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 keep

pace.

 Total estimated investment of USD 320-350 billion in infrastructure up

to 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, Distribution
OTHER 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 and
other sectors
 Design based on superior technology which may not be available
domestically

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%

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

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

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
 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

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’

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 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

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

Sectoral Opportunities

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
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

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

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% which

must increase to 10% by 2012

 Almost a million broadband connections added in 2006-2007. With

low penetration scope for further increase

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