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Source: This post is created based on the article “IFS: Getting set to make an impact”, published in Business Standard on 4th August 2022.
Syllabus Topic: GS Paper 2, Government departments and organisations
News: Government is setting up Infrastructure Finance Secretariat (IFS).
The 2 divisions of the Department of Economic Affairs (DEA); 1) the Infrastructure Policy and Planning Division, and 2) the Infrastructure Support and Development Division, are now moved under a new set-up called Infrastructure Finance Secretariat (IFS).
IFS will have three sections: Infrastructure financing, sectoral studies, and capacity building.
If the IFS function as an extended arm of DEA, what was the need to set it up?
First, DEA has many times recommended having an institution like the 3P India, which was announced in Arun Jaitley’s budget speech in July 2014.
3P India was supposed to be an experts-led independent institution to revitalise the broken public-private partnership ecosystem.
The Kelkar Committee in 2015 in its report titled “Revisiting and Revitalising PPP Model of Infrastructure Development”, also strongly endorsed the setting up of 3P India.
Second, its mechanism will not be based on the bureaucratic model. It would have a mechanism for contractual hiring terms for experts. It would also attract professionals deputed from multilateral institutions like the World Bank and the Asian Development Bank.
Third, The IFS is expected to harmonising policies and formats related to infrastructure financing and development. At present, the matter of infrastructure has the involvement of 16 line ministries at the center, along with the NITI Aayog and the Ministry of Finance plus individual efforts of 30-plus states and Union Territories.
Fourth, financial and operating playing field has changed substantially in the first two decades of this century. Now, Investment policy supports Greenfield projects through state funding and monetization and brownfield assets through private capital. Technical platforms like Gati Shakti and new financial institutions — namely, the National Investment and Infrastructure Fund, have been set up. Now, IFS was needed to bring coherency in the functioning of every aspect.
Fifth, urban local bodies and village panchayats require capacity building to fulfill the obligation of ownership and operations and maintenance of utilities like Nal-Se-Jal. Capacity building is one of the priority mandates of the IFS.
Sixth, IFS will be one-stop to engage with various stakeholders like regulators, project bidders, asset owners, asset operators and investors.
What more can be done?
IFS could draw upon the learnings from similar organisations in other countries. For example, the National Infrastructure Commission of the United Kingdom was set up in October 2015.
In UK, the NIC functions as a think-tank focused on the long-term infrastructure priorities of the country. Thus, it provides advice and recommendations to the government on infrastructure challenges and strategy.
