it is important to have an inbuilt mechanism in the services / pricing contract for a hike in pass - through of price hikes to the end users on account of increase in input prices. i would like to highlight a disquieting practice that has come to characterize the usage of infrastructure services. very often we find that vips and influential people are allowed to enjoy these facilities free of charge. this not only creates a moral hazard, but simultaneously also leads to leakage and distortion of the whole pricing structure. if we allow

##visages that about half of the investment requirements of infrastructure would have to be met through funding from the private sector. for this purpose, the share of private sector in infrastructure investment will have to rise substantially from about 37 per cent in the 11th plan to about 48 per cent in the 12th plan. the private sector ’ s interest in the infrastructure sector has, however, been badly hit because of the delays due to certain policy formulations and implementation aspects relating to land acquisition, rehabilitation, environment etc. at present, more than 50 per cent of projects are stuck at various stages of implementation due to variety of regulatory hurdles and sector specific bottlenecks leading to significant time and cost overruns. role of infrastructure in inclusive development 3. before we turn to examining the role of infrastructure ; let us first look at what is meant by infrastructure. investopedia defines infrastructure as the basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function. thus, infrastructure can be understood as the support structures that facilitate production of goods and services, distribution of finished products to markets, as also the basic social services such as schools and hospitals. in a sense, infrastructure is a catalytic agent for the economy. the structures which can be counted among infrastructure are roads, bridges, power, water supply, sewers, electrical grids, telecommunications, ports and so forth. bis central bankers ’ speeches 4. post the advent of the global crisis, we live in uncertain times. the growth rate of the indian economy is diminishing by the quarter and a recovery continues to elude. but amidst this scenario of persistent gloom, high inflation, political uncertainties, etc., if one looks for a catalyst that can revive the economy, put the domestic growth engine back on track and ensure an inclusive growth, the most potent option available is investment in creation of better all round infrastructure. provision of better infrastructural facilities such as irrigation, electrification, roads, drinking water, sanitation, housing, community it service, etc. to the rural centres would enable mainstreaming of a vast majority of the rural population and helping them to positively contribute to domestic growth through their entrepreneurial or farm based activities. 5. the fast paced urbanisation during the recent years of heady economic growth has also necessitated the availability of new infrastructural facilities as well as upgrading the quality of existing infrastructure. infrastructure development in new townships is also a priority so as