Infrastructure companies need to work on innovative instrument to attract global funds, says Suresh Prabhu

Stating that there is no dearth of funds, Commerce and Industry Minister Suresh Prabhu Friday said there is a need to work on innovative instrument and structure to attract global money for investment in infrastructure sector. The government is in talks with various global funds to sell India growth story, he said. “I have talked to funds in Australia and Canada and government is trying to work with them. Uniqueness of this is that the pension funds of both Canada and Australia is more than their national GDP,” Prabhu said at an event organised by rating agency Crisil here. The government is talking to them, he added.

“On 15th of this month, I have invited the chairman of Abu Dhabi Investment Authority, which is the largest sovereign wealth fund in the world. “They are very keen for investment in India. They feel that India is a growth story…India’s GDP is bound to rise…they want to invest in India. Now, with all these things in place what is missing is instrument, structures and policies,” the minister said.

So, infrastructure developers need to work out instruments and proper structure to attract investment, Prabhu noted. Speaking on the occasion, Niti Aayog CEO Amitabh Kant said there is need of long term lending for the development of infra projects which cannot come from commercial banks. He also emphasised on the need for development of bond market.

“There is major challenge of long term financing in India. We don’t have development finance institutions. All the development finance institutions have been converted into banks. There is need for development finance institution,” Kant said. There is a need for more institutions like India Infrastructure Finance Company Ltd (IIFCL) to take care of long term financing need of infrastructure projects, he added. Meanwhile, Crisil in its report highlighted that a material ramp-up in government spending in the past few years has meant the share of private investments in infrastructure has fallen to a decadal low of around 25 per cent in fiscal 2018.

“The share, which averaged 37 per cent between fiscals 2008 and 2013, fell 600 basis points between fiscals 2013 and 2017 as a plethora of stalled projects and stressed assets dampened investor interest and risk appetite,” it said. While the highways sector has seen a revival in public private partnerships (PPPs), and the renewables sector some buoyancy, private investments in other infrastructure segments have remained stagnant or weak, it said.

“Resumption and broad-basing of private investments has become critical to sustain the share of infrastructure investments at about 6 per cent of GDP over a medium-to-long term,” said Crisil Managing Director Ashu Suyash. This requires new PPP frameworks, expeditious resolution of stressed assets, and steps to deepen financing sources, she said.

The investment trends are reflected in the scores of CRISIL InfraInvex, India’s first investability index that tracks the development and investment attractiveness of infrastructure sector, which was published along with the CRISIL Infrastructure Yearbook 2018. The highway sector saw the biggest rise in CRISIL InfraInvex score – from 6.9 in 2017 to 7.4 in 2018 – riding on private sector interest in the hybrid annuity model (HAM) and success of asset monetisation under the toll-operate transfer model.

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