EBRs, PPP power investments into infra despite Budget squeeze

The country’s infrastructure investments seem to have largely kept pace with the targets for FY21 despite the pandemic and cutbacks in budgetary expenditure. According to data provided by nine ministries to the department of economic affairs, investments to the tune of Rs 3.83 lakh crore have been made till date in the sectors they oversee; this is 62% of their combined annual target, a creditable achievement given how Covid-19 hit the economy.

Even though Budget spending remained sluggish (against gross budget support target of Rs 2.45 lakh crore for FY21, just Rs 1.2 lakh crore has been achieved so far by the nine ministries), funding of infrastructure projects through extra budgetary resources (EBR) and public-private-partnerships (PPPs) remained strong (see chart below). According to the DEA note reviewed by FE, the ministry of housing and urban affairs (MoHUA), which implements the government’s flagship Pradhan Mantri Awas Yojana and the smart cities mission, received just a little over Rs 19,000 crore from Budget but managed to mobilise Rs 1.08 lakh crore in EBR (borrowed funds). Also, at Rs 1.05 lakh crore, the projects under the MoHUA saw 96% of all private investments reported by the nine ministries.

The railways, which is at the cusp of a transformation with string response received from private investors into passenger trains business, has been the second-biggest investor, as it pulled in Rs 94,718 crore or 25% of the total achievement by nine ministries. The railways received Rs 57,176-crore budgetary support, borrowed Rs 34,105 crore (EBR) and catalysed Rs 3,436-crore private investments. The rural development ministry, which implements the popular rural employment guarantee scheme, reported investments of Rs 40,785 crore till date, against the FY21 target of Rs 85,889 crore.

The nine ministries — railways, shipping, atomic energy, telecom, rural development, housing and urban affairs, steel, school education and youth affairs — have also firmed up plans to mobilise Rs 7.14 lakh-crore investments in FY22 compared with an earlier projection of Rs 6.61 lakh crore, an increase of 8%. Though the DEA sought update of infrastructure investments from 23 ministries, only the above nine have supplied the data thus far. In FY22, MoHUA is envisaging a whopping Rs 3.62-lakh-crore investments with nearly 80% of it expected to be funded through EBR and private investments. The railways also plans a massive Rs 2.9-lakh-crore investments in the next fiscal and estimates Budget support of over Rs 1 lakh crore.

To augments resources for new projects, 11 infrastructure ministries have identified core assets for monetisation. The existing pipeline of core assets (of PSUs) include over 100 assets valued at about Rs 4 lakh crore. For monetisation of assets, PPP concession models, infrastructure investment trust (InvIT), real Estate investment trust (REIT) and toll operate transfer (TOT) models have been identified. “Infrastructure ministries to prepare a pipeline of potential assets for monetisation over FY21-24,” the department of economic affairs said in a recent presentation to finance minister. Other steps include creation of national monetisation pipeline to provide visibility to investors and ministries. An asset monetisation dashboard will be maintained for tracking progress of asset monetisation by ministries.

According to an official statement, of the total projected capital expenditure of Rs 111 lakh crore in five years through FY25, projects worth Rs 44 lakh crore (40%) are under implementation, projects worth Rs 33 lakh crore (30%) are at the conceptual stage and those worth Rs 22 lakh crore (20%) are under development. Infrastructure investment in India during FY08 to FY17 was estimated at ~Rs 60 lakh crore ($1.1 trillion), according to a report of the task-force on the national infrastructure pipeline. The infrastructure investment in the 11th Five Year Plan amounted to Rs 24 lakh crore and that in the 12th Five Year Plan through FY17 stood at Rs 36 lakh crore. However, infrastructure investment, as percentage of GDP, fell to ~5.8% during the 12th Five Year Plan from ~7% during the 11th Plan period. As per estimates, India’s infrastructure investment for FY18 and FY19 are about Rs 10.2 lakh crore and Rs 10 lakh crore, respectively.

While infrastructure investment was predominantly made by the public sector (the Centre and state governments had a share of over 70%) between FY08 and FY17, the share of private sector was ~30%. However, the private sector’s share dropped to about 25% in FY1 and FY19, it added.