The 5th India Infrastructure Summit 2013 organised by FICCI recently in New Delhi explored the various means of infrastructure financing and funding. A report.
In a bid to stimulate investments, develop and build infrastructure projects and nurture a strong long term relationship between the project sponsoring authority and the private partner, the government will launch Infrastructure Investment Trusts (IITs) by end of this November. This was stated by Arvind Mayaram, Secretary, Department of Economic Affairs, Ministry of Finance. Like the Real Estate Investment Trusts (REITs), the IITs will manage the projects over a longer period of time to do away with the current practice of private players turning into developers whose interest is limited to merely contracting for construction and are not attuned to a 25-year relationship with the government. A major reason why some PPP projects in the infrastructure sector have run into problems is that many private partners did not price the risk in projects over a 25-year time frame,' Mayaram said. He underlined the need to engage with pension funds from overseas and welcomed the Canadian High Commissioner, Stewart Beck's offer to bring in pension funds to develop Indian's infrastructure sector. He also stressed the need for incentivising Infrastructure Debt Funds (IDFs).
Stewart Beck outlined four areas where Canada could collaborate with India for successful PPP projects. These are food security, energy security, education and infrastructure. 'We have one of the strongest pension system in the world and are willing to deploy these in infrastructure building,' he said. Subbu Narayanswamy, Director, McKinsey & Company, said that in order to make better decisions on selection of PPP projects,
India could set up a national level agency (similar to Korea's PIMAC)
Annuity model for projects
Hari Sankaran, Chairman, FICCI Infrastructure Committee and Vice-Chairman & MD, IL & FS, and A Didar Singh, Secretary General, FICCI, also shared their perspectives on the subject. FICCI has suggested an 'annuity' model for projects which are commercially unviable due to uncertain revenue-stream from tolling and hence unable to attract BOT operators.
Regulatory authority for roads
The government has decided to constitute a regulatory authority for the road sector as was announced by the Finance Minister in his Budget Speech of 2013. The Authority will perform the adjudicatory and advisory role and will have financial, administrative and operational autonomy, said Vijay Chhibber, Secretary, Ministry of Road Transport & Highways.
The roads and highways sector witnessed a comparatively slow growth in the last five years, said BK Chaturvedi, Member, Planning Commission, and added that the reasons attributable are both global and domestic. While the economic downturn has impacted the sector, local issues are equally responsible including delays in getting the relevant clearances for constructing roads, unclear mandate on different taxes levied in various states and limited number of developers in the country.
KK Kapila, Co-Chairman, FICCI Infrastructure Committee and CMD, Intercontinental Consultants and Technocrats; DK Sen, Executive Vice President & Head Transportation Infrastructure, Larsen & Toubro, Sudhir R Hoshing, CEO Roads Business, Reliance Infrastructure; and Sanjeev Ghai, Chief General Manager, IIFCL also addressed the Summit.