In an interactive meeting with Badal and senior officials of Punjab here, they said the pricing of public services should be entrusted to independent regulatory authorities as this would help in evolving a cost-based user charge which would attract private sector participation.

Expressing concern over the tardy pace of infrastructure development, Ahluwalia identified the power sector as the main problem area.

He said the process of depoliticizing had begun, but what was missing was the operation plan and the willingness of the government to have cost-based power tariffs. ``The deterioration in the quality of the services will continue unless and until the governments make the projects financially viable by making people pay for services,'' he added.

The Planning Commission member said the government must set up regulatory authorities to decide tariffs to create confidence among private investors. The state governments were looking towards the private sector to meet their fund requirements of thousands of crores for infrastructure development but these funds would not come if the governments did not assure adequate returns on investments, he added.

Rakesh Mohan, director-general, NCAER, said the state finances had deteriorated and rate of growth dropped. The government needed to improve its financial situation by checking subsidies and making people pay for services. People were willing to pay if they were provided improved services, he added.

Making a case of abolition of subsidies, G. Sahota, advisor, Punjab government, said the abolition of 75 per cent of subsidies of Rs 8,000 of the state could raise the money needed annually for the maintenance and building of new infrastructure. The elimination of the PSUs' losses alone would save equivalent to nearly 30 per cent of the funds needed for infrastructure development in the state, he added.

Feedback Ventures-SBI Capital Markets Ltd, which has been engaged in assisting the Punjab Infrastructure Development Board in identification of the projects, made a detailed presentation to highlight steps being taken to accelerate the process of development and privatisation of infrastructure.

Earlier, Ahluwalia told industrialists at CII that the government must corporatise Indian Railways with ``freight'' and ``passenger'' traffic being two separate entities. He said the politicisation of the railways had played havoc with the system and tariffs being fixed without looking at the rate of return.

Talking about the massive fund requirements for infrastructure sector, Ahluwalia said that foreign direct investment (FDI) inflows cannot be seen as a solution to the resource gap in financing infrastructure projects in India. Ahluwalia said the IRA Bill, which is pending before Parliament, would not make available immediately the insurance funds for infrastructure development.

Sunil Kant Munjal, chairman-designate, CII (northern region), said the fund requirements of this sector were so enormous that if the private sector decided to invest all the funds available with it into development of infrastructure, it would be able to meet only 20 per cent of the requirement. The government would have to play a dominant role in not only funding the infrastructure projects but also taking policy initiatives to create a level playing field for private sector participation, he added.

Munjal urged the government to create independent, autonomous, fair-minded and duly empowered regulatory bodies, immediately review all subsidies to ensure fair pricing of all public services with acceptable delivery standards and restructure existing administrative systems and procedures to ensure faster decision-making as was being done in some states through various innovative mechanisms. The government must take all enabling measures to mobilise long-term funds and develop deep and vibrant debt markets, he added.