Infrastructure of the Policy

Government will accord a very high priority to the allocation of budgetary resources to the development of key areas of infrastructure, particularly power, roads and water supply. Government will also enhance the volume of resources earmarked for maintenance of the existing infrastructure.

Role of the Private Sector:

Karnataka has already experienced significant private sector participation in infrastructure projects. The private sector has taken up a number of power generation projects. Construction of the Bangalore-Mysore Infrastructure Corridor has been entrusted to a private consortium. Private investors also with the Government will implement the Elevated Light Rail Transit system in Bangalore. The private sector has also invested in hotels and tourism projects, technology parks, etc., The Government now proposes to substantially involve the private sector in the following:

a) Roads
b) Bridges / Flyovers
c) Minor Seaports
d) Airports
e) Water Supply Schemes
f) Sewage disposal / Garbage disposal
g) Urban transport
h) Tourism infrastructure
i) Agricultural / Horticulture / Floricultural markets
j) Industrial infrastructures, viz., industrial parks / estates, software / science / biotechnology / export promotion / floriculture parks.

Government is confident that major investments in the above sectors will give a powerful stimulus to economic growth and will improve the quality of life. All the above sectors offer attractive opportunities for private investment.

Government has already identified some infrastructure projects, which will be offered to private investors. However, the different departments of Government and the urban local bodies should identify, as a continuous exercise infrastructure projects which are suitable for private investment and participation and which contribute to economic growth and public welfare.

Government will play an enabling and facilitating role to promote private sector investment in infrastructure development with the main objective of promoting the rapid economic development of the State.

The private investors should use the best technology for construction and installation of infrastructure facilities and should provide infrastructure of international standards.

The Government recognizes that private participation in infrastructure projects requires the projects to be commercially viable. The Government will make efforts to ensure that the projects are conceived with the objective that they are commercially viable before offering them to private investors.

Generally infrastructure projects will be offered to the private sector through open competitive bidding. However, Government will consider executing a Memorandum of Understanding (MOU) in either of the following circumstances

a. Where the investor proposes a project which is of a visionary nature or which is totally new in conception;

b. Where the investor on his own initiative proposes a project which the government has not contemplated offering to the private sector because it did not appear to be commercially viable.

In all such cases the MOU will be valid for a limited period during which the investor will have to achieve agreed objectives, such as preparation of a techno economic feasibility report. Further, the MOU will require that the investor follow internationally accepted best practices, such as competitive bidding of construction contracts etc.,

In respect of infrastructure projects, several types of agreement are possible, such as Build - Operate - Transfer (BOT), Build-own-Operate (BOO), Build-Own-Operate-Transfer (BOOT), Build Operate-Share-Transfer (BOST), etc. Depending on the nature of each project, the State Government will decide upon the nature of the contractual agreement.

The State Government will not offer any guarantee for these projects. However, the Government may consider making token investment in a particular infrastructure project if it will facilitate speedy implementation.

In respect of infrastructure projects which come under the control of urban local bodies, such as solid waste management and surface drainage, the local body concerned will be responsible for the initial tasks, such as preparation of the project report and calling for bids. A private investor who wishes to propose a project in any such area of infrastructure should approach the local body concerned.

An inter-departmental committee headed by the Chief Secretary shall examine proposals for private sector investment in infrastructure involving Rs.100 crores or more. The Committee will make suitable recommendations to the concerned Minister/Cabinet.

The Government, after receipt of the recommendations of the committee will take a decision of giving approval to the project. The Government may require the investor to amend the proposal and revert to Government with the same. The amended proposal will be considered on a priority basis.

The Government gives a commitment to the investor to take a decision on his proposal within 90 days of submission of the proposal or the amended proposal as the case may be, respect of project which have been proposed by the investor on his own initiative.

After the project is approved by the Government, the committee will ensure that all necessary clearances and assistance are given by the different authorities and will monitor the execution of the project.

The committee will also ensure that there is coordination between different infrastructure projects. Coordination is required to prevent occurrence of problems such as overlapping locations of projects. Co-ordination is also necessary to ensure integration and synergy between different infrastructure projects. For example, a new power project may come up in the vicinity of a port, which is being developed. A coordinated approach would optimize benefits to all users.

Where necessary, Government will propose amendment of the relevant Acts and Rules to facilitate private investment and participation in infrastructure. Action will be taken to ensure that all requisite clearances are made available at one point by a single window agency.

Incentives and Concession:

As per the Industrial Policy of the State, incentives, concessions and exemptions are already available for different types of projects. The Government of India has also offered certain fiscal investment for investment in infrastructure, However recognizing the fact that infrastructure projects require special consideration in view of long gestation periods, low rates of return and higher risks, the Government proposes to offer the following incentives:

a) Exemption from payment of entry tax on machines, equipment, capital goods and construction material procured for implementation of infrastructure projects, for a period of three years or till the date of completion of the projects, for a period of three years or till the date of completion of the project, whichever is earlier, subject to the condition that each invoice should be for not less than Rs. One crore (Rs.25 lakhs of construction materials);

b) Exemption from sales tax / works contract tax arising in the construction of the infrastructure facility for a period of three years or till the date of completion of the project, whichever is earlier;

c) 100% exemption from payment of stamp duty and registration charges on the first sales of land in the case of infrastructure projects involving second sales of land, such as industrial parks. In the case of other projects the exemption will be to the extent of 50%. There will be 100% exemption from stamp duty and registration charges on transfer of land specifically required for construction of roads on BOT/BOOT basis; This exemption will be available only to the extent of land requirement for the road construction;

d) Government land may be provided, subject to availability, at concessional rates, except in Corporation and City Municipal Council areas;

e) Where it is not possible for private investors to obtain land required for the project on their own, the Karnataka Industrial Areas Development Board will acquire the land required for the project charging concessional administrative charges and will hand over the same to the investors free of encumbrances;

f) The investor will be allowed to charge users fees (tools, port dues etc.,) during the concession period;

g) Wherever an infrastructure project by itself is not financially viable, the private investor will we allowed to develop any suitable commercial activity, such as commercial complexes, hotels, housing complexes, advertisement Boarding, etc., to ensure a reasonable composite internal rare of return.

For projects involving investment of more than Rs.100 crores, the Government may consider the grant of further concessions / incentives which are directly related to the project, depending upon the merits of each case.