The Hindu Business Line : Infrastructure SPV welcome, but speedy clearances vital: Industry

, THE Union Cabinet's approval for establishment of a special purpose vehicle (SPV) for financing viable infrastructure projects has been welcomed by the infrastructure development and finance sectors.

However, the view held by a cross-section of entities in these sectors is that there was a greater need for the Government to ensure speedier clearances of infrastructure projects and remove bottlenecks on the way to infrastructure development.

Mr Deepak Parekh, Chairman, HDFC, pointed out: "There is money available - there is so much liquidity." He said infrastructure development needed large funding and therefore any additional money for infrastructure was less in India.

He, however, stressed that "our (infrastructure) projects take too long to fructify. For example, we need power projects but many of them are just lying idle for six months to one year, awaiting clearances. There is too much delay at operational level between the States and the Centre. What we need more is a shorter process time for projects."

The construction industry, on the other hand, feels that the step was a long-awaited one and that it would go a long way to spur infrastructure development in India. Says Mr Amitabh Mundhra, Director of Simplex Concrete Piles Ltd: "Finance is available in the common pool, but to have a dedicated fund for infrastructure is definitely going to give a shot in the arm for infrastructure development. To tap funds from the common pool is often tedious, but a dedicated source is certainly a boon to the industry."

Analysts feel that with the new SPV, competition in the infrastructure lending business is likely to become more intense, fuelled in part by a liquidity overhang in the banking system. "Even the mainstream banks, faced with rising interest rates, can no longer make money by accumulating government paper and therefore they are under pressure to accelerate the pace of their lending activities across the board, including infrastructure," an analyst pointed out.

As per the Cabinet decision, the SPV would cover sectors such as roads and bridges, railways, seaports, airports, inland waterways and other transportation projects, power, urban transport, water supply, sewage, solid waste, gas pipelines and infrastructure projects in SEZs.

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