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'I don't think Indian banks are short of funds,' proclaimed Piyush Goyal, Minister of Railways and Coal, Government of India, during a press meet in Mumbai.
INFRASTRUCTURE TODAY spoke to the then interim Finance Minister on the sidelines of AIIB Annual General Meeting in a length over various issues, especially funding for infrastructure. 'For a good project, there is no dearth of capital and equity. The government will supplement infrastructure projects funding with the help of multilateral development banks, if the situation arises,' he said.
What would be India's stand if it comes to financing One Belt One Road project by the Asian Infrastructure Investment Bank?
These things are discussed at the board level and a final decision is already been taken. Keeping all interests and viewpoint in mind, we don't make decisions outside the boardroom. AIIB is an independent organisation; it is not a Chinese-led or an American or European-led institution. It is always a multilateral institution.
AIIB is already looking at a bouquet of almost 9 to 10 more projects to be financed in India. I believe that every multilateral bank has many dimensions, and one cannot dictate who and what they will invest in other countries. I think, we should look at what we can do and how as a country, we benefit out of such engagements rather than focusing on the efforts on trying to see what they should not be doing.
AIIB has really matured in a very short period of time and is rapidly progressing to become one of the most important infrastructure financiers across the world. Avery strong management team and robust management practices- some of which have never been seen at the global stage- have been put in place by AIIB. In fact, the government is extremely delighted with the progress the bank has made. India is the second largest shareholder with a commitment of over USD 8 billion to the AIIB. It is a matter of great pride for all countries and forming partners associated with AIIB that a concept that was first rooted in 2014 was able to mature in a short span of six to seven months into an international agreement and by December 25, 2015, we actually had a multilateral development bank in place, in operation with India, as the second largest shareholder.
Are you looking out for AIIB playing a major role in railway projects?
We will put up all our requirements to multilateral development banks and other available avenues of finance. Whoever gives us the best deal, we are open to it. India is in a sweet spot in terms of the robust economy, which the current government has given. The democratic framework where rule of law prevails, with a good regulatory environment that we have in India and today, I do not see money as the reason why we will not be able to do good projects. We have to build our capacity and rapidly expand our infrastructure. You can already see this happening in the last four years. The trust and focus of this government has been to expand our infrastructure across the length and breadth of the country.
What is the commitment made by AIIB to India, considering India is the second largest shareholder after China?
India is the largest recipient of concessional finances for various infrastructure projects. Nearly 25 per cent or USD 4.2 billion of the total funds committed by the AIIB have been committed for projects in India, both in the government and private sector. Out of the USD 4.5 billion sanctioned funds so far, USD 1.2 billion have been received by the Indian economy. It is a matter of satisfaction for the Indian Government. In fact, the President of AIIB was satisfied with the kind of project proposal been submitted to the multilateral bank. AIIB has approved an investment of USD 200 million in the National Infrastructure Investment Fund (NIIF).
You recently had a meeting with the stakeholders and banks to sort out the non-performing asset (NPA) issue. What was the outcome?
The outcome was very good.
We could see a lot of enthusiasm among the bankers to lend funds, particularly to the MSME sector and the small businesses who are keen to participate in the growing infrastructure story in India. Currently, our country needs a strong banking system. I often tell friends from the media that when you go to a doctor, he can help you cure your illness, only then you know what the ailment is. Unfortunately, during the UPA years, the then government never really addressed the actual illness, which has led to increase in NPAs. Prime Minister Narendra Modi believes that it is important that we should bite the bullet and Finance Minister Arun Jaitley brought out the truth before the nation. I think the nation will be grateful to both for addressing the problems of the banking sector and strengthening them to once again to start becoming a powerful engine growth. With proper financing of infrastructure and financing the credit needs of the industries, the Indian banking system is now poised for very good times ahead.
We also believe that highest levels of probity, transparency and accountability are very important ingredients for the success of the investments in infrastructure. Our energy and efforts in the last four years have been focused on creating a framework that excites investment in India.
I don't think Indian banks are short of funds. For a good project, there is no dearth of capital and equity. Indian banks will continue to play an important role in financing the infrastructure needs of the country. And we will supplement it (infrastructure projects) with multilateral development banks with government support. In the road sector, we have done a lot of hybrid annuity projects. We also have viability gap funding for many projects. There are many projects where we mitigate the initial risk with government investing and setting up the project and then divesting it to monetising at a second stage. So we are looking at all options. And, Indian banks will continue to finance such projects to promoters.
For aspirational projects like the bullet train, would it be more with the government's line of thinking that for such projects they would rather have an internal funding agency in which you are a large shareholder rather than getting it from multilateral banks?
We are open to it. In fact, I met the President of AIIB on January 24, 2018. He expressed a lot of interest in taking up the next set of high-speed corridor projects that India would envisage. We even had a very engaging discussion, particularly on the golden quadrilateral project.
When it comes to infrastructure projects in India, land acquisition is a big problem. How is the government trying to meet this challenge? There are a few instances where farmers have staged protest against the bullet train project.
We are working in a democratic setup. Everybody has the right to raise issues, to make suggestions, to make engagement with the new project authorities. I think it is on any good infrastructure development corporation to take the local communities along with them, involve them in the development of the project and certainly highlight what could be good, and how it would impact their lives in the future.
With the new land acquisition laws giving five times the market value for the land that is acquired, by large, we are not facing any major stress in land acquisition. There are pockets where more engagement is required. I have discussed this with the chief ministers of Maharashtra and Gujarat, and I think the discussions are at advanced stages. The environmental and social impacts studies have been completed or are nearing completion and I don't see any stress in getting the land. In fact, the high-speed rail corridor has offered a larger compensation to the land owners. So instead of four times, we are willing to pay five times, if the land comes through consent. Otherwise, it will have to go through the acquisition mode. Villagers from the Palghar (Maharashtra) and Surat (Gujarat) belt will stand to benefit hugely from the high-speed rail corridor. The entire stretch, from Mumbai to Ahmedabad, will be developed somewhat like Beijing and Shanghai. I see Mumbai-Ahmedabad corridor as the first such corridor that will expand the economy in the entire region. And, we also hope to get this to other areas of the country.
With the new land acquisition laws giving five times the market value for the land that is acquired, we are not facing any major stress in land acquisition.
- RAHUL KAMAT