India is lagging when it comes to infrastructural facilities. Not only does the country need new warehouses, roads, ports and airports but even the old infrastructure must be upgraded. There are many government schemes that encourage PPP projects but there is also red tape which acts as an impediment. It will be our undertaking to smoothen the bumps on the policy routes by letting you share your ideas with the law makers.
Infrastructure is the backbone of economic growth. The progress of the nation depends on strong transportation network consisting of roads, railways, ports, waterway and aviation sectors, telecom, power and associated services. Infrastructure projects require large capital investments, have long gestation periods, give low returns and involve high risks. This limits the attraction of the sector to investors with a long-term view. The government encourages private sector participation through the public private partnership (PPP) programme. The private sector invested $225 billion in infrastructure between 2007 and 2012. Most of this investment, amounting to roughly 12 percent of GDP, was through PPP projects. According to official figures, 758 PPP projects worth $70 billion are in progress or complete. The majority of these are road, port and power projects.
Many PPP projects such as those in road and power sectors have hit bumps because of inflated expectations of private companies which bid unrealistic prices to bag them. The government is trying to fix the glitches and private players have tempered their expectations. Many PPP projects bagged between 2007 and 2010 are unlikely to make a profit. In power sector many companies incorrectly presumed that they will be supplied cheap coal by the public sector Coal India Ltd, or low-priced gas from operators who are mostly covered by PPP type contracts. The natural gas prices have recently been doubled to $8.4 per mmBtu effective April 1, 2014. The problems are compounded by red tape and delay in land acquisition. Just about a quarter of projects will be able to meet, or in some cases even beat, the deadline. High levels of borrowings impede flexibility when things don’t go according to the plan. The taxpayer may ultimately end up subsidising many of these projects as the government tweaks contracts and banks restructure loans to bail out the private companies executing the PPP projects.
Indian planners are targeting nearly $1 trillion investment in infrastructure between 2012 and 2017. Half of this amount is expected to come in the form of investments by the private sector. According to a report 18,637 km of expressways are required by the end of the 13th Five-Year Plan in 2022. This alone would need investments worth around Rs 4.5 lakh crore. The central and the state governments are focusing on development and inclusive growth. Prime Minister Manmohan Singh has set an investment target of Rs 1.15 lakh crore in public private partnership (PPP) projects across infrastructure sectors in railways, port and power in the next six months. These include the Rs 30,000 crore Mumbai elevated rail corridor, two international airports in Bhubaneswar and Imphal worth Rs 20,000 crore, and power and transmission projects totalling Rs 40,000 crore. A steering group will monitor the award and implementation of projects on priority basis. This group will also monitor two locomotive projects worth Rs 5,000 crore, Rs 10,000 crore Eastern Dedicated Freight Corridor and port projects totalling Rs 10,000 crore. The Airports Authority of India will take up the construction of 50 new low-cost small airports besides two new international airports. The new small airports will come up in Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Jharkhand, Madhya Pradesh, Maharashtra, Punjab, Rajasthan and Uttar Pradesh. New ports under PPP route will be built at Sagar in West Bengal and Durgarajapatnam in Andhra Pradesh.
The Planning Commission estimates that around 8 percent of the gross domestic product (GDP) needs to be invested in the infrastructure sector. This translates into an investment of over Rs 20 lakh crore in aviation, railways, roads, water transport, irrigation, power, telecom and water supply projects. The Organisation for Economic Co-operation and Development has picked up signs of upward momentum in the Indian economy. This is good news for those looking to invest in infrastructure and the India growth story.
(Disclaimer: The information has been aggregated through secondary research. IFIE is not responsible for errors if any)