It was as a newspaper-office intern in New Delhi in 1992 that I witnessed the birth of India’s homegrown belt-and-road initiative. The program was midwifed by an up-and-coming lender that few had then heard of: Infrastructure Leasing & Financial Services Ltd. It wasn’t called belt-and-road, a term that would gain currency much later as a catchphrase for China’s opaquely financed global infrastructure ambitions.
There’s a lot of scrutiny now of those energy and transportation projects, and a growing discomfort that Beijing may be ensnaring developing countries in a debt trap. So it’s remarkable that India – itself a vocal critic of belt-and-road – allowed a local financier to do something similar on home turf, with little accountability or supervision.
A perennial paucity of budgetary resources has forced taxpayers to outsource infrastructure — not to the Chinese, but to local public-private partnerships led by IL&FS. However, in many instances, only the returns became private. Risks remained with the public.
Those risks have now come back to bite. IL&FS and its associates have $12.5 billion in debt, of which $500 million is due over the next six months. The group has only $27 million of liquidity at hand, sparking a debt-repayment crisis that threatens to engulf Indian banks and mutual funds to insurance and pension funds. Chairman Ravi Parthasarathy, paid $3.65 million last fiscal year, left abruptly in July after being with the company since its inception.
When I first encountered it, the five-year-old IL&FS was barely getting started with what would become its unique model: a financier that also conceived, executed and owned large projects. It offered to do all those things in 1992, when India’s capital city of New Delhi and its eastern suburb of Noida agreed to build a connecting expressway across the river Yamuna. The IL&FS-controlled Noida Toll Bridge Co. opened a gleaming eight-lane motorway nine years later.
Driving on it was divine, but it soon became apparent shareholders were getting a risk-free ride at commuters’ expense, with the project guaranteeing 20 percent returns to equity investors including IL&FS. When the Delhi and Noida governments gave the land, they had expected the expressway to be returned to them in 30 years. In 2008, though, it looked like the asset was going to be in private hands for at least 70 years. In 2016, a court called out the daylight robbery and ordered the toll plazas to be dismantled. Stock of India’s first publicly traded toll road shot up above 70 rupees in 2007; it changes hands for less than 9 rupees now.
