Infra firms fail to attract investment: UR Associates

UR Associates has come out with its report on infrastructure sector. According to the research firm, Indian Railways has identified Public Private Partnership (PPP) investment in Railways in the 12th Five Year Plan in a number of areas. The projects having potential to attract private investment have been identified under PPP and are expected to be commissioned during the 12th & 13th Five Year Plan.

Road Ministry hopeful despite low interest from developers in Q1FY13
Response of private sector to Build-Operate-Transfer (BOT) projects in road sector was overwhelming till 2011-12, but recent response during the current financial year has been comparatively subdued. The primary reason is lack of availability of finance as many banks have reached the sectoral ceiling prescribed by the Reserve Bank of India and delays in the commencement of various projects. Infrastructure developers are finding it difficult to raise equity. Delays are due to slow land acquisition process and in obtaining environment and forest clearances. Such delay in the actual start of the project adds to the expense of the project cost and idling of various resources like manpower, plant and machinery, etc.

The road ministry believes that the targets the Government has set for the
road sector are ambitious; however, the sector in the recent past has surpassed earlier performance and inspires the ministry to fulfill the challenging targets in the days ahead. Referring to the continuous improvement of awards of projects from 639 Kms in 2008-09 to 3,360 Kms in 2009-10 followed by 5,082 Kms in 2010-11, the ministry said that the financial year 2011-12 was an outstanding year for the Indian Road Sector. A record length of 7,957 Kms of National Highways were awarded for strengthening / upgradation and improvement and over 2,200 Kms were completed during the year 2011-12.

The road ministry has a target of awarding 9,500 Kms of National Highways for widening and upgradation in 2012-13 and has also recently got the approval of Cabinet Committee on Infrastructure for awarding the already completed projects in the NHAI domain on Operate-Maintain-Transfer or OMT basis. NHAI has plans to award road projects covering around 4,000 Kms for better maintenance under OMT mode through Public Private Partnership route. This would not only help improve the existing roads with better maintenance, leading to higher level of users’ satisfaction but also provide new opportunities to OMT Concessionaires.

According to the ministry around Rs 110 bn have been stuck up in disputes in the roads and highway sector which is a cause for concern. The Government has taken serious measures to resolve these issues at the earliest by conforming to the report of the B. K. Chaturvedi Committee for faster resolution of pending disputes pertaining to National Highways Development Project (NHDP) works.

Projects under PPP mode in Railways
Indian Railways has identified Public Private Partnership (PPP) investment in Railways in the 12th Five Year Plan in a number of areas, which include an Elevated Rail Corridor (Churchgate-Virar), High Speed Corridors (Mumbai- Ahmedabad), Redevelopment of stations, Logistics Parks, Private Freight Terminals, Port Connectivity, Dedicated Freight Corridor (Sonenagar-Dankuni) and loco and coach manufacturing units, energy conservation etc. The projects having potential to attract private investment have been identified under PPP and are expected to be commissioned during the 12th & 13th Five Year Plan.

Indian infrastructure firms failing to attract much-needed investment

India's infrastructure companies are stuck in a vicious circle. They are looking to pull themselves out of a slowdown by selling stakes in projects to raise cash, but no one is buying because a lack of funds has jammed the brakes on expansion plans as well as ongoing construction work. In the year through March 2012, investments in the sector plunged 46%, according to the Reserve Bank of India's most recent annual report, released last week. It added that the government doesn't seem to have the "fiscal space" for spare cash required for an infusion of funds, and that the private sector has so far shown little interest in investing in projects involving railways, irrigation, water supply and sanitation, and ports and power distribution. This has implications far beyond the companies themselves, with the Indian government banking on the building of new roads, power plants and airports to pull the country out of its worst economic slowdown in almost a decade. From 2006, Indian companies were raising large amounts of debt to build assets that they hoped would fetch attractive returns in a booming economy. But these calculations went out the window last year, as economic and industrial growth tanked, and interest rates continued to rise

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