The first meeting of the newly formed Cabinet Committee of Investments (CCI) was held a few days back to discuss on various issues.
Vinayak Chatterjee, chairman, Feedback Infrastructure seemed to be very disappointed with the outcome of the first meeting. He said, “The expectation was that some decisions would be taken which would raise spirits in the market place.”
Below is the edited transcript of his interview on CNBC-TV18
Q: Would it be fair to say that you would have been disappointed by the outcome of the first meeting of the CCI?
A: Of course, along with everybody else. The main noise that the country was expecting was that some decisions would be announced because it was not a meeting that was called suddenly. It was from November or late October that Mr Chidambaram at the planning commission’s final National Development Council (NDC) meeting to adopt the 12th plan that the idea of National Investment Board (NIB) was rooted.
Then it went through various convulsions and ultimately, we got a watered down version called Cabinet Committee on Investments, which structurally was not vastly different from the Cabinet Committee on Infrastructure, which existed from United Progressive Alliance (UPA)–I with the Prime Minister chairing it and the secretariat being planning commission. The only change is now, the secretariat for the cabinet committee has become the cabinet secretary. To our mind, that is the only change that has happened.
The expectation was that some decisions would be taken which would raise spirits in the market place. What we got was rather banal 'come back in 30 days with a solution'. People who are setting the agenda could have asked these people to come to the meeting with solutions. What is the point calling the first historic meeting and then saying, please come back with your solutions. The purpose of a meeting is to discuss the solutions and come to a decision. So, one is left wondering about how governance management work is distinct from corporate sector management.
Q: apparently on next month’s meeting agenda, is this National Highways Authority of India (NHAI) versus some of the infrastructure companies issue, do you think there will be any resolution or any suggestion to that front?
A: You are talking about next time’s agenda. Let us forget all thoughts about next time’s agenda. The agenda of the first meeting remains unresolved because defense and energy are supposed to come back to clear these gas and oil blocks pending. So let us see whether the next meeting puts these issues to bed so that a large sector of the hydrocarbons can get moving and we increase our credibility vis-à-vis domestic and global investors then you come to the question of NHAI. That is not the only big ticket item left. After that you have got issues on coal linkage, fuel supply agreement (FSA), crude pricing of coal etc, there are many items on the agenda.
We of course do not know when the next meeting is and we hope that it is in 30 days. But then now we are moving close to the Budget cycle and everybody is going to be very busy with the budget till the end of February and early March. So assuming the next meeting is 30 days from the last meeting, my simple expectation is closure of the first agenda. Let us just see if that happens because otherwise we will just have parallel tracks running of lots of issues being discussed, and everybody being asked to come with solution. That I would be very afraid of.
Q: What have you made of this recent trend of some of these infrastructure companies, road developers pulling out of projects which were awarded to them, cases in point being GMR Infrastructure and GVK Infrastructure? Do you see this trend getting more accentuated as we roll forward into the year?
A: Right now there are two forces at work. One is these big wake-up calls from the biggies, the GMR Infrastructure and the GVK Infrastructure sending a strong message to the powers that be that unless the true spirit of the last 'P' which is the 'Partnership' in tandem with the second ‘P’ which is the 'Public' side of it – unless the public and private learn to move in tandem and we are not talked down to and our claims and our problems are sorted out in time and sympathetically as a partner, a strong message has gone to the system saying it is time for a wake-up call on the true meaning of the ‘partnership’ portion of private-public-partnership (PPP). So on one hand, the strong message has gone.
That strong message has two sides. One, there are similar road companies who are also thinking that if GMR Infrastructure and GVK Infrastructure can do it, we also have a huge bunch of problems, let us pull out. There is one school of thought which says that there are close to 15-20 road developers, who have got their letters ready to say we are pulling out.
The positive side of it is that, I think the system has taken the message very seriously. So reports emanating out from the ministry of road, transport and highways which incidentally has a new secretary, Mr Vijay Chibber who has just taken over two-three days back and NHAI have started reaching out far more positively and proactively, started talking with the developers including GMR Infrastructure. GVK Infrastructure saying let us talk, let us put issues on the table and let us see how quickly we can help you. So, there is a positive and a negative side. Being an optimist as always, I hope the optimistic side prevails over the pessimist.
Q: There are also apparently issues from big lenders like India Infrastructure Finance Company Limited (IIFCL) etc who are probably unlikely to go ahead and fund any further projects till issues like land acquisition are complete taking off from the earlier problem that we were discussing. Do you expect financial closure to become a bigger problem as we roll forward?
A: Yes, but I am happy about it because for a long time, many of us were even telling our friends in the private sector; some of our friends in the private sector are very eager to start a project even before the conditions precedent have been met because either their equipments are lying idle or they want their stock values to go up or whatever reason.
However, the correct thing to do is to not start a project till 100 percent land is acquired and various conditions precedent that NHAI is supposed to do like the removal of utility, state support agreement etc many issues, these are all to be sorted out and then the project should start construction. So, the fact that lenders have woken up now and said we will not fund till the key permissions are in place is a question that I have for the lenders. Why did you do it now? Why didn’t you do it seven years ago? These are the questions that I have for our key financiers, nobody seem to question the financing community. They seem to get away very easy.
The question I have for the leaders in the finance industry is if you say you are not going to finance now if 100 percent land is not available, why did you fund it seven years ago? You are as responsible as the developer. I think that is the message to be taken home.