Lack of funds and investor confidence are two factors that are hurting the infrastructure sector. Efforts are needed to bring back the faith and money in the sector.
FICCI´s India Infrastructure Summit 2014 focused on the theme ´Transport sector: Convergence & Connectivity´ where deliberations were put forth and shared among industry leaders, policymakers and players to facilitate ease of doing business in the infrastructure sector. Public private partnerships (PPP) in the infrastructure sector drew maximum attention as RP Singh, Chairman, National Highways Authority of India (NHAI), attributed the perceived failure of PPP projects for developing infrastructure projects to the failure of the people who handle such projects, rather than the concept. Singh highlighted the need for asset creation by injecting more liquidity in the infra sector to push the growth in the sector.
Much of the problem on PPP projects, Singh said, was caused by aggressive bidding for projects, misguided as the developers are by professionals and there is a tendency to pass on the risk to the government when the project becomes unviable. ¨There needs to be a level playing field for businesses to succeed and this is why PPP projects need to be transparent,¨ said Singh. He also stressed upon the need for constant interpretations in the Model Concession Agreement (MCA) to make projects more viable while fully supporting the PPP model where funding was scarce or unavailable. The biggest problem, he said, was the selection of project. No study has ever been done, not even by the Planning Commission, on the optimal road grid required. Basic decisions on these aspects are not taken with care and the tendency is to go on declaring roads as national highways, Singh further added.
According to the Knowledge Paper released at the event, all sectors suffer when inadequately planned projects are awarded. A project should only be awarded after completing detailed due diligence. An effective planning is dependent upon exact ground level situation. It is imperative now to develop Web-enabled integrated database of traffic data, land-related records and details of inventory (assets or trunk infrastructure). The paper suggests that to avoid long delays relating to project related clearances, single window clearances for all the critical transport projects are required (subject to a project cost threshold). There is a need to develop long-term source of funding through pension and insurance funds and support it with secondary bond market to access long term capital for transport projects.
Additionally, instead of limiting project planning and budgeting to project cost, planners have to assess entire life cycle costing to ensure availability of funds during the maintenance period. Further, government departments need to develop a long-term strategy to build capacities, either in-house by training and decentralising decision making or having full time Program Management Consultants to support departments, across levels in all of their operations. The paper stressed on the need to agree base case financial model to build consensus among concessionaire, lender and project proponent at the time of financial closure and regularly update it for future renegotiation.
Dr Vishwapati Trivedi, Secretary, Ministry of Shipping said that PPP is a concept worth supporting and also praised the current government´s focus on quick decision making in the current policy scenario that helped the shipping sector to a large extent. Trivedi said that there was also a need to shift the huge amount of transshipment through Indian coastline instead of the present practice of transshipment via Colombo. About 60 per cent of India´s exports and imports containers are transshipped through ports like Singapore and Colombo. This transshipment through ports outside the country involves an additional expenditure of $300 per container and an extra 7-10 days of transit time.
The day-long conference also saw industry experts sharing their views on the challenges in funding the infrastructure sector and the ways in which this gap can be bridged. Bond market funding to the infrastructure sector was suggested as a favourable measure to generate liquidity in the cash-strapped segment.
– Garima Pant
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