سرمایه گذاری مستقیم خارجی در بخش برق: چشم انداز هند

So far, India is losing out in the competition against other emerging economies to attract more foreign direct investment to its electricity sector. This is in large part because the Indian approach towards power sector reforms is more haphazard than the more orderly and sensitive growth model of Singapore and Latin American economies.

Infrastructure development is characterized by long sunk cost, long gestation period, and high-risk portfolio. Owing to these drawbacks associated with almost every infrastructure project, it becomes difficult for private investors to raise funds whose maturity matches the project completion time. Foreign direct investment (FDI) is one financing instrument which, besides numerous spillover advantages, is debt free and has no short-term payment obligations. FDI is capable of influencing the development of a country's imports and exports, capital reserves, factor endowments, and terms of trade.1 This source has played an important role in rapidly expanding the private sector base in infrastructure development in emerging economies.2 In the 1990s, many of the world's developing nations opened up their previously state-protected infrastructure utilities to private sector participation. In response to the liberalization policy, these economies witnessed a sudden inflow of FDI into infrastructure development. In recent years FDI in infrastructure services as a group has increased in absolute and relative terms in both greenfield investments and mergers and acquisitions (M&A). In 2006, infrastructure-related industries accounted for 22 percent of worldwide cross-border M&A (Figure 1(a)) compared with just 11 percent in 1990 and as little as 3 percent in 1988. In the developing economies,3 this trend is rising, with almost 30 percent of overall cross-border M&A happening in the infrastructure sector during the year 2006 (Figure 1(b)). Many research studies conducted on India's infrastructure-deficient environment highlighted the paucity of funds as one major cause of underdeveloped infrastructure facilities in the country.4 Inspired by several of these studies and other empirical findings, the Planning Commission of India emphasized involving the private sector in the development and maintenance of infrastructure facilities in the country. Following this, the government allowed private players, both domestic and foreign, to enter what had been state-owned services. This private sector involvement is mainly occurring in the form of divestitures, greenfield ventures, concessionaire arrangements, and joint ventures. Despite the fact that infrastructure investment in India offers a huge market and returns, the Latin American economies have enjoyed a larger share of FDI in infrastructure.5 Another major limitation witnessed in the case of India is a heavy imbalance in FDI among various sub-sectors, with most investment coming in the telecommunications sector but very little occurring in an important sector like power. There are number of reasons for this relatively low equity participation of foreign firms. One is the tough competition posed by other developing economies that are also in dire need of adding capacity to their existing facilities. The other is the ease of operations and direct recovery formula in sectors like telecommunications.

With regard to the growth and development of the power sector in India, the major challenge is to provide a favorable investment climate to suit investors’ needs and to provide affordable electricity to every household and business in the country. The Indian agricultural sector also needs electricity that is of good quality and consistent in supply to boost agricultural growth in the country. To encourage private investment, the government will need to follow policy changes affecting alternate energy uses and promoting small entrepreneurs in the areas of renewable energy so as to enable the rural population to have access to the electricity for both domestic and irrigation purposes, and at the same time discontinue the practice of panelizing commercial and industrial users via cross-subsidies. This will make the environment conducive to the commercial and industrial user and investors as well. The government of India has initiated the reforms process in many sectors including power but lacks a clear vision and wholehearted support from all quarters. To switch the entire country on, a more responsive, transparent, and investor-friendly environment needs to be created. 1 H. Li, P. Huang and J. Li, China's FDI Net Inflow and Deterioration of Terms of Trade: Paradox and Explanation, China & World Econ., 2007, Vol. 15, No. 1, at 87–95. 2 See occasional paper No. 12 of 2000 series titled Attracting Foreign Direct Investment into Infrastructure: Why Is It So Difficult? of Foreign Investment Advisory Service, World Bank, prepared by Frank Sader. 3 Developing economies, as defined by UNCTAD. 4 S. Thomsen, Sacred Cows on the Road to Development: Reforming India's Infrastructure Sectors, paper presented at Tokyo Club Foundation's Macroeconomy Conference, Tokyo, Dec. 6–7, 2006, at http://www.tcf.or.jp/seminars/2006/20061206-07.html. 5 S.G. Banerjee, J. Oetzel and R. Ranganathan, Private Provision of Infrastructure in Emerging Markets: Do Institutions Matter? Development Policy Rev., Vol. 24, No. 2 (2006), at 175–202. 6 See Discussion Paper No. 64 of Asian Development Bank (ADB), titled Policy Environment and Regulatory Reforms for Private and Foreign Investment in Developing Countries: A Case of the Indian Power Sector, prepared by Anoop Singh during his research tenure with ADB in 2007. 7 The plan-wise average outlay is calculated by taking the average of the outlay for the electricity sector for the 6th, 7th 8th, 9th and 10th FYPs; data on the plan-wise outlay is collected from the database of the Planning Commission of India. Further, the average annual contribution of the electricity sector to overall GDP is calculated by taking the average of the percentage contribution of the electricity sector to GDP for the period 2001–06, data on the sectoral contribution of GDP is retrieved from the National Accounts Statistics database of India's Ministry of Statistics and Planning. 8 See the report titled The Performance of the State Power Utilities for the Years 2003–04 to 2005–06, of the Power Finance Corporation India, available at http://pfc.gov.in/. 9 R. Ferguson, W. Wilkinson and R. Hill, Electricity Use and Economic Development, Energy Policy, Vol. 28 (2000), at 923–934. 10 The Electricity Power Survey is conducted and documented by the Central Electricity Authority of India in series. The referred information has been drawn from the 16th survey. 11 S. Zaheer, India Power Sector: Challenges and Investment Opportunities, paper presented at Plenary Session IV: Financing Options, in conference on India Electricity, May 12, 2006, organized by FICCI at New Delhi, available at http://www.ficci.com/. 12 See report titled Power of Investment Commission, India, available at www.investmentcommission.in/power.htm. 13 The information on electricity consumption by agriculture sector and rate of recovery from the sector is taken from National Accounts Statistics database of Ministry of Statistics and Planning, India. 14 See report titled Highlights of Power Sector of Ministry of Power, India, 2007, available at http://powermin.nic.in/generation/cea_month.htm. 15 Developing economies, as defined in the Private Participation in Infrastructure database, World Bank. 16 D. Sahoo and M. Mathai, Economic Growth in India: Does Foreign Direct Investment Inflow Matter? Singapore Econ. Rev., Vol. 48, No. 2 (2003), at 151–171. 17 M. Patibanda, Pattern of Foreign Direct Investment: A Comparative Analysis of China and India, Int’l. J. of Mgmt. & Decision Making, Vol. 8, No. 2–4 (2007), at 356–377. 18 See publication titled World Investment Prospects Survey 2007–09 of United Nations Publications, New York and Geneva. 19 D. Aykut and S. Selin, The Role of the Sectoral Composition of FDI on Growth, in Do Multinationals Feed Local Development and Growth?, Ed. Lucia Piscitello and Grazia D. Santangelo (Elsevier: 2007). 20 See the annual publication of UNCTAD World Investment Report titled World Investment Report: Transnational Corporations, Extractive Industries and Development 2007. 21 See occasional paper No. 1 of 1990 series of International Finance Corporation (IFC), titled Marketing a Country: Promotion as a Tool for Attracting Foreign Investment, prepared by T. Jr. Wells and A.G. Wint. 22 A.G. Wint and D. Williams, Attracting FDI to Developing Countries: A Changing Role for Government, Int’l. J. of Public Sector Mgmt., Vol. 15 (2002), at 361–74. 23 S. Globerman and D. Shapiro, Global Foreign Direct Investment Flows: The Role of Governance Infrastructure, World Development, Vol. 30 (11) (2002), at 1899–1919. 24 See report titled The Experience of Independent Power Producers in Developing Countries, of PESD, Center for Environmental Science and Policy, Stanford Univ., prepared by E.J. Woodhouse in 2005. 25 Supra note 2. 26 See discussion paper No. 6 titled What International Investors Look for When Investing in Developing Countries, of Energy and Mining Sector Board, World Bank, prepared by Ranjit Lamech and Kazim Saeed. 27 R.J. Rolfe, D.A. Ricks, M.M. Pointer and M. McCarthy, Determinants of FDI Incentive Preferences of MNEs, J. Int’l. Bus. Studies, Vol. 24 (2) (1993), at 335–355. 28 See academic publication of year 2001 titled Foreign Direct Investment in New Electricity Generating Capacity in Developing Asia: Stakeholders, Risks, and the Search for a New Paradigm, of Asia/Pacific Research Center, Stanford Univ., prepared by R.T. Crow. 29 G.L.F. Holburn and B.A. Zennet (2008), Policy Risk, Political Capabilities and International Investment Strategy: Evidence from the Global Electric Power Industry, available at SSRN: http://ssrn.com/abstract=1091615. 30 See working paper No. 154 of 2005 series titled Trade and Foreign Direct Investment in Services: A Review, of Indian Council for Research on International Economic Relations, New Delhi, prepared by Rashmi Bagga. 31 See policy research working paper No. 1531 of 1995 series, titled Some New Evidence on Determinants of Foreign Direct Investment in Developing Countries, of International Economics Department, World Bank, prepared by H. Singh and K.W. Jun. 32 See working paper No. 11299 of National Bureau of Economic Research (NBER), Cambridge, Mass., titled A Review of the Empirical Literature on FDI Determinants, prepared by A.B. Bloniga, at http://www.nber.org/papers/w11299. 33 See policy research working paper No. 3536 of International Economics Department World Bank, titled Regulatory Effectiveness: the Impact of Regulation and Regulatory Governance Arrangements on Electricity Industry Outcomes, prepared by J. Stern and J. Cubbin. 34 See working paper No. 47 of Center for Environmental Science and Policy, Stanford Univ., titled Private Power Production in Mexico: A Country Study, prepared by A.N. Luna. 35 M.B. Rosenzweig, C. Pabon-Agudelo, S.P. Voll and J.S. Neto, Power Sector Reform in Brazil: Challenges to Private Investment, Project Finance Int’l., Washington, DC, Issue 222 (2001), at http://www.nera.com/Publication.asp?p_ID=1008. 36 See report titled Terms and Conditions of Tariff-2000 of Central Electricity Regulatory Commission, New Delhi, at http://www.cercind.gov.in/ord2004.htm. 37 Supra note 4. 38 Supra note 5. 39 Supra note 19. 40 Information retrieved from various reports from Web site www.prayaspune.org. 41 Supra note 5. 42 See working papers in economics No. 0448 of 2004 series, titled Electricity Reform in Chile: Lessons for Developing Countries, of Faculty of Economics, Univ. of Cambridge, prepared by M.G. Pollitt. 43 See working paper No. 53 of 2005 series, titled The IPP Experience in the Brazilian Electricity Market, of PESD, Stanford Univ., prepared by A.D. Oliveira, E.J. Woodhouse, L. Losekann and F.V.S. Araujo. 44 C. Youngho, The New Electricity Market of Singapore: Regulatory Framework, Market Power and Competition, Energy Policy, Vol. 35 (1) (2007), at 403–412. 45 See working paper No. 45 of 2005 series, titled China's Electric Power Market: The Rise and Fall of IPPs, of PESD, Univ. of Stanford, prepared by P.Y. Woo.