After a slew of reform announcements, two important reports have been submitted to the government — the 7th Pay Commission and Kelkar Committee on PPP. Bloomberg TV India caught up with Economic Affairs Secretary Shaktikanta Das to understand the impact of the Pay Commission mandate and the way forward for PPP.

The 7th Pay Commission has proposed a 23.55 per cent hike in salaries of government staff, which entails an additional spending of ₹1.02 lakh crore. How will you deal with the extra outgo even while maintaining fiscal prudence?

The Department of Expenditure will analyse and examine the 7th CPC report and there is a well established mechanism to process this report, which will be followed.

So as far as the overall fiscal is concerned, the government has a road map for fiscal consolidation which was spelled out in the Budget and we are confident that the fiscal deficit target and the road map will be maintained. For the current year we are looking at (fiscal deficit) of 3.9 per cent of GDP and next year we are looking at an improved fiscal deficit at 3.5 per cent.

How will you accommodate the extra spending on salaries given the priority to push up capital expenditure as part of efforts to improve the quality of fiscal consolidation and foster growth?

Both are important requirements. With regards to the salary and other aspects, the government will take a view on the implementation and time of adoption. But with regards to the infrastructure side, in the current Budget, the government has taken a slight fiscal expansion.

The Finance Minister has said that instead of a two-year roadmap we are taking a two-year roadmap. So the government in the current budget has taken a slightly more liberal view with regard to the fiscal deficit target — that’s why the deficit is projected at 3.9 per cent for FY16. The necessary funds have been made available for infrastructure sectors. Apart from that the government has also permitted various PSUs to raise tax-free bonds of about ₹50,000 crore. The RBI has also recently announced the regime for rupee bonds. The ECB rules are also under review. Therefore, as far as infrastructure is concerned there will not be any dearth of resources.

So, you are looking to maintain a balance between the public capex as well as the additional spending on heads like salaries to implement the Pay Commission?

It should not be stagnant. There has to be some growth on the infrastructure investment.

Can you elaborate on the Kelkar Committee report on public private partnerships (PPPs), and your own efforts in that area?

We have internally examined all the PPP projects. We also had an interaction recently with all the various developers and promoters of PPP projects and tried to understand the difficulties which are being faced in this sector. We are going through the Kelkar report and it will be our endeavour to take forward the various recommendations to go forward with the implementation at the earliest.

There have been a lot of issues with PPP projects in our country, such as absence of long-term finance, capacity issues, issues surrounding the contractual matters, delays beyond the control of developers, delays due to developers... In this context, how do you allocate the risks? The allocation of risk among the public authority and private developer has to be realistic in a manner that the project moves ahead. And in case of a delay there has to be a mechanism of not getting stuck and moving forward.

Are you looking at more innovative models of financing these projects?

Apart from the PPP projects, we are now accessing a lot of bilateral assistance for long-term projects going into infrastructure projects. So one aspect is PPP and the other is to try and access ODA loans, which have a long life to deal with the infrastructure investment requirement in this sector.

How quickly can we expect the National Investment and Infrastructure Fund (NIIF) to start investing, particularly into stalled projects?

A lot of interest has been shown on the NIIF by private sector investors, pension funds, as well as sovereign wealth funds (SWFs). We are in dialogues with the SWFs and pension funds. When the first loan will be sanctioned depends on the appraisal and how many projects are coming forward.

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