Infrastructure players seek policy tweaks to boost growth

V Rishi Kumar Hyderabad | Updated on August 17, 2020

Stress need for relay finance, setting up of development finance institutions

Infrastructure sector players and some of the institutions extending finance to these companies have stressed the need for policy tweaks to accelerate the growth of a sector with immense potential.

They want the long-term costs of infrastructure projects to come down from 12 per cent in India to about 7 per cent like in other countries and development finance institutions (DFIs), like in China, Brazil, Korea and Germany, to fund infra projects.

A la ‘Channel Tunnel’

During a webinar hosted during the weekend by the PHD Chamber of Commerce and Industry on “Infrastructure Investment during Covid times,” Padmanabhan Raja Jaishankar, Managing Director, IIFCL, said, “Infrastructure projects require long-term finance going up to 20-25 years. The banking sector finds it difficult to do so. One way to address this issue is provide for relay finance, that is more than one finance company extends funds, and they move out to bring a new one. This is not new but has been in practice in some countries and brings stability to the infrastructure sector. Channel Tunnel between the UK and France is one such example.”

The National Infrastructure Pipeline has got investment from big companies and banks with almost 40 per cent of its projects already in the implementation stage and the rest under development. Of the 6,835 infrastructure projects listed under national projects, 42 per cent are already under implementation, 32 per cent in conceptualisation and the rest under consideration.

Pawan Singh, Managing Director and CEO, PTC India Financial Services (PFS), expressed the need for specialised infrastructure finance institutions as infrastructure financing requires special attention. There is a case for development finance institutions that understand the issues relating to infrastructure and have the systems in place to address the problems of long-term finance.

Tapping bond market

DK Aggarwal, President, PHD Chamber of Commerce and Industry, said “infrastructure sector is a major employment generator and is being rightly given special focus under the Atmanirbhar Bharat initiative of the Government. Due to Covid-19 there has been a hit on infrastructure with the dispersing of migrant labour and leftover projects. With rising infections in this new normal, the government has given significant cushion to this industry with the announcement of the economic package.”

As per estimates, for 1 per cent investment in infrastructure, the GDP is expected to grow by 2 per cent.

He lauded the efforts and initiatives undertaken by the Ministry of Finance in identifying so many infrastructure projects under the National Infrastructure Pipeline. These projects have been put on the online dashboard providing details to all prospective investors.

Aggarwal said there is a need to create a vibrant bond market that will help raise money for infrastructure projects.

In the past two-three months, India managed to attract about ₹2.5-lakh crore inward investments, which include those made into Reliance and other companies.

Published on August 17, 2020

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