Staying away

The foreign equity component, involving 27 overseas entities, is a meagre one per cent of the total project investment.

Arun S.

New Delhi, Dec. 24

Even as the Centre is aggressively pushing the public-private partnership (PPP) formula in virtually every sector, official data show a minuscule one per cent share of foreign equity in total investments under this head.

According to the Department of Economic Affairs (DEA), there were 450 PPP projects operational in the country as on November 15, involving an aggregate outlay of Rs 2,24,175.75 crore. The DEA study, pertaining to 300 of these projects, reveals foreign multinational equity participation in only 22 of them.

Indian investment

The foreign equity component, involving 27 overseas entities, in these projects is only Rs 1,725.85 crore, “a meagre one per cent of the total project investment of Rs 1,35,871.42 crore”.

Indian private investors pumped in the remaining 99 per cent, amounting to Rs 1,34,145.57 crore. This, despite the Centre allowing 100 per cent FDI in infrastructure projects, while facilitating funding of these and providing fiscal incentives.

A sector-wise break-up of the PPP investments shows the bulk of foreign equity flowed into airports. Four airport projects got Rs 1,053.13 crore, or 61 per cent of their total investment. Of the remaining, 24 per cent or Rs 416.5 crore were given to nine port projects, while 15 per cent or Rs 256.22 crore went into nine road projects.

Mr Vinayak Chatterjee, Chairman of Feedback Ventures, an infrastructure consultancy, said “I thought a lot more foreign equity had come in. But most Indian companies invest in PPPs through Special Purpose Vehicles, which may show that the entire investment is by the Indian investor. Though their holding companies may have got foreign equity, the DEA study wouldn't have captured that data.”

Mr Hemant Sahai, a lawyer specialising in infrastructure projects, said foreign players mostly participate in PPPs indirectly as lenders, construction contractors, and equipment providers. “They are reluctant towards equity participation due to the forex fluctuation risks involved in the returns. But we needn't create a special regime for foreign players as there is enough competition and risk appetite among domestic companies and banks.”

(This article was published in the Business Line print edition dated December 25, 2009)
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