The Government is committed to removing all hurdles to promote infrastructure development. This was stated by Mr. M Venkaiah Naidu, Minister of Urban Development, Housing and Urban Poverty Alleviation and Parliamentary Affairs, Government of India while addressing a Session on “Renewing Infrastructure Finance” at the National Strategy Day on India, jointly organized by the World Economic Forum and Confederation of Indian Industry (CII) in New Delhi today.
The Minister stated that the government – through the reforms that it was undertaking – was trying to change the 3 “M’s” – Mindset, Models and Mechanisms. In this context, he pointed out that the mindsets of the people were already changing. There is now a greater demand for better infrastructure and users were now more inclined to pay a fee for the same.
Talking about some of the major reforms that the government has carried out in the recent past, the Minister stated that the Government was trying to encourage the adoption of the PPP model for infrastructure development. He stated that steps are being taken to make it easier to get construction approvals with the creation of a single window mechanism.
The Minister stated that there was a need to enhance the capacity of the urban municipal corporations and was setting up Special Purpose Vehicles (SPVs) to enhance infrastructure development in urban areas. The Central Government would provide seed financing to the urban municipal bodies through these SPVs. The urban municipal bodies in turn could then use this seed capital to raise commercial finance from banks for the projects they are undertaking.
In the Minister’s view, these measures have once again led to greater interest among investors in India’s infrastructure sector. He pointed out that not long ago, investor interest had waned thanks to the indecision in the government. Now, the situation has changed considerably and the number of bidders for infrastructure projects is on the rise.
In his address, Mr. Sumit Mazumder, President, CII stated that over the last two decades, infrastructure development has come a long way in India and several iconic projects like the Mumbai Airport have been developed. However, a lot more still needs to be done. He pointed out that the bank portfolios were overstretched with infrastructure projects that they had financed and which were now in danger of becoming NPAs. He commended the government for its efforts in addressing this issue with the spate of infrastructure reforms that it had undertaken and hoped that a sustained momentum in this direction would help alleviate the problem.
Mr. Mazumder also pointed out that the government had taken several measures to get infrastructure projects which were stuck due to various reasons off the ground. This helped spark greater investor interest in India’s infrastructure sector.
According to Mr. Alan Davies, Chief Executive Officer, Diamonds and Minerals, Rio Tinto, there were several states in India which had made good progress in making it easier to do business especially in the infrastructure sector while many others had tremendous ground to cover in this regard. He felt that the Government should encourage the adoption of global best practices by all bidders of infrastructure projects in India in order to help bring Indian infrastructure to global standards.
Ms. Punita Sinha, Founder and Managing Partner, Pacific Paradigm Advisors was of the view that the earlier system of infrastructure financing was clearly inadequate to address the needs of the sector. Short term debt financing was being used to finance long term projects without a clear understanding of the cash flows that the project would generate. The rules at the time did not allow for long term financing. This was one of the reasons that many of these projects turned into NPAs. With long term financing being facilitated now, she hoped that the situation would change.
Ms. Sinha also stated that a new breed of investors was coming into the market now. These investors had a longer term view of the market and had the appetite to take on brownfield projects which were up for sale.
Mr. Richard Samans, Head of the Centre for the Global Agenda, Member of the Managing Board, World Economic Forum stated that globally the old model of infrastructure financing was changing and both developed and developing countries were looking at alternative financing models such as the PP approach. Even groups like the G20 had set up a forum for member countries to share their experience in this regard.