Long-term promises in a short timeframe

13 August 2013

Manish B Agarwal, Leader, Capital Projects and Infrastructure, PwC India

It is difficult to avoid cynicism in the current economic environment.

The role infrastructure investments play in promoting growth cannot be overemphasised. However, the announcements from the government do not inspire confidence, especially when it is well-known that the identified projects, worth 100,000 crore INR, cannot realistically be awarded in six months. Even in cases where the project preparatory work has been completed (such as deep sea ports, high-speed rail and greenfield expressways will take a couple of years), financial institutions are rejecting the PPP model used so far.

Minor tweaks are unlikely to bring back banks, which are nervously watching projects they have already financed. It is critical to test the bankability of demand risk combined with market risk. Whether it is the elevated rail corridor in Mumbai (30,000 crore INR) or the greenfield airports in 50 cities (200 crore to 500 crore INR each), the current VGF model is unlikely to be suitable. I don’t doubt the intention to align the model with the needs, only the timeframe in which it can be done.

The government is working on the right things. However, it just doesn’t seem to be announcing them. The PPP highways under operation can double from 5,000 km in 2012 to 10,000 km in 2014 and 20,000 km in 2016, if land acquisition and clearances hurdles are removed. A six-month target on this will be achievable, and will help boost investor sentiment. Similarly, a target of awarding already prepared port projects (such as container terminals at JNPT and Ennore), along with measures to avoid past mistakes, will be achievable. Several DMIC projects are in high level of readiness. In order to retain investor interest, the government must provide reasonable timeframes in its announcements.


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