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In a bid to fill the massive lack of funding in the infrastructure sector, the government is looking at ramping up private investment through public-private partnerships (PPP). Key sectors such as the railways and petroleum could benefit from this initiative.
At the Business Standard National Infrastructure Summit 2015 in New Delhi on January 15, Railways Minister Suresh Prabhakar Prabhu said private participation was among the key factors that led to massive investments in the power sector post the reforms initiated in 2003 and there was a need to replicate the same growth story in the railways.
"The power sector got a good share of the $100-150-billion investment and that has led to immense development in the sector, as private players came in. It was a similar story in the roads sector, in which growth happened after private investment came in. A similar investment is needed in the railways as well."
During his inaugural speech, the minister added growth in railways infrastructure would automatically open up an investment cycle in related areas of steel, cement and locomotives, thereby boosting manufacturing, the focus of Prime Minister Narendra Modi's 'Make in India' campaign. "The railways needs an investment of at least $100 billion in the next few years to expand its network and improve service. There is enough scope for the private sector to invest," said Prabhu, adding the ministry was aiming at increasing the tracks across the country by 30,000 km, and this alone would cost $50 billion.
The railway ministry has already held two mega investor meets since December with over 160 senior executives of 60 large companies to attract investments worth over Rs 90,000 crore under five models of participative policy.
It has also discussed the framework of engineering, procurement and construction (EPC) contracts, sectoral guidelines for foreign and domestic investment, a new model concession agreement under the PPP model and new projects, such as station development, also under PPP.
Companies which have expressed interest in the railway ministry's PPP initiative include Reliance Infrastructure, Larsen & Toubro, Siemens, Adani Ports, GMR, Tata Infrastructure, Gammon, Jindal Steel and Power Ltd (JSPL), JSW, Bombardier, General Electric, Alstom, Electromotive Diesel, Bharat Heavy Electricals and NMDC.
JSPL chief executive officer Ravi Uppal, who was part of the panel discussion on infrastructure during the summit, said logistics costs, at seven-eight per cent for the domestic manufacturing sector, was very high.
"Making railways efficient by enlisting the private sector could be a solution. There is a clear role for the private sector in creating the right benchmarks such as in the telecom sector, in which private companies brought in efficiency," he said.
Aniruddha Ganguly, president, strategy and development, GMR Energy, who also participated in the discussion, said for the PPP model to be successful, the government needed to shed its control in some of its businesses, such as airlines.
He said the investor needed to look at the PPP model as the "patience, passion and perseverance" model. "The government needs to learn to let go. It is, for example, running out of excuses to run an airline. Dilution of a two to five per cent stake is a joke." Ganguly added PPP initiatives had mostly failed in the past six or seven years.
"Since the Union Budget, I have not heard of the 3P India project - for which Rs 500 crore had been proposed - to support PPP projects. We do not know what happened to that," he said, adding success from initiatives to attract foreign capital might be difficult unless the government addressed issues such as retrospective tax regime.
