Where are the infra moneybags

I do not know if introduction of GST will add a point or two to our GDP. Nor do I know for sure if our GDP will get a leg up should we substantially improve the skills of our people, or if we have a digital India, or if we have Smart Cities. But I do know that a world class infrastructure will increase our competitiveness and give a big fillip to our national output. Many people are waiting for the infrastructure boom to engulf us, not least among them being the steel and cement industry, the whole construction sector, the manufacturing players and the people interested in ´Make in India´ and generally everybody else who are waiting in the wings expecting Infrastructure Investments to be the forerunners of our economic turnaround. Sadly, we do not see it happening yet. There may be myriad reasons for the slow pick up in infra projects, but a major and critical factor would have to be the dearth of investments. So, it is quite relevant and timely to discuss the issues around investments in this sector.

Over the last two decades, the idea that only the government will provide all expenditure for infrastructure development has gradually been changing in India. Given that governments always have competing needs of spending money, and they have their own idiosyncratic political or socio-economic considerations on which its limited resources are allocated, the private investors will have to step in to fill the yawning gap. It is from this imperative, that the concept of Public Private Partnerships was born. So far, in India, we have had a mixed bag of successes and failures with PPPs.

Over the course of the last decade, private sector participation in isolated cases of infra projects has really elevated the user experience in terms of quality and service delivery. On the other hand, we have seen PPP projects which got inordinately delayed due to permitting and right of way problems, or failed to attract sufficient users on completion, and thus turned unviable. Skewed understanding, in government parlance, of equitable or proportionate sharing of risks, and absence of any mechanism in our country for renegotiation of distressed PPPs, is making matters worse. These infirmities are but only to be expected in initial phases of our journey through PPP projects as we try to acquire a sheen of maturity in this space by evolving an enabling regulatory framework. Encouragingly, we see the government not only willing, but taking steps to even woo private sector participation. There seems to be a genuine desire to understand the complexities and sort things out in a systemic, process-driven approach. The government´s interventions in amending the Arbitration Act, the strong ( but unsuccessful, so far ) efforts to redefine the contours of Land Acquisition Act, its current efforts to set right the bankruptcy laws and the new hybrid-annuity model in the roads sector are strong cases in point of how this new government is flexible in its thinking, and is trying to remove existing hurdles.

So, we do hope the money will come, and will come soon. Some early signs are positive, as we see entry of international fund houses buying up road assets. There are three basic challenges to be overcome in attracting money into our PPPs in infrastructure sector – one is to be able to showcase viable projects with reasonable quantum of risks, as attractive investment opportunities to potential investors; two – to be able to create an eco-system of infra financiers with a set of financial products and tools suitable for long term infrastructure financing, and three – probably the most difficult, is to be able to generate confidence in the domestic and international investor fraternity regarding directional consistency of our regulatory policies, and regarding a mindset change of our public representatives towards the concept of ´true´ partnership with the private sector. We hope all these three questions attract the attention of our policy-makers as we move ahead.