Conference on Infrastructure Finance
September 4-5, 2019, NCCI, Nagpur
The conference on Infrastructure Finance in Nagpur looks to discusses various aspects related to infrastructure development in India which includes not only financial aspects but critical issues such as impacts on environment, land, agriculture, livelihoods, displacement of rural and urban communities among others. In the past few years, infrastructure development has emerged as a key driver for the Indian economy. It is understood that the sector would be responsible for propelling India’s overall development. The government is intent on creating a policy environment to ensure time-bound construction of mega infrastructure projects in the country. In India infrastructure sector includes power generation and transmission, highways, ports, airports, bridges, dams, industrial zones, railway freight corridors, inland waterways, logistics hubs as well as urban infrastructure including smart cities, metro rail systems, housing, water supply, sanitation and others.
Global Infrastructure Outlook reflects that rising income levels and economic prosperity is likely to further drive demand for infrastructure investment in India over the next 25 years. Around US$ 4.5 trillion worth of investments are required by India till 2040 to develop infrastructure to improve economic growth and community wellbeing. The current trend shows that India can meet around US$ 3.9 trillion infrastructure investment out of US$ 4.5 trillion. The cumulative figure for India’s infrastructure investment gap would be around US$ 526 billion by 2040. Similar, projections for investments in infrastructure development, increasingly by the private sector, have been made by the World Bank, Asian Development Bank (ADB) and International Finance Corporation (IFC) in their reports on infrastructure gaps in India.
Government of India’s Economic Survey (2017–2018), says that in order to ensure high and sustainable growth, there has been a substantial step-up of investment in infrastructure mostly on transportation, energy, communication, housing and sanitation and urban infrastructure sector. It, adds that there was massive under-investment in infrastructure sector until the recent past when the focus shifted to invest more on infrastructure. The reasons behind the shortfall in investment were: the collapse of Public-Private Partnership (PPP) especially in power and telecom projects; stressed balance sheet of private companies; issues related to land and forest clearances. The need of the hour is to fill the infrastructure investment gap by financing from private investment, institutions dedicated for infrastructure financing like National Infrastructure Investment Bank (NIIB) and also global institutions like Asian Infrastructure Investment Bank (AIIB), New Development Bank.
The government is trying to create more fiscal space by enhancing the efficiency of tax collection and expenditure distribution, and by devolving more resources to states. It is also seeking to revitalize PPPs by strengthening PPP institutions, promoting improved contractual modalities, pursuing fair allocation of risks, and strengthening progress monitoring. However, states with limited fiscal space need to rationalize expenditures and mobilize revenues, while strengthening investment cost-recovery mechanisms. Urban local bodies need to increasingly tap own revenue sources and private capital.
It is also being indicated that the failure of PPP model to deliver on various aspects has led the government to look to finance projects through models like Hybrid Annuity Model (HAM), government fully serviced bonds, station redevelopment, private investment, foreign direct investment, Infrastructure Investment Trusts route, LIC, Long Term Pension Funds, etc. apart from the financial support from the national and international financial institutions.
Similar, policy recommendations to finance these megaprojects are being made by national and international financial institutions like the World Bank, ADB, IFC, AIIB and others in their country strategy documents, infrastructure development reports and analysis of the investments required.
The announcements made by the GoI in Union Budget 2018-19 indicate the way forward in the coming future. Similar, budgetary recommendations are also made in the full budget for FY 2019 – 20.
However, in spite of all the discussions about the huge amounts of investments required there has been little debate regarding the implications of these massive investments and projects on the local communities, natural resources as well as the environment. Critical concerns such as infrastructure for whom and where have largely been ignored and public consultations with communities missing. More importantly, the investments from IFIs have some sort of environment and safeguard policies to comply with. But these have been missing on part of the domestic financial institutions, private investors and financial intermediaries which are being rapidly created and increasingly used to finance these projects. Most of the finances coming from these institutions do not observe the transparency and accountability mechanisms.
Notwithstanding, the problems and failure of PPP model for infrastructure development as noted in reports of various agencies, PPPs are being promoted by various government and international agencies to implement these mega infrastructure projects. The problems of financing and operationalising PPP contracts in roads, power, water supply, sanitation have been well documented not only in India but across many other countries. Regardless of these experiences and evidence, the PPP model is being strongly recommended for more such projects.
The conference on Infrastructure Finance on September 4-5, 2019 in Nagpur would deliberate into some of these aspects of infrastructure development from socio-economic-environmental perspectives. It will also discuss the role of national and international financial institutions, projects and finances as well as mechanisms used to drive investments into these projects. The conference would also discuss the impacts of such megaprojects on issues such as agriculture, climate change, natural resources, labour and implications on the local communities.
Hybrid Annuity Model (HAM) is a combination of two models i.e., the EPC (Engineering, Procurement and Construction) model and BOT – Annuity (Build, Operate, Transfer) model.