The finance ministry and the Reserve Bank of India (RBI) would usher in policy and regulatory changes to make ongoing infrastructure projects worth $100-150 billion attractive to long-term global investors, officials said on Friday.
“We are working very hard to understand what the issues and challenges are. What we further need to do as far as the law, regulation and project structuring are concerned, (we will do) so that we can be able to present you (a scenario) of attractive returns where risks are much lower,” minister of state for finance Jayant Sinha said at an investors summit organised by the ministry.
The investor summit is part of the government’s attempt to market the opportunities in viable projects to long-term global investors such as sovereign wealth funds (SWFs), private equity (PE) funds and pension funds. It is also seeking their partnership in the National Infrastructure and Investment Fund (NIIF), the new vehicle for catalysing infrastructure financing. The Centre would hold 49% in the NIIF, being set up as a fund of funds with an initial corpus of R40,000 crore. It would leverage the corpus multiple times to raise debt to provide equity and debt funding to projects in highways, railways and energy, among others.
The RBI has also offered support to the initiatives of the Centre as the country’s current infrastructure does not match its growth ambitions. “We are open for regulatory changes as the situation demand as nothing is cast in stone. We are sensitive to demand,” RBI deputy governor H R Khan said at the event.
Besides steps taken by the government such as liberalisation of FDI norms, the RBI has announced several steps including the relaxation in external commercial borrowing (ECB) rules and liberalisation of lending norms by banks in the infrastructure sector. Khan said the central bank could look at further fine-tuning of the ECB norms to make it easier for firms to mobilise funds from global markets.
Speaking at the summit, chief economic adviser Arvind Subramanian said the slump in price of commodities such as oil, steel and cement presents India with an opportunity to build infrastructure at lower costs, as well as to shore up public and private spending.
“Although it is a challenging time, it is a kind of positive shock for investing in infrastructure. If oil, steel, cement are down, the cost of building infrastructure comes down and returns to infrastructure goes up,” Subramanian said. India’s strong macroeconomic fundamentals increases its attractiveness, he told investors. Sinha outlined the variety of projects that are on offer for investors — stalled projects, greenfield projects and portfolios of cash-generating developed projects — that can be packaged together into relatively solid attractive yield-generating portfolios.
The government is trying to rethink the whole manner of refinancing greenfield projects and trying to ensure that these projects get to cash flow as early as possible. A number of funds like Apollo, Blackstone and Edelweiss are looking at investing in some brownfield stalled projects, Sinha added.