The Telegraph
Since 1st March, 1999
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Levy of user charges key to core sector investments

Calcutta, May 16: The government should reduce subsidies on power, railways and water supply in urban areas and impose user charges to boost investment in infrastructure, according to Rakesh Mohan, deputy governor of the Reserve Bank of India.

“The rich are enjoying free lunches in society. The government should come up with rational and reasonable user-charges. There must also be a guaranteed payment security system,” he said. Mohan was addressing members of the Indian Chamber of Commerce (ICC) today.

According to Mohan, the subsidies that are offered on power and railways are meant to help the underprivileged. But these subsidies hardly reach them as almost 40 per cent of such people neither have access to power nor travel by rail.

“Because of huge revenue expenditure, the government is unable to spend on infrastructure and as such growth prospect is getting hampered,” Mohan said.

On low government investment in this sector, Mohan said during the past few years there had been little or no increase in service charges of railways and power because of political considerations. As a result, government utilities could not spend on infrastructure.

“Willingness of the public to pay user-charges is a must to help the government spend more on infrastructure development,” he said.

Mohan said though infrastructure development was primarily the responsibility of the government, the private sector could be leveraged to develop roads and telecommunication.

ICC president Vikram Thapar said infrastructure development is the key to a quantum jump in the economy. “Logistic transaction cost in India is almost double that of neighbouring countries,” he added.

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