New Delhi: India's finance minister called yesterday for a doubling of infrastructure spending to $1 trillion (Dh3.67 trillion) in the five years to 2016-17, and said private sector firms would be allowed to sell special bonds to help pay for it.

Poor infrastructure is a long-standing roadblock to faster development in India, with choked roads and ports and inadequate power supplies acting as a brake on its economic growth.

The enormous funding needs cannot be met by overstretched banks alone and will require new sources of financing, Finance Minister Pranab Mukherjee told an industry conference.

Red tape and difficulties in acquiring land, along with an underdeveloped domestic bond market and wariness of overseas investors in committing to long-term, big-ticket projects have slowed infrastructure development.

The government has decided to allow private firms to issue infrastructure bonds, which will hopefully attract investments from big pension funds and other cash-rich firms, Mukherjee said. Issuance of these bonds, whose buyers can claim tax breaks, is currently limited to state entities.

"We have still not completely succeeded in exploiting the full potential of insurance and pension funds for deployment ininfrastructure projects," Mukherjee said, without giving a timeframe for when the first such private bonds would be allowed to proceed.

"The availability of equity, both domestic and FDI [foreign direct investment], continue to remain an area of concern," he said.

The government has estimated the country needs $514 billion poured into infrastructure in the five years to 2011-12, the year when the economy is expected to expand an annual nine per cent. The bulk of this investment is seen coming from private sources.

Prime Minister Manmohan Singh told the conference India needed reforms to ensure increased resources for the sector and for more private sector participation.

Private participation

"Our experience shows that private participation in infrastructure development is indeed a feasible proposition and can help expand infrastructure much faster than it would have relying only on public resources," he said.

The spending would help boost India's GDP growth into double digits, he said.