Top worries of infra CFOs

During a recent interaction with R. Nagarajan, Chief Financial Officer, Sri City (P) Ltd, Chennai (http://bit.ly/F4TNagarajanR), Business Line brought up a question. What are the top three or four concerns of infrastructure company finance head? Lack of availability of long-term funds comes foremost in Nagarajan's list. “Generally, infra projects have long gestation period, and access to long-term funds is a prerequisite for the success of the project,” he reasons. The other major worry for infra finance chiefs, in Nagarajan's view, is the frequent change in policies that makes business strategy difficult to implement. Lack of long-term government policies for the creation of infrastructure support – say power, road and port connectivity – adds to the hurdles before the sector, he rues. For, an ever-changing economic scenario makes decision-making all the more stressed. Our conversation continues over the email.

Excerpts from the interview.

How can the policy worries be mitigated?

What is needed is an acceptance that infrastructure is a must for the growth of the economy. For instance, it is imperative to decongest the ever-growing cities and to have satellite cities/townships/industrial parks for development. Again, the policy implementation is very slow.

The current proposed land acquisition law, SEZ policy changes, and the proposed changes to tax code are some of the examples where actions are in contradiction to the accepted requirements. We require long-term policy guidelines with the acceptance of various State governments, policies that are consistent for a longer period of time, keeping in view the interests of all stakeholders. Tax incentives for infra projects – in the form of VAT concessions, and sops in excise duty, service tax, and income-tax – are required for infrastructure, the epitome of the future of Indian economy.

As for the policy to encourage decentralised growth through the promotion of satellite industrial parks and integrated town ships, connectivity to these satellite townships should be made available at the planning stages so that there are no problems when these become operational. Among other suggestions are the implementation of a single-window clearance for all kinds of infra projects with a predefined duration for clearance from all agencies; and the conducting of seminars and events within and outside India to highlight the advantages of infra projects to all prospective stakeholders.

Your views on how the cost of capital can be reduced.

Funds should be made available to infra companies at a subsidised cost till they reach a minimum cash break-even. Since infra projects require funds for the long haul, 15- to 20-year loans or bonds can be a great help; also, pension/insurance funds may lend support to infra projects.

Allowing access to international funds with more flexibility can be a boon, within the framework of forex management, especially when local funds are so difficult to obtain and are expensive.

There should be opportunity to borrow overseas and replace the expensive local funds. Additionally, the government could set up infra funds for taking up equity in long-term projects to help these companies have better borrowing capability.

Other points of interest.

* Human resource management is critical since exposure to and understanding of the dynamic economy is a prerequisite for any successful organisation. There should be constant monitoring of the resources to make sure they are adequately exposed and trained.

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