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Transcript of 1 India - Opportunities in Infrastructure for Foreign Investors Arvind Mayaram Department of...
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India - Opportunities in Infrastructure for Foreign Investors
Arvind MayaramDepartment of Economic Affairs
Ministry of FinanceGovernment of India
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Investment scenario
GCFI in infrastructure as percentage of GDP 4.6 % during the tenth plan
If growth in GDP to be sustained GCFI in infrastructure must keep pace.
Total estimated investment of USD 320-350 billion in infrastructure up to 2012
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Investment Opportunities in IndiaIndicative
TRANSPORT: Roads ($ 48 bn.): BOT preferred mode; NHDP-40,000
kms Airports ($ 9 bn.): 4 Metro, 35 Non-metro airports Ports ($ 12 bn.): All new berths through BOT Railways ($ 12 billion): Container trains, DFC, Stations
POWER Generation ($ 130 bn.): Transmission, Distribution
OTHER SECTORS Gas Pipelines: Cross Country, Intra-city pipelines Telecom Health and Education Infrastructure Urban Mass Transport Urban Water Supply, Solid Waste Management
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Government is committed to PPP mode- Why?
Maximizing investment Budgetary constraints Development of assets of world class
standards Improved maintenance and management of
assets Provision of efficient services Affordable prices through greater
competition Risk Sharing
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What are Foreign Investors looking for?
Good projects Demand Potential Revenue Potential Stable Policy Environment/Political
Commitment Optimal Risk Allocation Framework Independent Regulation
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Does India have it?
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Good Projects
Large Package sizes are being insisted upon by GoI in the road and other sectors
Design based on superior technology which may not be available domestically
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Demand Potential
Ports: 877 million tonnes of traffic by 2011-2012
15.5% growth expected in containerized trafficAirports: Passenger and cargo traffic slated
to grow at over 20% annuallyRailways: Freight traffic is growing at close to
10% and passenger traffic at close to 8% annually
Power: 13% peaking and 8% average shortage of power annually
Telecom: Rural penetration less than 4%
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Revenue Potential
India scores because of its large untapped markets
Example: India is a telecom success story despite low Average Revenue per User- there is comfort in numbers
Power: High revenue recovery recorded in recent times with 100% recovery in many cases
High economic growth rate has translated into a larger disposable income and larger spending capacity
Willingness to pay exists provided delivery is of good quality
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Stable Policy Environment
Model Concession Agreements for each sector guaranteeing protection against change in law, change in taxation
Clarity in obligations of the authority and provision for penalty for breach of obligation
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Optimal Risk Allocation
Demand Risk is partly mitigated through provisions for change in duration of concession –both upside and downside
Competition from other suppliers limited through a variety of non-compete clauses
Escalation in input costs mitigated through indexation of user charges to inflation
Construction and performance risk to be borne by the investor
Political risk and force majeure risks borne by the Government
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Termination payments and terms protect against arbitrary termination by Government
Land acquisition risk borne by government
Risk relating to permits and approvals especially environment permission borne by government
Provision of other related infrastructure an obligation of the authority
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Independent Regulation
Telecom Regulatory Authority of India Central Electricity Regulatory
Commission/State Electricity Regulatory Commissions
Tariff Authority for Major Ports Airport Economic Regulatory
Authority Robust ‘regulation by contract’
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Is there a financing constraint or is it the problem of lack of a good project pipeline?
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Steps taken by government to ease financing constraints
Viability Gap Funding (VGF) India Infrastructure Finance Company Limited (IIFCL) India Infrastructure Initiative ($ 5 bn. Fund) Enhanced Annual External Commercial Borrowing
ceiling Bonds- reporting platform started and trading
platform slated to start from July 1, 2007 Permission to foreign financial institutions and
multilaterals to raise rupee resources: ADB allowed to raise rupee resources
Encouraging development of new instruments such as grading of PPP projects/SPV rating by the major credit rating companies
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Creating a pipeline
Building capacity within institutions to handle large PPP program, including project preparation
Preparation of project preparation manuals, handbooks on procedures, toolkits, standard bidding and contract documents etc.
Expert support to central ministries/state governments for project preparation
India Infrastructure Project Development fund
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Thank YouThank You
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Sectoral Opportunities
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Power (Estimated investment: USD 60 billion)
Over 67000 MW capacity to be added in the 11th plan period (2007-08 to 2011-2012)
9 UMPPs to be implemented during the 11th and 12th plans
Transmission capacity augmentation through JVs for new generation
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Roads (Estimated investment: USD 49 billion)
NHDP-II: 4569 km, $103800
mn. NHDP-III: 10000 km $155200 mn. NHDP-IV: 20000 km $66100 mn. NHDP-V: 6500 km $98100 mn. NHDP-VI: 1000 km $39700 mn.
NHDP-VII: $38000 mn. State Roads
programme are in addtion
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Railways(Estimated investment USD 67 billion)
Dedicated Freight Corridors with PPP sub-projects envisaging more than USD 7 billion investment for the North South, East West Corridors alone
Container operations Rail side warehousing Logistics Parks Development of Rail links to Ports Dedicated rail links for evacuation of
specific industrial items Modernization of Railway Stations Development of new routes
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Airports (estimated investment USD 9 billion)
Metro Airport development through PPP
Greenfield Airports Concept of Merchant
Airports being examined by Government
City side development in 24 Non-metro Airports
Provision of Services within airports
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Ports:(Estimated investment
USD 11 billion)
National Maritime Development Programme
387 port projects
All new berths on PPP basis
Gradual transition of old berths to PPPCompound Annual Rate of Growth
during different Time span
10.789.979.5
6.745.51
0
2
4
6
8
10
12
1951-2004
54 Years
1992-2004
Post Liberalized
Era
2001-2004
Last 3 Years
2003-2004
Prev ious Year
2004-2005
Projected Grow th
Period
Pe
rce
nta
ge
25
Telecom
Untapped rural potential with low rural tele-density of 1.9% which must increase to 10% by 2012
Almost a million broadband connections added in 2006-2007. With low penetration scope for further increase
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Urban Infrastructure
Mass Rapid Transit Systems at Mumbai at a capital cost of about USD 2.5 billion, Hyderabad and Kolkata at about USD 1 billion each, Ahmedabad at about USD 950 million and other cities