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Countries and Regions Country Assistance Plans Document
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Country Assistance Plans - India : III. Sector Strategies
F. Private Sector Development77. Support for private sector development is an integral part of ADB's operational strategy in India. The main emphasis has been on establishing the policy, institutional, and regulatory frameworks for private sector participation in economic development, particularly in the roads and ports, hydrocarbon, and communications sectors and, at the state level, in the power sector. This strategy also includes facilitating private sector investment in physical infrastructure; improving the commercial framework through support for developing alternate dispute settlement mechanisms; and providing direct financial assistance for strategic private sector initiatives. Given the need for well functioning financial and capital markets, ADB's focus has been on making selective investments to help create and build institutions that mobilize resources for infrastructure, reduce the Government's shareholding in state-owned banks, and enhance financial sector competition, and strengthen financial supervision. 78. India's next round of economic reforms presents the ADB with new opportunities and challenges with respect to its effort to support private sector development through its public and private sector operations. ADB's poverty reduction strategy recognizes the importance of a dynamic private sector as the driver for accelerated economic growth and hence poverty reduction. This is being reinforced by ADB's Private Sector Development Strategy. To this end, the ADB will continue to support Government's initiatives to develop the enabling framework conducive to enhanced and sustained private sector activities, focusing inter alia on effective governance in the public and private sectors; sound macroeconomic management; effective and transparent financial intermediation; expanded public-private partnerships; and regional and subregional cooperation. Private sector operations will also seek to leverage ADB assistance by cofinancing through the complementary financing scheme and guarantee facilities. Moreover, ADB could assist in catalyzing private sector projects through direct financing and risk mitigation, particularly in infrastructure financing in the oil and gas, power, railways, telecommunications, water supply/waste management, and port sectors. ADB has already supported state governments' (Gujarat and Madhya Pradesh) efforts at restructuring and privatizing state-owned enterprises creating enabling environment for private sector participation. The expansion of state-level operations to a third focal state will provide further opportunities to provide assistance to state governments in this regard. 79. In meeting this developmental challenge, ADB will provide catalytic support for private sector projects to those sectors where appropriate policy, institutional, and regulatory frameworks are being evolved, and is fostering the establishment of such frameworks through policy dialogue as part of public sector interventions. The private sector pipeline, while continuously evolving, includes at present a LNG import terminal project in Gujarat ($50 million loan and/or equity), and a combined power and LNG terminal project in Tamil Nadu ($50 million loan and/or equity). Oil transmission, telecommunications/optical fiber network, and environment-related initiatives are also under consideration. Some of these projects, for example the LNG import terminal initiative in Gujarat and coal beneficiation projects, were formerly identified for public sector financing, but have been removed from the pipeline due to their potential for private sector financing. Moreover, some of the projects are complementing ADB's public sector operations, for example support for oil transmission in one of ADB's focal states, and spin off of telecommunications ventures using railways' right-of-way as part of railways sector development.
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