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Infrastructure Finance Update October 2020

This month in Infrastructure Finance Update – the government looks to seek the Parliament’s approval for Rs 37,000-crore additional spending on infrastructure development in the second batch of supplementary demands for grant. Earlier this month, Finance Minister had announced additional budget of Rs 25,000 crore as capital expenditure (capex) on roads, defence, water supply, urban development and domestically produced capital equipment. Besides, the central government approved issuance of a special interest-free 50-year loan to states of Rs 12,000 crore for infrastructure development.

In a bid to attract long-term capital for infrastructure financing, the Prime Minister will hold a meeting with top 15 global fund houses to get their views on investment in infra projects. Fund houses around the world are in touch with the government for investment in some good infrastructure assets which require patient capital. These entities are not looking for very high returns but stable returns.

In a move that will attract more participation in the construction of highways, the government has relaxed technical and financial qualifications for bidders of national highway projects under hybrid annuity mode (HAM) and builds, operate, transfer (BOT) mode. Under the modified rules, a bidder will be qualified to bid for a HAM project if it has a minimum net worth of 15% of the estimated project cost (EPC) at the close of the preceding financial year. Earlier, it was 25%. Also, the capital cost of the project should be more than 5% of the amount specified as the estimated project cost, the ministry of road transport and highways said in a notification. This was “more than 10%” earlier.

The National Highways Authority of India (NHAI) on Wednesday said it has awarded 40 national highway projects, totalling 1,330 km, with a capital cost of Rs 47,289 crore in the first half of the current fiscal. In the April-August period of the last fiscal, the authority had awarded 828 km national highway projects. The capital cost includes the cost of civil work, land acquisition, and other pre-construction activities. Of the 40 projects awarded till September, 24 were awarded through the engineering, procurement and construction (EPC) mode and the remaining on the hybrid annuity model (HAM) mode.

The Northeast state of Tripura is all set for infrastructure upgradation, Union Minister for Road Transport and Highways, would be laying the foundation stones of nine NH projects in Tripura. These NH projects will cover a distance of around 262 km in total and will cost over Rs 2,752 crore.

Kerala will get infrastructure upgrade as various highway projects will be developed for better connectivity. The Union Minister laid the foundation stone of seven highway projects in Kerala worth Rs 11,571 crore. Apart from these, the minister also inaugurated the 27 km long highway from Kazhakoottam to Mukkola, built at a cost of Rs 1,121 crore.

The Union Minister also inaugurated 10 road projects and laid the foundation stones for as many as 16 NH projects in the state of Andhra Pradesh. These projects would cover a total length of 1,411 kilometres and are of worth Rs 15,592 crore.

The Union Minister also said that for Tamil Nadu-Puducherry connectivity, highway works worth Rs 11,000 crore were underway. For Tamil Nadu-Puducherry connectivity, the work is under progress in an aggregate length of 287 km.

The National Highways Authority of India (NHAI) has received upfront consideration of ₹5,011 crore on Monday from Cube Highways, under the third bundle of the toll-operate-transfer (TOT) model. TOT is part of the government’s initiative to monetise public infrastructure and build new assets. Under this model, the highest bidder wins the right to operate and maintain highway assets for 30 years. The one who wins the bid garners toll revenue during that time period. The concession period is 30 years and the concessionaire shall operate, maintain and collect the toll during the concession period.

Work on Mumbai-Nagpur Expressway has been impacted due to the COVID-19 pandemic. The ambitious infra project, worth over Rs 55,000 crore, will now be ready for the public to use by May 2022 as against the earlier target of December 2021. The overall length of the expressway project is 700 kilometres. The expressway is designed to be an 8-lane greenfield highway and the new alignment is being called ‘Samruddhi’.

Indian Railways’ Rail Land Development Authority (RLDA) conducted the second online pre-bid meeting for the redevelopment of New Delhi Railway Station (NDLS). The meeting was attended by over 25 participants including SNCF, Anchorage Infrastructure, Tata Projects Limited, I Squared Capital, GMR Group, Adani Group. The NDLS redevelopment is a flagship station redevelopment project of Indian Railways that is expected to incur a capital expenditure of around Rs 6,500 crore.

The finance ministry is looking at launching the initial public offering (IPO) of Indian Railway Finance Corp Ltd (IRFC) and state-owned telecom infrastructure provider RailTel Corporation. Officials said the plan is to sell about 25 per cent in IRFC and 27 per cent stake in RailTel.

As many as 15 firms, including Spain’s Construcciones y Auxiliar de Ferrocarrriles, Singapore-based Cube Highways, homegrown L&T and GMR, and state-run BHEL have put in a total of 120 applications among them, in response to a request for qualifications (RFQs) to run 151 passenger trains on 140 pairs of routes divided into 12 clusters.

The Airports Authority of India (AAI) is planning to upgrade runways at seven airports – Jammu Airport in Jammu and Kashmir, Kolhapur Airport in Maharashtra, Jabalpur Airport in Madhya Pradesh, Barapani Airport in Meghalaya, Kadapa Airport in Andhra Pradesh, Tirupati Airport in Andhra Pradesh and Tuticorin Airport in Tamil Nadu.

The Uttar Pradesh government on Wednesday signed the concession agreement with representatives of Zurich Airport International for the development of the Noida international airport at Jewar, 90 km from Delhi. The airport will be developed on a public-private partnership model and is scheduled to open in 2024. The concession agreement for the greenfield airport was signed between the UP government’s agency Noida International Airport Authority (NIAL) and the Yamuna International Airport (YIAPL), a special purpose vehicle floated by the Zurich Airport for the project. The airport, estimated to cost about Rs 30,000 crore, will cater to 70 million passengers annually after the completion of all the four stages.

Central government has given nod for Phase II and Phase III of Dam Rehabilitation and Improvement Project (DRIP) to improve the safety and operational performance of selected 736 dams across India. The project, worth ₹10,211 crore, will be implemented from April 2021-March 2031. The Cabinet Committee on Economic Affairs has approved the DRIP with the financial assistance of the World Bank (WB), and Asian Infrastructure Investment Bank (AIIB).

Assam is all set to have India’s first International Multi-Modal Hub. Asian Development Bank (ADB) has agreed to fund the project at an estimated cost of around Rs 600 crore.

The World Bank would provide a loan of $120 million to improve road connectivity in Meghalaya. As per reports, the Meghalaya Integrated Transport Project (MITP) project is likely to improve 300 km of state highways, including major district roads and urban roads.

Asian Development Bank (ADB) and the Government of India have signed a $270 million loan to develop water supply and integrated storm water and sewage management infrastructure and strengthen capacities of urban local bodies for improved service delivery in the state of Madhya Pradesh. This is an additional financing to scale up the scope of the ongoing Madhya Pradesh Urban Services Improvement Project, which was approved in 2017 with a $275 million loan. It will expand the outcome of the current project by covering additional 64 small cities.

International Finance Corporation (IFC) is planning to invest around USD 75 million (Rs 550 crore) in Indospace Logistics Parks-III LP for developing logistics and industrial parks across India. The fund is managed by Indospace Capital Asia and its Indian affiliate Indospace Capital Advisors, together referred to as Indospace. It develops and operates warehousing and industrial property assets in India through various special purpose vehicles (SPVs). These SPVs are indirectly owned by Indospace Logistics Parks-III LP, a Singapore-based limited partnership managed by Indospace Capital Asia.

New Development Bank, has approved infrastructure projects worth 741 million dollars in India. In a press statement, it said that it approved a loan of USD 500 million for the Delhi-Ghaziabad-Meerut Regional Rapid Transit System (RRTS) Project and a loan of USD 241 million for Mumbai Metro Rail II (Line 6) Project.

Setting up a ₹25,000-crore Maritime Development Fund (MDF) and a pan-India port regulatory authority are among the highlights of the Maritime India Vision 2030, a ten-year blue-print for the maritime sector, to be released by Prime Minister Narendra Modi at the Maritime India Summit in November. Maritime India Vision 2030, the latest avatar of the Sagarmala programme, outlines a raft of policy initiatives and development projects involving an investment of ₹3.5 lakh crore to double cargo volumes to 2,600 million tonnes (mt), which will help create over 2 million additional jobs (direct and indirect) and unlock additional annual revenue of about ₹20,000 crore for state-owned major ports. The MDF seeks to provide low cost, long-tenure financing to the sector with the Centre contributing ₹2,500 crore over seven years.

Sagarmala Development Company Ltd to step in to help deploy some of the 24 roll-on, roll-off (Ro-Ro) as well as Ropax vessels owned by the Inland Waterways Authority of India (IWAI) that are idling due to low economic viability. It will set up a special purpose vehicle (SPV) with a private entity for operating the vessels on the best possible commercial terms by relaxing the reserve price set by the IWAI for leasing the vessels.

The United Kingdom has entered into a strategic partnership to develop India’s fledgling international financial services centre GIFT City, and agreed to set up a new Fund of Funds to be managed by the State Bank of India group in order to route U.K.’s future capital investments into India.

Bharatpur is likely to become a Smart City in the coming years as the plan to include the city in the Smart City Mission has intensified. Recently, the Urban Development Department has sent a proposal to the Union Ministry of Urban Development to include Bharatpur in the Smart City Scheme.

Dholera Special Investment Region is all set to develop one of the world’s largest single-location Ultra Mega Solar Power Park which the government approved recently. Close to 11,000 hectares of land parcels are dedicated to the Park with estimated capacity of 5000 MW. Currently Phase 1 of 1000 MW is being developed in which a 700 MW bid was recently awarded to five companies in August 2020 namely Vena Energy Renewables, Tata Power, ReNew Power, SJVN Limited, and TEQ Green Power while 300 MW from the bid issued in the year 2019 was awarded to Tata Power.

Private equity firm KKR has announced the launch of its renewable energy platform–Virescent Infrastructure–to acquire green energy assets in India in the backdrop of KKR making its foray in India’s green energy space. Virescent has 317 megawatt (MW) solar projects in Maharashtra and Tamil Nadu.

Adani Green Energy has said it has tied up with around 10 international banks to diversify construction finance portfolio for its ongoing and future projects. The company — which has a portfolio of 14 GW of operating, in- construction and awarded wind and solar parks — is aiming to commission renewable capacity of 25 GW by 2025.

LIC Housing Finance has sanctioned more than Rs 600 crore to at least five developers including Shriram Properties, Vatika Group and Radiance Realty, data collated by data intelligence provider Propstack showed. These range from fresh disbursals to refinance deals where the mortgage lender has taken over loans from other lenders.

As many as 66 infrastructure projects in various sectors at ₹2,953.36 crore have got the approval of the Kerala Infrastructure Investment Fund Board (KIIFB). The KIIFB executive committee, that met on Monday, cleared 54 projects costing ₹1,336.15 crore and the KIIFB Board that met on Tuesday cleared 12 projects costing ₹1,617.21 crore. With this, the projects approved by KIIFB have gone up to 806, costing ₹59,813.61 crore. Finance Minister T.M. Thomas Isaac, Vice Chairman of KIIFB, told mediapersons that ₹59,813.61 crore included ₹20,000 crore for acquiring land for the National Highway four/six laning, industrial parks, and the Kochi-Bengalaru industrial corridor.

Japan International Cooperation Agency (Jica) is said to have informed the state government that it could commit to funding the ambitious ‘Silver Line’ semi-high speed rail project only after at least 80% land acquisition for the project is complete. The condition is put forward by Jica, one of the international financial agencies with whom the Kerala Rail Development Corporation LTD, a joint venture of railways and the state government, is in talks with for mobilising Rs 33,700 crore funding for the project. The Silver Line project proposes to establish semi-high speed rail connectivity between Thiruvananthapuram and Kasaragod.

As seen from the above mentioned, the developments continue in line with the government’s objective to focus on projects and financing in infrastructure sector to boost the economic growth with various steps being taken to attract private participation and capital in infrastructure sectors. The discussion on a new development finance institution and its framework continue considering the focus this sector has in the backdrop of banks struggling with NPAs and higher provisioning amount kept aside to compensate for losses. In addition to this the idea of using the climate crisis as an investment opportunity for green infrastructure financing in urban green spaces and in renewables, green technologies, electric vehicles, etc while scaling up private finance in these projects through municipal and green bonds also being discussed. The other significant measure that is being proposed is asset monetisation as an innovative way to finance the infrastructure sector in India. Public entities have a large base of assets across sectors like roads, ports, railways, power and telecom. The revenue potential from such underutilised assets as well as from operational assets could be used to attract future investment such as land and buildings, and brownfield operational assets like roads, railway stations, pipelines, mobile towers offer extensive possibilities for raising resources through asset monetisation.

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