Transcript India - Opportunities in Infrastructure for Foreign Investors Arvind Mayaram

India - Opportunities in
Infrastructure for Foreign
Investors
Arvind Mayaram
Department of Economic Affairs
Ministry of Finance
Government of India
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Investment scenario
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GCFI in infrastructure as percentage of GDP
4.6 % during the tenth plan
If growth in GDP to be sustained GCFI in
infrastructure must keep pace.
Total estimated investment of USD 320-350
billion in infrastructure up to 2012
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Investment Opportunities in India
Indicative
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TRANSPORT:
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Roads ($ 48 bn.): BOT preferred mode; NHDP-40,000 kms
Airports ($ 9 bn.): 4 Metro, 35 Non-metro airports
Ports ($ 12 bn.): All new berths through BOT
Railways ($ 12 billion): Container trains, DFC, Stations
POWER Generation ($ 130 bn.): Transmission, Distribution
OTHER SECTORS
 Gas Pipelines: Cross Country, Intra-city pipelines
 Telecom
 Health and Education Infrastructure
 Urban Mass Transport
 Urban Water Supply, Solid Waste Management
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Government is committed to PPP modeWhy?
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Maximizing investment
Budgetary constraints
Development of assets of world class standards
Improved maintenance and management of assets
Provision of efficient services
Affordable prices through greater competition
Risk Sharing
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What are Foreign Investors looking for?
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Good projects
Demand Potential
Revenue Potential
Stable Policy Environment/Political Commitment
Optimal Risk Allocation Framework
Independent Regulation
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Does India have it?
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Good Projects
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Large Package sizes are
being insisted upon by GoI
in the road and other
sectors
Design based on superior
technology which may not
be available domestically
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Demand Potential
Ports: 877 million tonnes of traffic by 2011-2012
15.5% growth expected in containerized traffic
Airports: Passenger and cargo traffic slated to grow at
over 20% annually
Railways: Freight traffic is growing at close to 10%
and passenger traffic at close to 8% annually
Power: 13% peaking and 8% average shortage of
power annually
Telecom: Rural penetration less than 4%
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Revenue Potential
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India scores because of its large untapped markets
Example: India is a telecom success story despite low
Average Revenue per User- there is comfort in numbers
Power: High revenue recovery recorded in recent times with
100% recovery in many cases
High economic growth rate has translated into a larger
disposable income and larger spending capacity
Willingness to pay exists provided delivery is of good quality
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Stable Policy Environment
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Model Concession Agreements for each sector
guaranteeing protection against change in law,
change in taxation
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Clarity in obligations of the authority and provision
for penalty for breach of obligation
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Optimal Risk Allocation
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Demand Risk is partly mitigated through provisions
for change in duration of concession –both upside and
downside
Competition from other suppliers limited through a
variety of non-compete clauses
Escalation in input costs mitigated through
indexation of user charges to inflation
Construction and performance risk to be borne by the
investor
Political risk and force majeure risks borne by the
Government
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Termination payments and terms protect
against arbitrary termination by Government
 Land acquisition risk borne by government
 Risk relating to permits and approvals
especially environment permission borne by
government
 Provision of other related infrastructure an
obligation of the authority
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Independent Regulation
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Telecom Regulatory Authority of India
Central Electricity Regulatory Commission/State
Electricity Regulatory Commissions
Tariff Authority for Major Ports
Airport Economic Regulatory Authority
Robust ‘regulation by contract’
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Is there a financing constraint or is it
the problem of lack of a good project
pipeline?
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Steps taken by government to ease
financing constraints
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Viability Gap Funding (VGF)
India Infrastructure Finance Company Limited (IIFCL)
India Infrastructure Initiative ($ 5 bn. Fund)
Enhanced Annual External Commercial Borrowing ceiling
Bonds- reporting platform started and trading platform
slated to start from July 1, 2007
Permission to foreign financial institutions and multilaterals
to raise rupee resources: ADB allowed to raise rupee
resources
Encouraging development of new instruments such as
grading of PPP projects/SPV rating by the major credit
rating companies
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Creating a pipeline
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Building capacity within institutions to handle
large PPP program, including project preparation
Preparation of project preparation manuals,
handbooks on procedures, toolkits, standard bidding
and contract documents etc.
Expert support to central ministries/state
governments for project preparation
India Infrastructure Project Development fund
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Thank You
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Sectoral Opportunities
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Power
(Estimated investment: USD 60 billion)
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Over 67000 MW capacity to be added in the 11th
plan period (2007-08 to 2011-2012)
9 UMPPs to be implemented during the 11th and
12th plans
Transmission capacity augmentation through JVs
for new generation
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Roads
(Estimated investment: USD 49 billion)
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NHDP-II: 4569 km,
$103800 mn.
NHDP-III: 10000 km
$155200 mn.
NHDP-IV: 20000 km
$66100 mn.
NHDP-V: 6500 km
$98100 mn.
NHDP-VI: 1000 km
$39700 mn.
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NHDP-VII: $38000 mn.
State Roads programme are in
addtion
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Railways
(Estimated investment
USD 67 billion)
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Dedicated Freight Corridors with PPP sub-projects
envisaging more than USD 7 billion investment for the
North South, East West Corridors alone
Container operations
Rail side warehousing
Logistics Parks
Development of Rail links to Ports
Dedicated rail links for evacuation of specific industrial
items
Modernization of Railway Stations
Development of new routes
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Airports
(estimated investment USD 9 billion)
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Metro Airport
development through PPP
Greenfield Airports
Concept of Merchant
Airports being examined by
Government
City side development in
24 Non-metro Airports
Provision of Services
within airports
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Ports:
(Estimated investment
USD 11 billion)
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National Maritime
Development Programme
387 port projects
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All new berths on PPP
basis
Gradual transition of old
berths to PPP
Compound Annual Rate of Growth
during different Time span
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10.78
10
Percentage
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9.5
8
6
5.51
9.97
6.74
4
2
0
1951-2004
1992-2004
2001-2004
2003-2004
2004-2005
54 Years
Post Liberalized
Last 3 Years
Prev ious Year
Projected Grow th
Era
Period
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Telecom
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Untapped rural potential
with low rural tele-density
of 1.9% which must
increase to 10% by 2012
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Almost a million
broadband connections
added in 2006-2007. With
low penetration scope for
further increase
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Urban Infrastructure
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Mass Rapid Transit Systems at Mumbai at a
capital cost of about USD 2.5 billion, Hyderabad
and Kolkata at about USD 1 billion each,
Ahmedabad at about USD 950 million and other
cities
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