Former deputy chairperson of the erstwhile Planning Commission Montek Singh Ahluwalia on Tuesday suggested rewriting of the Fiscal Responsibility and Budget Management Act and advocated for a public-private partnership law to tap finances. In the changing scenario in view of rising finance needs and fiscal limitation of states, rewriting the Fiscal Responsibility and Budget Management Act should be considered, Ahluwalia, the author of Backstage: The Story Behind India's High Growth Years, added.
He was addressing a workshop organised by the finance department of Madhya Pradesh on 'Alternative Finance for Projects' at the Minto Hall here.
There is a need for enacting a law for public-private partnership to overcome the budget constraints for socially important economic infrastructure projects, he added.
Ahluwalia said designing projects, making budget provisions for them and completing them within available resources is a common practice across the world.
The fact is that governments have limited financial resources for ambitious projects. They have many tasks, responsibilities, priorities and social obligations apart from economic infrastructure projects, he added.
And as a result, the speed of projects slows down and starts lagging, he added.
He said that there is a need to think beyond the conventional approach of relying on budgetary resources.
In such a situation, states look towards the private sector for assistance.
The private sector is fearful of risks and threats while the governments are bound by the welfare principles beyond the loss and profit, he added.
Both have their limitations.
Therefore, there is a need for a law to work in cooperation between the two, Ahluwalia said.
He said that instead of managing finances for large economic infrastructural projects, the system of providing guarantee by the state should also be considered.
The governments should assume the role of a friend in managing the financial risks for the projects.
For example, in order to deal with the ill effects of climate change, infrastructure projects of economic importance should be given a guarantee, he opined.
These may include irrigation and water conservation projects, he added.
He said that considering the density of forest resources, Madhya Pradesh can raise budget resources on its basis.
This process can also be adopted for sector-specific dedicated infrastructure projects.
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