Fund, bankable projects to fuel infra growth

Project financing for the infrastructure sector requires government support in the form of dedicated infrastructure fund to meet the shortfall in lending to the sector.

“While most infrastructure projects today are being implemented in the public-private participation mode, there is concern about financing to this sector,” S V Ranganath, chief secretary, Government of Karnataka, said at ‘Suminfra-2010’ organised by the Confederation of Indian Industry (CII) here.

The issue of financing can only be solved through a dedicated infrastructure fund set up by the government that can take the risk of long-term investments, he added.

India plans to invest close to $1 trillion for the development of infrastructure in the 12th Plan period. Of this investment, 50 per cent will be under the PPP mode.

However, project financing is an area of concern for the private companies as banks don’t lend to the infrastructure sector in a major way due to an asset-liability mis-match.

On the other hand, there are not enough infrastructure funds to lend to this sector.

To bridge this gap, though, the government had been mulling an India Infrastructure Fund with a corpus of Rs 50,000 crore. But, it is yet to see the light of the day.

As per the Deepak Parekh Committee recommendations on infrastructure, the country should allow insurance companies and pension funds to participate in infrastructure lending.

“Centre should allow insurance and pension funds to participate in infrastructure lending as this will be able to meet the requirements of long-term financing,” J P Nayak, president (operations and whole time director), L&T, said.

He also said, there should be consistency in the bidding process across the country.

Some industry experts also feel that along with financing issue, there should be enough number of bankable projects in the country.

“More than finance, the government should create a sound pipeline of bankable projects in the country on the PPP mode,” Vinayak Chatterjee, chairman of Feedback Ventures, said.

While the government is talking of the huge investments flowing into the infrastructure space, there is a lesser number of projects on the PPP mode, he added.

Talking of the issue of land acquisition, he said, “Locals should be involved in the growth process to overcome the land acquisition problems.”

He, however, said the growth of PPP projects were satisfactory compared to pre-liberalisation era in the country.