News & Events

We need several $10 bn funds: Montek

September 2011
FICCI's infrastructure summit in New Delhi, marked by large participation from all sectors, did not witness remarkable announcements, but for the reiteration that infrastructure is likely to miss the 11th Plan target by more than 10 per cent. A report.

How do we make banks' infrastructure lending more long-term with less mismatches? Well, create solutions outside banks, says Planning Commission's high-profile Deputy Chairman Montek Singh Ahluwalia. Speaking at the India Infrastructure Summit 2011: Achieving the Trillion Dollar Dream organised by FICCI, Ahluwalia said banks are not typically designed to lend long term, and so the need is to create more funds on the lines of the much-discussed $10 billion India Infrastructure Fund. "The $10 billion fund won't be just a one-off," he said, "but more like a pilot, where the guidelines will first be put in place for this fund. At least two more such funds should be established to start off in the next fiscal year."

Open up to public scrutiny: Ahluwalia feared, though, that India may miss the $500 billion target for infrastructure investment in the 11th Five Year Plan ending 2012. "I would not be surprised if it is 10 per cent or even 12 per cent short," he said. Private players have the responsibility of honouring their assurance of performance so as to prevent overruns but also to ensure public good, he added. Just as public scrutiny of privately handled portions of PPP projects should not be excessive, and better upfront definitions and terms of service delivery must be put in place, which can reduce time lags in projects, "It should be logical to open the private sector projects to government scrutiny in terms of assessing the performance parameters." Planning Commission member BK Chaturvedi echoed the sentiment and reiterated that bidding and not delivering is a "disservice to the company and to the nation".

Offline, Chaturvedi expanded that there was no reason to believe that the recent premium bidding in highways was excessively aggressive, as the bidding companies in PPP are large and experienced enough to know what they are in for, so long as the process is transparent. Referring to the recent headlines stating that the National Highways Authority of India (NHAI) would be receiving a bonanza of nearly Rs 77,000 crore in Negative Viability Gap Funding (VGF) or Premium, he told Infrastructure Today that the astronomical premium bids in highways recently only reflect a sign of the private sector's assessment of growth over the next few decades. He pointed out that government estimates of traffic growth in highways only includes five per cent per year, but this figure, which bidders have gone well over, may be too conservative to be realistic.

Off-track: Over the next five years India is likely to hike spend on creating ports, power and pipelines infrastructure. However, there are concerns in regards to the implementation of projects, Chaturvedi said. Private participation in several sectors has not matched what the Planning Commission envisaged, he said, citing the much-spotlighted example of the railway sector, where, although Rs 80,000 crore is being invested in the Dedicated Freight Corridors (DFCs) alone, only about four per cent of the value of the ongoing railway projects is under PPP. Comparing India's railway development with China's, he said: "China has expanded massively in the recent past. There is a need for expansion of our networks and their quality, including faster movement of larger freight trains up to 30 tonne capacity." On ports, which Chaturvedi cited as the other slow mover, he said the expansion we are witnessing is mostly because of the private sector initiatives.

"To facilitate [the all-round growth as planned], a balanced view on land acquisition is critical," Chaturvedi said. "The Planning Commission has taken states onboard now to discuss this."

Panels at business sessions through the day reviewed institutional and policy framework and analysed issues and challenges for private developers, reviewed viable investment and partnership models in infra finance, and provided case studies of mega infrastructure projects such as DFC, Transshipment Terminals, modernisation of India's airports and the "20 km challenge" in road building. Significantly, there was no mention of private participation in urban infrastructure, where private sector has been cautious because of magnified land and viability issues.