With 1-lakh-km-lane target, infra gets new structure

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Updated: March 1, 2015 2:54:12 AM

Govt to spend extra R70,000 cr on infrastructure; plug-&-play model to fast-track clearances

Infrastructure-investmentThe government is expected to spend an additional Rs 70,000 crore on capital expenditure for the infra sector.

With a slew of projects, schemes and a range of new funding options, the infrastructure space is set to get a big boost. The government is expected to spend an additional R70,000 crore on capital expenditure for the infra sector. The proposed addition of 1 lakh lane km of roads, five new UMPPs of 4,000 MW each in the plug-and-play mode, the corporatisation of 12 public sector ports, rural electrification programmes as also other rural infrastructure schemes together with the much-awaited revised norms for PPP (public-private participation) norms will go a long way to speed up the country’s infra build-out. India’s infrastructure space has been languishing due to a lack of funds and also because of the regulatory quagmire.

Paresh Mehta, CFO, Ashoka Buildcon, said a beginning towards revitalising PPP model for roads is already on the anvil with the government looking to bring in a hybrid annuity programme which balances the risk equally between the government and the private concessionaire.

The plug-and-play approach will mean that all clearances and linkages will be given to promoters before projects are bid out and this will prevent projects from getting stalled for one clearance or another. Private sector will be more encouraged to participate since there will be virtually no uncertainty. “This should unlock investments to the extent of R1 lakh crore,” said finance minister Arun Jaitley. The plug-and-play approach will be used for projects in other sectors such as roads, ports, rail lines and airports.

Rathin Basu, country president, Alstom India and South Asia, said, “These are positive initiatives towards power sector, including UMPPs and renewable projects, one needs to see the execution speed, particularly in view of huge NPAs stuck with IPPs and state discoms.” Providing connectivity to each of the 1.78 lakh unconnected habitations, Jaitley said, in addition to completion of 1 lakh km roads that is currently under construction, there is a need to sanction and build another 1 lakh km of road.

Reworking the rules for PPP, such that the government shoulders a larger portion of the financial and operational risk, will also encourage promoters to participate in more projects across roads, ports and railways. The model has already been introduced for the roads sector. Virendra Mhaiskar, CMD, IRB Infra Developers, observed the addition of roads signals more bidding opportunity and it also underscores the importance of bidding under the BOT model.

After initiating the process of boosting coastal and inland waterways, the government will now encourage corporatisation of public sector ports.

“Ports in the public sector need to both attract such investment as well as leverage the huge land resources lying unused with them. To enable us to do so, public sector ports will be encouraged to corporatise and become companies under the Companies Act,” said Jaitley. Experts said this should make the ports more efficient and profitable. Infra players have also welcomed the setting up of the Infra fund and the introduction of tax-free bonds.

The government has also promised to amend laws so that they become more user-friendly; experts believe a proper dispute resolution mechanism needs to be put in place so that any disputes are resolved speedily. Jaitley also said good progress has been made for DMIC corridors, with the Ahmedabad-Dhaulera Investment Region in Gujarat, and the Shendra-Bidkin Industrial Park near Aurangabad, in Maharashtra. He said that both are now in a position to start work on basic infrastructure.

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