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INDIA’S INFRASTRUCTURE –Issues and Prospects

INDIA’S INFRASTRUCTURE –Issues and Prospects. PRESENTATION BY SS Kohli Chairman & Managing Director INDIA INFRASTRUCTURE FINANCE COMPANY LTD NEW DELHI. INDIA GROWTH STORY. India’s economic growth is attracting wide attention India & China are enjoying high economic growth

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INDIA’S INFRASTRUCTURE –Issues and Prospects

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  1. INDIA’S INFRASTRUCTURE –Issues and Prospects PRESENTATION BY SS Kohli Chairman & Managing Director INDIA INFRASTRUCTURE FINANCE COMPANY LTD NEW DELHI

  2. INDIA GROWTH STORY • India’s economic growth is attracting wide attention • India & China are enjoying high economic growth • In 2006-07 India’s growth was 9.4% • Economic prosperity is placing huge demands on infrastructure • India is the third largest economy behind USA and China

  3. Infrastructure Requirements • World Economic Forum has noted that India’s annual investments in infrastructure between 1998 and 2005 averaged 4% of GDP compared to 8.2% for China • Government of India is addressing the infrastructure requirements • 11th Five Year Plan (2007-2012) calls for more than doubling the financial outlay for infrastructure

  4. Investment requirements • Total financing requirements • $492 billion in the next five years • Of this, $147 billion to come from private investment • Share of private investment in total to rise from 17% to 30% by 2012. • Investment to touch $1.48 trillion by 2017

  5. Interest of international investors • Strong interest evinced by international investors in India’s infrastructure • This includes Private Equity • 3i, Blackstone etc • International banks • Citigroup, Macquarie Bank (Australia), Mizuho (Japan), Deutche Bank • Multilateral institutions including ADB, World Bank, IFC, JBIC, KfW

  6. Challenges before India • India growth story likely to continue • Strong economic growth will fuel further demand on infrastructure • India should absorb the large investments in infrastructure sector to sustain growth momentum • Indian rupee has appreciated against the dollar by 5% over the past year and 20% in the past five years

  7. Development of PPP market in India • PPPs in India are at a nascent stage • Slew of measures by government • 100% foreign investment allowed in infra sectors • Model Concession Agreements evolved • Viability Gap Funding (VGF) • Setting up of IIFCL • Regulatory institutions (Telecom Regulatory Authority, Port Tariff Authority) • PPPs in India are accelerating • 118 projects valued at $13.4 billion are progressing in roads, ports, airport sectors

  8. Transport Sector – the potential in India Aviation infrastructure • 100% foreign direct investment allowed • $ 9 billion programme to upgrade 25 airports • Delhi and Mumbai International airports – two PPP projects with estimated investment of $3.8 billion • 19 greenfield airport locations identified • Airport Economic Regulatory Authority being set up

  9. Air transportation - growth • Passenger traffic is projected to cross 100 million passengers p.a. by 2010   • Cargo traffic to grow at over 20% p.a. over the next five years- To cross 3.3 million tonnes by 2010 • Maintenance, Repair and Overhaul (MRO) growing in a big way • MRO market expected to grow by 10%

  10. Roads and Highways • India has the second longest road network in the world of 3.3 million KMs • Expressways and highways constitute only 2% of the above • US $54 billion earmarked for the sector • Cargo traffic expected to grow by 15-18% over the next 5 years

  11. Roads - Potential • 100% foreign direct investment allowed • Incentives:- 100% income tax exemption for a period of 10 years • - Grants/viability gap funding for marginal projects available • - Model Concession Agreement formulated • Opportunities in construction equipment (earth moving, material handling equipment etc), tolling equipment services and advisory (architecture, structural design, soil investigation etc)

  12. Railways • India has one of the largest railway networks in the world (63,000 route KMs network) • Accounts for 30% of total freight traffic • Traffic volumes set to double by 2012 • Potential for rolling stock, locomotives, passenger coaches, track equipment, signalling equipment

  13. Ports • India has coastline of 7500 KMs • 12 major ports; 187 minor ports • Traffic has grown by a compounded average of 8.5% • Traffic expected to reach 880 million tonnes by 2011-12 • 95% of India’s exports & imports moved by sea • India expects to double its exports to $150 billion in the next five years

  14. Ports • 100% FDI under the automatic route is permitted for port development projects    • 100% income tax exemption is available for a period of 10 years •  Tariff Authority for Major Ports (TAMP) regulates the ceiling for tariffs charged by Major ports • Investment needed in the next 5 years $18 billion

  15. Ports - Opportunity • Opportunities exist in • Development of greenfield ports • Development of container and bulk terminals • Logistics infrastructure • Dredging services • Port related equipment • Ship building, ship repair, maritime training

  16. Role of IIFCL • IIFCL is a SPV to provide long term finance to infrastructure projects • Overriding priority to PPP projects • Finance projects in sectors like roads, airports, ports, power, urban infrastructure etc • Since inception in April 2006 • Financed 77 projects to the tune of $4.3 billion with a total project cost of $31 billion

  17. Conclusion • Investment requirements of infrastructure sector huge • India growth story to continue • 50% of the population is below 25 years • Huge domestic demand • Need to bridge infrastructure gaps to sustain economic growth • Opportunities for international investors significant • India can leverage on its vast human capital to successfully adopt the PPP model

  18. THANK YOU FOR YOUR ATTENTION

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