Luis Miranda, Former Infrastructure Investor
The challenges this year have had little to do with the availaÂbility of finance, but with the poor bankability of infrasÂtructure projects. The inability of the goÂveÂrnment to honour agreements (tariff increases, coal linkages, enÂviroÂnment clearanÂces, land acquiÂsitions, payment of dues, etc.) has made projects less bankable.
The drag factors: Politicians have repeatedly said that we need a balanced approach to environment issues, but we don't see any concrete action. The infraÂstructure gap in India is too large and we need to make compromises on some environment issues, without going overboard (like the way the miners in Karnataka did). If the US, when they were building their infraÂstructure 60 years back, had to deal with the same environmental issues that Indian developers face today, they would not have that infrastructure today. The same goes for the Chinese infrastructure developments over the past two decades.
The problem of law enforcement continues to plague policy in India: instead of penalising the violators, the government and the Supreme Court clamps down on the entire industry …. a case of throwing the baby out with the bath water.
A weak proposition: Given this environment, getting foreign money into IDFs will be a challenge. Simply investing domestic bank money in IDFs will have limited benefit and will increase the infrastructure exposure of these banks. IDFs will not attract global investors, for the reasons stated above and the low international credit rating of Indian infrastructure projects. And existing lenÂders will not give up their loans after commencement of operations of the project if the construction risk is not priced higher.
These problems can be easily solved. All it takes is for the government to take bold steps to show that they are in control of the situation (like the move to a revenue share model in the telecom sector many years back). The infrastructure opportunity is too enticing for global and domestic investors to stay away from if we can fix these problems. The problem was created by the government and the solution needs to come from the government.