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Re: Could we have a summary please?



INFRASTRUCTURE POLICY
Summary of the debate so far

Major points

1] The private sector should be involved in the provisioning of infrastructure.
2] The govt should not directly construct or maintain any structure, but
sub-contract these services to private vendors.
3] Defining clearly property rights is vitally important in cleaning up
corruption, as well as improving the environment

Secondary-order policies to be applied across all infrastructure sectors.

1] Guarantees
-  The govt should not extend public guarantees to private infrastructure
projects
2] BOT (Build-Operate-Transfer)
-   Unsure if BOT is superior to the govt directly seeking tenders.
3] Make the bidding process  open and transparent
4] Create additional capacity to meet demand
5] User pay principle to remove any cross-subsidies, which may be handled
better  through social safety nets


Sectors to include in an infrastructure policy:

Drinking water
- Govt should completely allow the private sector into water facilities,
collecting dues locally
Hygiene
- Local govt should privatize the clean-up of cities, paid by local taxes
- Appropriate here?
Electricity
- Open up completely to MNCs and local firms, giving tax breaks to invest in
new technology
- No tax concessions necessary
Roads
- Hire MNCs and locals to develop National Highways, while management
contracts should be awarded to the private sector, too
Telecom
- Privatize VSNL and Mahanagar Telecom as well as other state telecom boards
Transport - Road, rail, air, ports
- Privatize all transportation facilities save perhaps airports, bus
terminals, and railway stations
- Abolish octroi and such
Postal Service
- It works, don't fix it
Health
- Appropriate here?
Environment
- Appropriate here?
Basic public amenities
- Such as a community garden/park, planned out developmental activities in
terms of maintenance and development of public distribution systems of
essential commodities

Please forgive me if I seemed to have left out some of the debate... I will
go back through the debate at www.indiapolicy.org a little later and fill in
the missing points (if any).
_________________________

Please consider the following..

As per Dr. Roy's point about property rights, I agree that defining such
rights clearly is extremely important in maintaining investor confidence as
well as the rule of law. Though, extremely important, and as because we are
taking a very comprehensive and integrated approach to India, I believe that
we should place this very important idea in a higher-level document and let
its implications be implicitly embodied in sector specific policy. E.g., we
are assuming the existence of the rule of law when considering the design of
infrastructure contracts awarded to the private sector, though we will take
up this topic more directly next week.

As per  the inclusion of the environment, health, and basic civic amenities
like parks,  it seems very inappropriate to include these topics in an
infrastructure policy, although they are extremely important. I argue that
they deserve a separate policy grouping (esp health and environment) just
like education (which fulfills much of the same infrastructure role, that is
in human capital , as health). Our infrastructure policy should include
sectors that tend to become 'natural monopolies' or have significant
externalities (i.e., its social benefits far outweigh private benefits and,
as such, may be supplied below the socially optimal amount).

I believe that the basic idea behind the privatization of infrastructure is
that, besides the existence of 'market failures', we are beginning to
understand that there are also 'public failures'. As such, the privatization
of infrastructure 'may' lead to gains in efficiency, increase potentially
the amount of private funds available to such, and increase the use of
entrepreneurial talent available among the people (while at the same time
freeing up the use of our better civil servants to concentrate in areas
where govt involvement is more appropriate).

As such, we should privatize and open to competition as much as possible may
infrastructure areas. For areas where competition is not possible (i.e. the
transmission of electricity which seemingly lends itself to become a
'natural monopoly' as the costs of developing more than one set of
transmission lines is exorbitant and perhaps 'wasteful'), we should award a
long term concession (unless the sector is not capital-intensive an requires
many years to recoup the full cost of such) in an open, transparent bidding
process that maximizes the revenue obtained. An independent, regulatory body
should be set up to make any necessary adjustments to tariffs, and which
should comprise at most minority govt representation.

More on the this later...


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