India’s infrastructure sector has been struggling for the past few years due to lack of investments as banks have been wary of lending due to policy constraints.The government is looking to improve investments in the sector even as the parliamentary elections are less than a year away.

Under the infrastructure trusts, the underlying revenue of a projectwill be transferred to a trust, which will issue units to investors, including foreign investors who want to buy the units.

“A major reason why some PPP (public-private partnership) projects in the infrastructure sector have run into problems is that many private partners did not price the risk in projects over a 25-year time frame. We are looking to set up an infrastructure trust fund in two months to ensure long-term management of projects,” said Arvind Mayaram, secretary, department of economic affairs.

Mayaram added the government was looking to develop the corporate bond market and encourage the Employees’ Provident Fund Organisation (EPFO) to invest in infrastructure projects.

Meanwhile, in a move to boost investments in the road sector, the ministry of road transport and highways is also looking to award close to 6,500 km of road projects through the engineering, procurement and construction (EPC) mode in 2013-14.

“We are planning to award 6,500 km of road projects on the EPC basis this year,” said Vijay Chhibber, secretary, ministry of roads.

The ministry has been actively looking to award projects on the EPC basis for the past few years as a number of projects have been struggling since they were awarded on the build-operate-transfer (BoT) model. The ministry will also award three major expressway projects by the end of the year, according to Chhibber.

The move comes at a time when the road ministry has been able to award only 1,400 km of road projects against a target of 9,500 km in the last financial year.

Under the EPC model, the government spends the entire money required to build roads unlike the BoT mode, where the constructor builds a project and charges a toll on the same.

The ministry has also said an independent road regulator will be in place before the end of the year and the authority is expected to play an adjudicatory role and advice the government on existing road projects in addition to working on the toll mechanism in the country.

“There have been contrarian views on a road regulator and we think we need a road regulator’, Chhibber said.

Road projects in the country have been held up since the past few years due to various reasons, including the Delhi-Gurgaon Expressway. The government had awarded close to 3,055 km through the EPC mode in 2005-06, but has since managed to award less than 500 km through the EPC route. Meanwhile, BoT projects continued to perform better during the years and the ministry managed to award more than 6,400 km in 2011-12 alone.

Meanwhile, the government is also looking to set up a fund to promote debt and equity investment in the infrastructure sector. “There will be greater deepening of the equity and bond markets for financing the infrastructure sector in the next few months,” Mayaram said.

The government is also looking to set up an International Trust Fund where the underlying revenue of a project will be transferred to a trust which will issue units to investors, including foreign investors who want to buy the units, he added.

Source-http://www.business-standard.com