Download infrastructure

Private Investment in Infrastructure:
A Perspective
By
Vinayak Chatterjee
Chairman
&
Chairman
National Council on
Infrastructure
December 20, 2006 : New Delhi
Vision For Next 5 Years (2007-2012)
Approach Paper to the 11th
Five Year Plan provides a
‘vision’ for the period 200708 to 2011-12.
On
18th
October’06,
Chairing a meeting of the
Planning Commission, the
Prime Minister set a target
of 9% average economic
growth for the 11th Plan.
Slide 2
Gross Capital Formation in Infrastructure (GCFI)
The Planning Commission
suggests that “investments
will need to increase from
4.6% of GDP to between
7% and 8% in the 11th
Plan period”.
This would entail an outlay of
US$ 350 Billion across the
11th Plan Period (2007-2012).
Slide 3
Mr. P. Chidabaram, Finance Minister
“There is enough private capital
jostling around the world. We will
have to change our thinking to tap
these
resources.
………..The
government is considering the
removal of certain restrictions on
the securitisation of debt raised
abroad. Private wealth managers
in the west who preside over
investible
funds
should
be
encouraged to finance India’s
infrastructure projects by putting
in place necessary safeguards.
[Speaking at the Infrastructure Seminar, Vigyan Bhawan, New Delhi , 7th October’06]
Slide 4
Mr. P. Chidabaram, Finance Minister (Contd..)
…………We will have to think out
of the box. We will have to
accept that we are part of the
global economy. ……….We don’t
have any financial instrument for
savers who would like to keep their
money for five years or more,
except insurance policies. We will
have to press ahead with pension
and new insurance products to
encourage long-term savings.”
[Speaking at the Infrastructure Seminar, Vigyan Bhawan, New Delhi , 7th October’06]
Slide 5
General Pattern of Funding
World Bank sources tell us
that in the 1990s:
70% of infrastructure
investment in developing
countries came from
governments or public
utilities
22% came from
private sector
the
8%
from
official
development assistance
Slide 6
Perspective on Indian Infra Funding Sources
(US$ Billion)
Slide 7
Amount
%
Resources to be organized for
infra investments in 11th Plan
Period
350
100%
From Private Capital (Domestic
and FDI)
77
22%
From World Bank, ADB, JBIC
and other multilateral/bilateral
agencies
39
11%
From Public Expenditure
234
67%
Sectoral Requirement of Funds
(US$ Billion)
Sector
Amount
%
Energy
120
34
Railways
67
19
Nat Highways
49
14
Irrigation
18
5
Airports
9
3
Ports
11
3
274
78
76
22
350
100
Envisaged
Others*
Total
PPP Possibilities
* Telecom, Tourism, SEZs & Townships, Supporting
Urban Infrastructure, Water & Sanitation, State &
Rural Roads, Logistics etc.
Slide 8
Key Imperative ONE : Private Sector
Create enough attractive
investment opportunities
to channelise FDI and
domestic capital by:
• PPP initiatives leading to
a large pool of bankable
projects.
• Establishment of really
“independent”
Economic Regulators.
Slide 9
Key Imperative ONE : Private Sector(Contd..)
• PPP for the 11th Plan
period should be to the
tune of US$ 77 Billion.
• In a summary statement
circulated
in
the
document pack of the
Infrastructure Seminar at
Vigyan Bhawan on 7th
October’06, the total
number of PPP projects
listed ‘officially’ was 346
with an estimated cost of
US$ 31 Billion.
Slide 10
Key Imperative ONE : Private Sector(Contd..)
• Who is responsible for creating
the required project pipeline ?
• Surely
sector.
not
the
private
• Private sector cannot create
projects; it can ONLY bid for
them.
• The sovereign has to play the
role
of
a
‘visionary
entrepreneur’
in
the
infrastructure sector unlike the
‘product-market economy’.
Slide 11
Key Imperatives TWO : Overseas Development
Assistance (ODA)
Engage
aggressively
multilateral agencies like
with
• World Bank
• Asian Development Bank and
• Japan Bank for International
Cooperation
to
secure
commitments
totaling not less than US$ 39
Billion
for the 11th Plan
period.
Slide 12
Key Imperatives THREE : Public Expenditure
• Structure large-scale projects
(like Rail Freight Corridor,
NHDP and Bharat Nirman)
involving substantive public
expenditure
• Implement fresh ‘out-of-thebox’ initiatives to raise savings
and resources for this purpose
to a level of US$ 234 Billion.
Slide 13
Key Imperatives Four : Long Term Financing
Create vibrant equity and longterm
debt
markets
for
infrastructure financing.
Slide 14
Summing Up
Project pipe-line creation
Public expenditure & ODA to
‘pull’ private involvement.
GCFI as
indicator
key
performance
Creation
of
‘independent
economic regulators’
PPP policies and dedicated PPP
cells
Long-term debt markets
Political will and public mind-set
to implement user-pay charges
Sovereign to be
entrepreneur’.
‘visionary
G-to-G opportunity structuring
Slide 15
Closing Quote
“You and I come by road or
rail, but economists travel
on INFRASTRUCTURE”.
Margaret Thatcher
Slide 16