India's infrastructure, a positive story

| Updated on: Apr 19, 2012
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There is a lot of capital asset building at the rural level, which does not come into the capital formation statistics. VINAYAK CHATTERJEE, CHAIRMAN OF FEEDBACK INFRASTRUCTURE SERVICES (P) LTD.

Mr Vinayak Chatterjee is passionate about infrastructure. As Chairman of Feedback Infrastructure Services (P) Ltd, a leading provider of professional and technical services in infrastructure, he has his finger on the pulse of the sector. Moreover, as Chairman of the Confederation of Indian Industry's National Task Force on Infrastructure — Monitoring and Advocacy, the 52-year-old is completely clued in on regulatory issues. He was a member of the Sam Pitroda committee on modernisation of Indian Railways.

When almost all other voices talk of gloom, in a recent interview in Chennai, this Economics (Hons) graduate from St Stephen's College, Delhi and MBA from IIM-Ahmedabad, gave a balanced scorecard — the positive developments and the NSG (not-so-good) areas, as he calls it. Excerpts from the interview:

positive developments

With all the battering that we do to the infrastructure sector, there is also some good news. First is that Gross Capital Formation in Infrastructure is increasing. The 10th Plan average was 5.1 per cent of GDP. It is expected to be 7.1 per cent in the 11th Plan and estimated to go up to 9.7 per cent in the 12th Plan.

In the early 1990s, we used to envy China at 9 per cent, saying can we ever match China when we were doing 3 per cent. This is tremendous good news, where across shades of different political dispensation we have had a silent movement of the tectonic plates of India's infrastructure geoplates.

To achieve this in the kind of polity and democracy we are, in a space of 15 years, has been a major structural shift.

Second, private-public-partnership is above expectations. During the 10th Plan, 25 per cent of our infrastructure was through PPP. The 10th Plan was largely driven by telecom and the early power projects. In the 11th Plan, the target was 30 per cent, but we are likely to do 37 per cent and in the 12th Plan there is reasonable confidence that we will do 50 per cent. This is a major change in India's infrastructure development.

In the 10th Plan, the investment was $220 billion, of which 25 per cent came through PPP.

In the 11th Plan, it is almost $480-500 billion of that 37 per cent, and 50 per cent of $1,000 billion in the 12th Plan.

The third is we constantly debunk the Planning Commission. India is one of the few countries that officially publishes a Plan and the system is willing to be tested and criticised against its performance or non-performance.

I have still not come across any other country that does this with that degree of meticulousness and rigour, of saying as a country we will look five years ahead, we will plan and prioritise. It is not that we are not achieving the figures.

When the Planning Commission announced the 11th Plan figures, there was general scepticism. As the 11th Plan has come to a close, we are likely to exceed the planned $500-billion spend on infrastructure.

A lot of capital investment in infrastructure is not officially captured. An irrigation canal is often written away as a revenue expenditure of the department rather than treating it as a balance sheet item in the books.

There is a lot of capital asset building at the rural level, which does not come into the capital formation statistics. There are metros that are happening, flyovers, storm water drains, if all of those were added up, the figure is likely to exceed $500 billion.

Along with that there has been significant capacity building – model concession agreements, creation of new institutions such as NHAI, IDFC, IIFC, viability gap funding, increased allocation in Budget…

Not-so-Good areas

There are three areas that are not so good, what I call the NSG. If you dissect these figures and put them into two broad baskets – aam aadmi areas – electricity, water supply, sanitation and irrigation that touch the common man directly.

I put everything else in the other area. Our failure rate has been the highest in the aam aadmi areas. That is a concern in the overall mix.

We must push things differently; maybe have pure EPC (engineering, procurement, construction) or annuity. We must prioritise through different methods. We must push the aam aadmi agenda. This has found resonance. The approach paper to the 12{+t}{+h} Plan talks about electricity and water as the two priorities.

A large portion of infrastructure development is the responsibility of the States. The expectation is that while the Centre would show the way, the States would quickly learn their lessons and would pick up the infrastructure development agenda. That is not happening.

The States' share is falling , while private sector is picking up. This is a matter of huge concern. In a federal structure we are seeing the politics getting more state-oriented and we are seeing greater devolution. Unfortunately the infra agenda, particularly PPP, is not being picked up with the rapidity one would have expected.

There are only a few frontline States, possibly, Tamil Nadu, Karnataka, Maharashtra, Gujarat and Punjab, which have picked up the PPP agenda.

The world that we are living in right now is in anxious times, the corporate world is looking at depleting order books.

Depleting order books resulting in strangling operational cash flows going for corporate debt restructuring, most infra companies are cash-strapped, declining profitability, rising debt… how badly they have leveraged their balance sheets, worrisome NPAs. Infrastructure NPAs have gone up significantly. Assets are on sale – road projects and power plants are on sale – because people want to de-leverage and become asset light. And disillusioned PE funds.

Most PE funds had invested in the boom time in 2004-05 and exit periods are normally seven years. So we are now at a time when the 2004-05 stocks are down. This is the current situation. I am saying that, one must get inside to understand the pain of players there.

This is an inflection cycle. We were at bottom at least two months ago when everything was going wrong. Now things have bottomed out.

There are far more road projects that are being awarded by the C P Joshi establishment, the appointment of the Pulok Chatterjee committee on power and coal, infuse some confidence that the Government is acting.

And the Presidential decree, while we may question the veracity of it, just gives a flavour that the Government is back to taking decisions. The secular graph is made of counter-cyclicalities and we are currently at this stage and likely to move up.

Published on November 15, 2017

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