Road projects suffer as Baalu obsessed with Setu
The Pioneer, 26-09-07

The key infrastructure projects of the Ministry of Road, Transport and Shipping headed by TR Baalu are running far behind the schedule of completion. The time overrun is so huge that it raises doubts whether timely completion of the projects is any concern for Baalu, currently seized with the issue of Sethusamudram project.

The latest infrastructure appraisal report by the Ministry of Statistics and Programme Implementation paints a grim picture of delay in the execution of work on east-west, north-south corridors along with the monstrous delay in completing the crucial port connectivity roads. In the case of several such projects, the physical progress is nil. The deadline is lost.

The majority of projects under North-Sourth Corridor-II have registered tardy progress. For instance, the physical progress of Rs 546.15 crore-worth Adloor-Kalkallu road on the National Highway 7 has so far been only 0.50 per cent.

"The project was approved in December 2003 at an estimated cost of Rs 546.15 crore. The progress report of the project is dismal. In fact, there are several such projects where the physical progress is abysmal, leading to cost overruns. It is a sad reflection on the implementation of important projects," an official in the Ministry of S&PI said.

"The North-Sourth Corridor-II projects showing tardy progress include the corridors between Jam-Wadner-Devdhari-Kelapur in Maharashtra, Madurai-Kanyakumari project on the National Highway 7 in Tamil Nadu, Nagpur-Hyderabad, and Pathankot-Bhogpur. All the 40 corridors under the project are bound to miss the deadline," the official said.

"Similarly, there are as many as 66 corridors to be completed under East-West Corridor-II project. Except a few corridors like Rajkot bypass-Gondal Getpur in Gujarat where the physical progress is 41.90 per cent, others are progressing at the snail's pace, though they were approved in December 2003 itself," the official added.

The infrastructure appraisal report of the S&PI Ministry even shows all the projects under the Golden Quadrilateral have been delayed by three years. An ambitious project launched during the NDA's time, the project was to be originally commissioned by 2004, and the deadline now appears to be early 2008 or 2009.

The GQ, north-south and east-west corridors are the part of National Highway Development Project-I (NHDP). According to a Government official, there were 196 projects of the Road and Transport Ministry on the monitoring radar of the S&PI Ministry for the period ending December 2006. At least 92 projects have been delayed.

The officials attribute the time overrun in NHDP packages to adverse law and order situation in Bihar and Jharkhand, difficulties experienced in land acquisition as in Maharashtra, Karnataka, and Tamil Nadu.

"There are several other factors like delay in getting the forestland clearance, removal of large number of structures, including places of worship and other utilities, which contribute greatly in delaying the road projects," they said.

Core sector needs $1.5 trillion
26-09-07, Times of India

There is all round acknowledgement on poor infrastructure holding back economic growth but there are few estimates on how much needs to be invested. Planning Commission, which has been on the job for a while, has finally come up with its investment projections and has estimated that the Centre, state governments and private sector need to invest $1.5 trillion (over Rs 60 lakh crore) over the next 10 years to get infrastructure to world-class levels.

During the eleventh five year plan, which kicked off in April, the plan panel has projected an investment of $488 billion with nearly one-third going into the power sector that is seen as the biggest drag on the economy with little that the government has managed to do so far.

While projections are something that the Planning Commission has never shied away from, it has left some financing gaps without offering specific solutions. While 40% of the funding during the eleventh plan is expected to come from the Centre, state governments and private sector are projected to chip in with 30% each. But within the public spending, public sector companies are projected to play a big role and the Planning Commission acknowledged that finding resources by state-owned companies could be a problem.

Similarly, while estimating the debt requirement of $240 billion during the eleventh plan period, the panel has offered little advice on filling the $39 billion gap other than saying that measures need to be initiated to enhance bank credit, external commercial borrowings and pension and insurance funds.

Among the sources of debt funds, domestic bank credit is expected to contribute Rs 4,23,691 crore, credit from non-bank financial companies (NBFCs) Rs 2,24,171 crore, pension and insurance funds Rs 55,414 crore and external commercial borrowings around Rs 1,22,263 crore.

The panel said physical infrastructure like roads, ports, airports and power require total debt funding of Rs 9,85,702 crore from the public and private sector, but only Rs 8,25,539 crore would be available during 2007-12.

While the Centre is expected to pump in Rs 8,11,611 crore, the states would chip in with Rs 6,10,565 crore in the infrastructure sector. Private sector is expected to invest Rs 5,96,533 crore on infrastructure during the period, 30% of which would come from non-debt sources like equity, internal sources and others which suggest that private sector would meet 70% of its investment in infrastructure through debt.

The private sector's contribution has been targeted to increase to 29% of the total investment, up from 16% during the tenth plan.

Infra panel revises 11th plan investment need to $492 bn
Indian Express, 26-09-07

Given the huge task for building infrastructure projects in the country over the next five years, the Committee of Infrastructure (CoI) has estimated the funding requirement to be around $490 billion as against the earlier figures that ranged between $340 billion and $370 billion.
Chaired by Prime Minister Manmohan Singh, the CoI in a paper released on Tuesday said that after taking into account a spill over of 15 per cent of the projected investment from the 11th Plan to the 12th Plan, "the expected infrastructure investment in 11th Plan would amount to Rs 20,18,709 crore (or $492 billion)".
This figure according to the paper "is 2.45 times the amount (Rs 8,22,193 crore or $201 billion) anticipated to be achieved in the 10th Plan".
The paper that projects the investment requirement for the 11th Plan said that the calculations are based on sector-wise pipeline financing plans, combined with a detailed analysis of past trends. This analysis, it said "yields total investment in infrastructure during the 11th Plan of Rs 23,74,952 crore ($579 billion)". It is part of these investments that are expected to spillover to the next Plan.
This is in contrast to an estimate done with log-linear "business as usual" projection for the 11th Plan that put the investment requirement at $280 billion.
A sectorwise break up for investment projections in infrastructure shows that of the $492 billion, the electricity sector's investment requirements are the highest forming 30 per cent of the total projected requirement. In all other key sectors, such as roads, telecom, railways, irrigation and water supply and sanitation, the share ranges from 10 to 15 per cent of the total project requirement.
The paper also shows that investment requirements show a remarkable increase in the terminal years of the 11th Plan. The total investment spending in the last two years is projected to be more than 51 per cent of the total requirement.
Firms need to raise $31 bn in ECBs for core projects
Financial Express 26-09-07

Public and private sector corporates are projected to require at least $31 billion (Rs 1,22,263 crore) from external commercial borrowings (ECB) to finance infrastructure projects. According to recent calculations, investment requirement for infrastructure projects in the 11th Plan has been projected at Rs 20,18,709 crore. This is 2.45 times the amount of Rs 8,22,193 crore invested in the 10th Plan.
In the current Plan, both the public and private sectors would require a debt component of Rs 9,85,702 crore. Total availability of debt funds to finance infra projects is estimated at Rs 8,25,539 crore, which leaves a gap of Rs 1,60,164 crore ($39 billion).
Domestic banks are expected to contribute Rs 4,23,691 crore and credit from non-bank financial companies would be Rs 2,24171 crore. Resources from pension and insurance companies are projected to be around Rs 55,414 crore.
The Planning Commission has also calculated a deficit of Rs 1,60,164 crore ($39 billion) to finance infrastructure projects in sectors like power, national highways, rural roads. This has come at a time when the UPA government is already preparing for polls and the fund crunch for its crucial sector could cause serious concerns.
The fund constraint, despite having included all the private players’ investments and public private partnerships (PPPs), might even stall the mega airport modernisation programmes.
The government is now left with just two alternatives. It either has to work out an innovative mechanism to arrange for more funds, such as using the forex reverses or discontinue some of its flagship infrastructure programmes like 6/4 laning of golden quadrilateral and other highways development projects, construction of 1,65,244 km of new rural roads, construction of dedicated freight corridors between Mumbai-Delhi and Ludhiana-Kolkata, and capacity addition in ports.
Some other projects that might suffer due to fund constraints are 70,000-mw power generation capacity expansion plans and development of 16 million hectares for irrigation.
Finance minister P Chidambaram has already been appraised of the situation. Planning Commission deputy chairman Montek Singh Ahluwalia, who is on a visit to the US, is likely to extend the begging bowl yet again trying to raise funds for the government's thrust sector.
Prime minister Manmohan Singh has been keeping tab on the performance of the sector and conducting periodical reviews.
Plan panel sees funds for infrastructure short by Rs1.6 trillion
Mint, 26-09-07

The panel says increasing budgetary outlays is not feasible because of competing demands

The Planning Commission has estimated a shortfall of more than Rs1.6 trillion in the financing needs of the country’s infrastructure projects during the 11th Plan (2007-2012).
A consultation paper prepared by the panel projects total investments of more than Rs20 trillion to be made in infrastructure projects in the 11th Plan, an increase of nearly 2.5 times over the 10th Plan.
Industry experts say infrastructure is expected to be one of the biggest bottlenecks to the country’s economic growth target of above 9%.
However, infrastructure funding requirement cannot depend on budgetary support alone. It needs to be supplemented by debt funds. The Plan panel estimates that as much as half of the total expected investment is to be generated through debt financing.
Analysts, however, say the biggest hurdle to generating the projected investment is creating enough bankable projects to invest in.
“In order to attract debt funds, there is a need to improve project bankability and credit rating of projects through well-defined, escrowed user charges,” said Akash Deep Jyoti, who heads corporate and infrastructure rating for ratings firm Crisil Ltd. “Further, it would be imperative to facilitate rational risk allocation mechanisms, sound commercial terms, effective legal structures, faster clearances and lower transaction costs for superior project implementation,” he added.
A recent report by the committee on infrastructure financing headed by Deepak Parekh, chairman, Housing Development Finance Corp. Ltd, also warned that unless governance issues such as those related to levying correct user charges for infrastructure are addressed, even the most efficient financial system would not be able to mobilize the required resources, or create a large enough pipeline of bankable projects.
The paper estimates the availability of debt funds at a little over Rs8.25 trillion—Rs1.6 trillion short of the projected investment.
“Among the sources of debt funds, domestic bank credit for infrastructure is expected to contribute Rs4,23,691 crore, credit from non-banking financial companies (NBFCs) Rs2,24,171, crore, resources from pension and insurance companies Rs55,414 crore and external commercial borrowings around Rs1,22,263 crore...,” the paper said.
The paper said increasing budgetary outlays to meet shortfalls is not feasible because of competing demands for rural infrastructure and social sector development.
“The shortfall is likely to affect some key infrastructure building initiatives such as the Bharat Nirman programme for rural infrastructure and the National Highway Development Programme,” said a commission official who preferred not to be quoted.
“Infrastructure projects are typically financed by domestic financial said Harsh Shrivastava, institutions and from external commercial borrowings,” vice-president, marketing with Feedback Ventures Pvt. Ltd, a project management company. “While there may not be a crunch right now, in theory, what they (Planning Commission) are saying is correct,” Shrivastava said.