Kingfisher moments in infrastructure

Srinivasan Nandakumar

The government’s ambitious $1 trillion target for infrastructure investment in the 12th Five-Year Plan has many interesting dimensions to it. While clearly the quantum of investment envisaged is huge, it would also appear essential given the country’s massive shortage of adequate and quality infrastructure–be it in transportation or energy or different components of urban infrastructure.

From an economic strategy perspective also, channelling investments into the sector holds immense potential to galvanise the present phase of sluggish growth. However, the push for investments into infrastructure projects comes at a time the sector itself is in the throes of acute stress.

Anecdotal evidence suggests that bank funding for new projects has practically dried up or, at the very least, considerably slowed down. There has been a virtual pendulum swing--from an environment of extreme eagerness to fund to a near-complete freeze.

Equity markets–both public and private–also seem to have lost interest in the sector. The current stress—resulting in some payment defaults and forced restructuring of loans—has been brought about not only by external factors (e.g., delays in land acquisition and environmental permits) but also by an inadequate appreciation of the risks inherent in funding infrastructure projects, coupled with sub-optimal financial structures (e.g., inadequate provision for contingencies, absence of or inadequate reserve accounts, etc.).

India Ratings continues to have a negative outlook for infrastructure projects as a whole in India. The agency expects a further intensification in many previously identified

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