PPPs remain most compelling way to drive growth

Written by Shubhra Tandon | Updated: Apr 30 2014, 08:07am hrs
Simplex Infrastructures Ltd is a prominent civil construction and engineering contractor, with more than eight decades of operations. It has completed more than 2,600 projects in India and overseas. Now, with the industry pinning its hopes on a stable government for a revival in the infrastructure sector, Amitabh Mundhra, vice-chairman, Simplex Infrastructures Ltd, tells FEs Shubhra Tandon what could be expected in this space.

Now that the political uncertainty is expected to come to an end, what activity can be expected in the infrastructure space

For a segment that is a key driver in the overall development of the economy, the infrastructure sector has been lagging for the last few years. As per the World Economic Forums Global Competitiveness Report 2013-14, India ranked a poor 85 out of 148 countries for its infrastructure. This said, it will be a wait-and-watch situation. However, we believe that irrespective of the final outcome on May 16, there will be more robust spending on infrastructure.

How soon do you expect this activity to begin

Ideally, it should be a few months post the announcement of results.

The PPP model has come under criticism of late. Do you see the new government making changes to the existing model

Although PPPs have proved to be politically successful, the on-ground situation on delivery has been mixed. What we need to remember is that in a developing economy like India, PPPs remain the most compelling way to drive growth. However, to achieve private confidence in this participative model, changes will need to be made to the existing framework.

What changes would you like to see in the model

There are several issues that need to be addressed. Most critical amongst these are delayed approvals and land acquisition, dispute resolution, financial framework and policy. Adequate risk allocation between both parties is another key element that will need to be looked at.

Even the EPC players, through aggressive bidding, seem to have taken on more orders than perhaps they could execute, which has skewed viability of many projects. Your comments.

Aggressive bidding has no doubt been the proverbial millstone around the industrys neck. Delays in project execution due to lack of clearances (creating cost and time overruns), an overall liquidity crunch coupled with working on wafer-thin margins have no doubt affected the viability of several projects and the overall financial health of infrastructure firms. Hopefully, all major players would have learnt their lessons and will bid more sensibly in future.

There has been a lull in order inflows in the last two years. Is that situation changing now What has been Simplexs experience

As one of the most diversified players in the infrastructure space, with a presence across all construction verticals, we are seeing steady order inflows. We ended the nine-months of FY14 with an order inflow of R69,123 million in addition to an L1 status of R9,400 million. Our order book is well diversified across 235 contracts, nine verticals and nine countries, with a significant chunk made up of short-duration projects that are executable in 2.5 years on an average.