Growth in India's Infrastructure Markets Projected
Participants in India's infrastructure construction sector are hopeful of market growth in the coming year and in 2014, as economic conditions recover and the government steps up efforts to remove bottlenecks that have deferred or delayed projects.
Last October, the government announced it would set up a National Investment Board, led by Prime Minister Manmohan Singh, to fast-track execution of approved projects by obtaining all regulatory clearances.
The Ministry of Railways is expediting its construction decision-making process, creating a separate holding company to free up resources and changing its concession cost-sharing model on projects.
The ministry now will share 95% of net project revenue, after deducting operation and maintenance costs. There will also be no takeover of private infrastructure by the railways.
With the minimum 25-year concession period extendable to 35 years, it is expected that banks will be comfortable in lending money to projects such as new lines and rail-gauge conversions, according to ministry officials.
Singh set strict deadlines in December to fast-track rail project investment plans. As a result, the ministry will invite bids for the Mumbai elevated rail corridor projects by early March.
The Dedicated Freight Corridor Corp. of India Ltd., a special purpose vehicle set up within the ministry, has already invited tenders for the initial phases of planned new freight corridors that are set to spur development of industrial corridors along their alignment.
In the first phase, the corporation will build two corridors spanning a total length of about 3,300 kilometers.
The eastern corridor, starting from Ludhiana in Punjab state, will pass through the states of Haryana, Uttar Pradesh, and Bihar and terminate at Dankuni in West Bengal. The western corridor will traverse the distance from Dadri to Mumbai, passing through the states of Delhi, Haryana, Rajasthan, Gujarat and Maharashtra.
Recently, a bid was released for a design-build, lump sum award of special steel bridges and approaches to be built in the western corridor that will include testing and commissioning.
“There are 1,056 level crossings on the eastern and western corridors," says Vinay Mittal, chairman of the freight corridor company. "Considering the high level of road traffic, a decision has been taken to eliminate level crossings through innovative engineering solutions.”
Prime Minister Singh also is reviewing financing needs and lending safeguards of highway and port projects that involve required loans from banks, international lenders and private-sector sources. In the past year, the National Highway Authority of India cancelled two projects due to lack of proper financing.
Last fall, the Asian Development Bank and India Infrastructure Finance Co. Ltd. launched the first version of a so-called credit enhancement scheme or infrastructure bond guarantee scheme that will partially guarantee $128 million of rupee-dominated bonds issued by Indian companies to finance infrastructure projects.
The government has also earmarked for public-private partnership financiing seven hydroelectric power projects in the northern state of Jammu and Kashmir with combined installed capacity of 1,036 MW. Now completed is the financing for the second phase of the 450-MW Baglihar hydroelectric power project, with bidding now under way for three other projects totaling more than 530 MW.
The Shipping Ministry is set to award by March two port projects with a total annual capacity of 245 million metric tons, in the south Indian state of Andhra Pradesh and the eastern state of West Bengal.
Industry executives also note government steps that could boost demand for real estate. These include its clearance of foreign direct investment (FDI) in the retail sector, an expected lowering of interest rates in the next several months by the Reserve Bank of India and new policies related to land acquisition and regulation. "In 2013 and 2014, we also are likely to see private equity investment from overseas due to the low returns in the west," Monish Krishna, director in India of U.S.-based developer Hines told ENR.
Despite the prospects look, contractors are concerned about the need for government-led changes in problematic contract and arbitration rules, particularly as India’s elections approach in early 2014 and there is a tendency not to make decisions, says one contractor. “Disputes need to be sorted out and timelines by the government adhered to," he says. "While the silver lining is visible, the need for speed in making decisions, is important.”