The banks are shying away from infrastructure funding

Written by Partha Mukhopadhyay | Updated: Jul 7 2009, 05:56am hrs
Partha mukhopadhyay
Some say this Budget is strong on infrastructure, but I have my reservations. IIFCL refinance for PPP projects and take-out financing is supposed to make Rs 1,00,000 crore available for infrastructure. This would be fine if the problem was liquidity, but it is not. The banks are shying away from infrastructure funding because they find the risk allocation unpalatable. This is also why insurance and pension regulators are wary. India Infrastructure Finance Company Ltd (IIFCL) cannot solve this problem. Contract structures need to change and sooner government gets around to this, the better.

NHAI's allocation has risen by 23% and Jawaharlal Nehru Urban Renewal Mission (JNNURM's) by 87%!. One doubts that Kamal Nath will be able to turn around NHAI quickly enough to absorb these funds this year. Nor is it clear why NHAI needs budgetary funds for PPP highway projects. JNNURM, on the other hand, is different.