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Investing in India's Infrastructure: Opportunities for Foreign Investors

Discover investment opportunities in India's key sectors like transport, power generation, and more. Learn about the government's commitment to PPP mode, risk sharing, and regulatory frameworks attracting foreign investors.

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Investing in India's Infrastructure: Opportunities for Foreign Investors

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  1. India - Opportunities in Infrastructure for Foreign Investors Arvind Mayaram Department of Economic Affairs Ministry of Finance Government of India

  2. 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

  3. 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

  4. 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

  5. What are Foreign Investors looking for? • Good projects • Demand Potential • Revenue Potential • Stable Policy Environment/Political Commitment • Optimal Risk Allocation Framework • Independent Regulation

  6. Does India have it?

  7. 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

  8. Demand Potential Ports: 877 million tonnes of traffic by 2011-2012 15.5% growth expected in containerized traffic Airports: Passenger and cargo traffic slated to grow at over 20% annually Railways: 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%

  9. 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

  10. 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

  11. 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

  12. 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

  13. 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’

  14. Is there a financing constraint or is it the problem of lack of a good project pipeline?

  15. 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

  16. 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

  17. Thank You

  18. Sectoral Opportunities

  19. 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

  20. 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 Roads (Estimated investment: USD 49 billion)

  21. 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

  22. 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 Airports (estimated investment USD 9 billion)

  23. National Maritime Development Programme 387 port projects All new berths on PPP basis Gradual transition of old berths to PPP Ports:(Estimated investment USD 11 billion)

  24. 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 Telecom

  25. 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

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