Foreign players wary of India infrastructure risk

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Foreign investment will play a secondary role in resolving India's infrastructure deficit in the near term given the complexity of completing projects, executives and officials told the Reuters India Investment Summit this week.

Power, for example, attracted USD 1.44 billion in foreign direct equity investment in the most recent financial year - a pittance in the context of India's hopes for USD 350 billion to USD 400 billion of funding for power for the five years starting in 2012.

"I don't see any completely independent plants being set up by foreign companies," Bal Krishna Chaturvedi, the government Planning Commission's member in charge of energy and infrastructure, said in an interview for the Summit.

"The main entrepreneur continues to be Indian. This model we find is not a bad one because he knows the conditions here, he's able to handle it much better than a foreign partner," he said.

A lack of attractive opportunities and earlystage delays often deter investors from tying up capital in longterm projects in India, prompting many instead to gain exposure by taking stakes in listed operators or investing through private equity.

The challenges to getting big projects completed were underscored by the chaotic preparations for the upcoming Commonwealth Games in New Delhi.

"India is competing for global capital. Even infrastructure in India has to compete for capital, so the government, Planning Commission, should remain mindful of that," Anoop Seth, co-head of Asian infrastructure at AMP Capital Investors, a unit of No. 2 Australian wealth manager told the Reuters Summit.

New Delhi is keen to increase foreign investment in projects as it targets a doubling in infrastructure spending to USD 1 trillion in the five years starting in 2012, half of which it hopes will be privately funded. Of a planned USD 11 billion infrastructure fund, half could be raised from overseas investors such as insurers and sovereign wealth funds.

The demand for capital is clear. India was by far the world's biggest market for project finance loans last year at USD 30 billion, according to data from Project Finance International, but funding was dominated by onshore lenders led by State Bank of India which topped the global league table.