“Poor infrastructure is one of the biggest drags on growth and development in India and there is a large investment funding gap of about USD 113 billion during the 12th Five-Year Plan for 2012-2017,” ADB said in a statement.

This assistance to India’s Infrastructure Finance Company Ltd (IIFCL) will allow it to lead the market evolution for infrastructure financing and will spur greater involvement from the private sector, said Cheolsu Kim, Lead Finance Specialist in ADB’s South Asia Department.

The government estimates that USD 1 trillion is needed in infrastructure investment to achieve economic growth of 8.4 per cent under its current five-year development plan, and expects nearly half of that to be financed by the private sector.

However, banks which have been the key source of infrastructure finance, are increasingly unable to provide funds as they are fast approaching exposure limits to key infrastructure companies, the Manila-based multi-lateral funding agency said.

ADB’s funds – provided through two loans under a multi tranche financing facility – will be used to provide direct loans for project developers and to replace bank loans, freeing up banks to provide credit in other greenfield projects, it added.

Currently, 31 road, railway, airport, urban infrastructure and energy projects, including in renewable energy, are in the pipeline to receive support from ADB.

Established in 2006, IIFCL is wholly owned by the government and its borrowing programme is fully backed by a government guarantee.

Experts say Mumbai faces a bigger challenge of bureaucracy, land acquisition and approvals than other cities because often there are conflicting views from within the government. A senior executive from an infrastructure conglomerate says, “For the ruling political parties, Mumbai is very strategic and important and often the two parties have different views on infrastructure projects. As a result the project suffers”. Another infrastructure executive says, “Sometimes we wonder if MMRDA and BMC work for the same city!”

The Congress-NCP government, which has ruled Maharashtra for three terms now, have often been at loggerheads over several projects in the past, some of which have eventually been scrapped. For instance, a feud between the NCP-led Public Works Department and the MMRDA and Urban Development department, both of which are led by Congress, has derailed several projects, including the Mumbai Trans Harbour Link, industry executives say.

“Executing a project in a congested city like Mumbai is not easy as we don’t even get the land needed to set up site office and store our construction material. Also, it is very difficult to set up labour camps near the site,” said a senior executive heading a big infrastructure project. “We have even faced problems relating to migrant labours who are now choosing to work in other cities, which are affordable and where they don’t face discrimination.”

But Chavan believes that private players are shying away from projects in Mumbai, primarily because of the “economic slowdown and the lack of confidence among private players…We may be facing a difficult situation for some time to come but it is our attempt to instil a sense of confidence among the private players,” he said. Chatterjee of Feedback Ventures suggests that Mumbai needs to be developed on similar lines as Manhattan, the island city where the business hub is connected to the satellite cities through bridges, rail and road. “Mumbai needs a network of metro, elevated rail and bridges connecting the hinterland to the city so that the population spreads out evenly and eases the pressure on the city’s infrastructure.”

Manhattan or Shanghai may be a distant dream. Given how Mumbai is losing time, it may be left behind other Indian cities if new infrastructure projects don’t move on from blueprints to reality.

Source-http://economictimes.indiatimes.com

Mumbai Metropolitan Region Development Authority (MMRDA) has signed a memorandum of understanding with Korea’s Ministry of Land, Infrastructure and Transport for preparing a master plan for developing eastern parts of the metropolitan region.The plan would look at developing the 126-km long Virar-Alibaug Multi-Modal Corridor, which was highly recommended by the Comprehensive Transportation Study conducted by the MMRDA and funded by the World Bank.

“We are sure that the Virar-Alibaug corridor which passes through the eastern part of Mumbai metropolitan region will trigger urbanization along the corridor and a master plan for the areas around this corridor will be necessary for its orderly development. The study will also identify growth centers which will afford stability to the spill-over areas”, Ashwini Bhide, additional metropolitan commissioner, MMRDA, was quoted as saying in the release.

The Korean team will share best practices with MMRDA’s planners and work out a detailed master plan and land development models along with funding patterns beginning January 1, 2014. The plan, development models and the funding patters will then be submitted to the state government, for approval, within a period of one year.

The study will be financed by the Korean Government and will also involve training of high level officials of MMRDA. The study will enable MMRDA approach global funding agencies such as World Bank and Japanese Cooperation Agency (JICA) for funding of the project.

“The Korean model of land use development has faced similar constraints as are being faced in India and could be suitably modified and used in developing the eastern Mumbai metropolitan region, especially around the Multi-Modal Corridor. By roping in the Korean expertise and best practices we will be able to use the land itself as a resource to fund our infrastructure requirements”, said Bhide.

The Highway Ministry would like provisions in the public-private partnership contracts that allow re-negotiations. For this, it wants the model concession agreement to be amended.

A model concession agreement is the contract between highway developers and National Highways Authority of India (NHAI), which spells out the rights and responsibilities of each party.

The Ministry batted for a flexible concession agreement, which permits the NHAI Board to decide on such issues, since the Board has representation from Secretaries of Highways Ministry, Planning Commission and Expenditure Ministry.

“Public-Private Partnerships (PPPs) are long-term partnerships spread over 20-25 years. No economist can predict correct growth rates for periods beyond three or four years. You don’t know what externalities will crop up in the eco-system of a road project,” said Rohit Singh, Joint Secretary-Highways, speaking at a PHDCCI seminar here on Wednesday.

“There is a distinct need for re-negotiation. Unfortunately, the model concession agreement has a rigid framework, even though it has its strengths. Even for small changes, we have to go to the Cabinet. That takes time and justification at various levels,” said Singh.

This stance comes in the backdrop of Cabinet finalising the modalities of a proposal to permit re-scheduling of premium payments for highway developers, which is basically a type of contract renegotiation. Premium is what developers pay to Government for bagging the rights to build and maintain a highway stretch and collect toll from its users.

INNOVATIVE PPP MODELS

Singh also said there is scope to have more PPP models to build highways, depending on the kind of climate.

For instance, there could a hybrid model, where developers get some payment from Government every year and can also collect toll from a highway stretch. In the present annuity model, this is not permitted. Another option could be making concession period a bid parameter.

Singh also said the private sector has not risen to the occasion.

“They bid aggressively looking at short-term profits instead of a long-term partnerships,” he added.

Referring to the private sector taking more debt from banks than Government approved level, Singh said, “We could have specified a certain total project cost. They go to banks to take significantly more than that. I am not saying everybody does it. But there are examples where PPP projects have been implemented with zero equity from the private partner. There is a need to have sincerity on both sides,” Singh said.

Source-http://www.thehindubusinessline.com