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Investment Opportunities in Infrastructure:

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 keeppace.

Total estimated investment of USD 320-350 billion in infrastructure upto 2012

Investment Opportunities in India

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, DistributionOTHER SECTORS

Gas Pipelines: Cross Country, Intra-city pipelines

Telecom

Health and Education Infrastructure

Urban Mass Transport Urban Water Supply, Solid Waste Management

What are Foreign Investors looking for?

Good projects

Demand Potential

Revenue Potential

Stable Policy Environment/Political Commitment

Optimal Risk Allocation Framework

Independent Regulation

Does India have it?

Good Projects

Large Package sizes are being insisted upon by GoI in the road andother sectors

Design based on superior technology which may not be availabledomestically

Demand Potential

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Ports: 877 million tonnes of traffic by 2011-201215.5% 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 to8% annually

Power: 13% peaking and 8% average shortage of power annuallyTelecom: Rural penetration less than 4%

Revenue Potential

India scores because of its large untapped markets

Example: India is a telecom success story despite low AverageRevenue 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 disposableincome and larger spending capacity

Willingness to pay exists provided delivery is of good quality

Stable Policy Environment

Model Concession Agreements for each sector guaranteeing protectionagainst change in law, change in taxation

Clarity in obligations of the authority and provision for penalty forbreach of obligation

Optimal Risk Allocation

Demand Risk is partly mitigated through provisions for change induration 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 chargesto inflation

Construction and performance risk to be borne by the investor

Political risk and force majeure risks borne by the Government

Termination payments and terms protect against arbitrary terminationby Government

Land acquisition risk borne by government

Risk relating to permits and approvals especially environmentpermission borne by government

Provision of other related infrastructure an obligation of the authority

Independent Regulation

Telecom Regulatory Authority of India

Central Electricity Regulatory Commission/State ElectricityRegulatory Commissions

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Tariff Authority for Major Ports

Airport Economic Regulatory Authority

Robust regulation by contract

Is there a financing constraint or is it the problem of lack of a good project

pipeline?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 startfrom 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

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 projectpreparation

India Infrastructure Project Development fund

Sectoral Opportunities

Power

(Estimated investment: USD 60 billion)

Over 67000 MW capacity to be added in the 11th plan period (2007-08to 2011-2012)

9 UMPPs to be implemented during the 11th and 12th plans

Transmission capacity augmentation through JVs for new generationRoads

(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

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$39700 mn.

NHDP-VII: $38000 mn.

State Roads programme are in addtion

Railways

(Estimated investmentUSD 67 billion)

Dedicated Freight Corridors with PPP sub-projects envisaging morethan 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

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

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 PPP

Telecom

Untapped rural potential with low rural tele-density of 1.9% whichmust increase to 10% by 2012

Almost a million broadband connections added in 2006-2007. Withlow penetration scope for further increase

Urban Infrastructure

Mass Rapid Transit Systems at Mumbai at a capital cost of about USD2.5 billion, Hyderabad and Kolkata at about USD 1 billion each, Ahmedabad

at about USD 950 million and other cities

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