Infra push: One-time aid to spur private investments

The department of economic affairs (DEA) is working out a framework to make critical infrastructure projects financially viable and stand on their own with just one-time, upfront budgetary support, DEA secretary Ajay Seth told FE.

The DEA is coordinating with other central ministries in firming up the model. It has almost completed the task of simplifying and streamlining various processes connected to infrastructure projects, Seth said. The work on how best risk allocation has to be made is almost over as well.

The move follows the government’s infrastructure push in the aftermath of the pandemic to create durable assets, spur employment and stimulate economic growth, betting on its high-multiplier effect. A government task force on the National Infrastructure Pipeline (NIP) had in April 2020 envisaged capital investments of Rs 111 lakh crore until FY25. The Centre (39%) and the states (40%) are expected to have almost an equal share in the NIP implementation, followed by the private sector (21%).

“This Budget wants to take it further to say what it will take to make these projects viable so that private capital and adequate bank credit can flow into relevant sectors. That’s what we have to look at in a structured manner, sector after sector,” Seth said.

The Centre’s own budgetary capital spending, too, has surged and is estimated to more than double to Rs 7.5 lakh crore in FY23 from the pre-Covid (FY20) level. The Centre’s capex is expected to jump 36% next fiscal from the revised estimate for FY22 (excluding capital infusion into Air India, etc).

The new plan will be an important part of the government’s all-round focus on setting up new infrastructure projects and monetising the existing ones. Apart from the NIP and elevated capex outlay, the government has also launched a National Monetisation Pipeline and a development finance institution for this purpose.

Asked if large-scale patient capital will flow into India’s infrastructure sector, the secretary said some of the investors, such as pension funds, are typically reluctant to take project risks, as they manage pensioners’ money. So, the monetisation model (where the project is up and running) will suit them more, as it would enable them to protect their principal and garner some returns on it.

Under the monetisation model, investors take on government assets on long-term lease by paying upfront and then keep collecting usage fees from consumers to recoup their investments. The government has set a target of raising Rs 6 lakh crore over four years through FY25 via asset monetisation. Over a half of the realisation is estimated to come from just roads and railway assets.

Calling Gati Shakti — the national master plan for multi-modal connectivity — a “paradigm shift” in the way policy-making takes place in India, the secretary said it would ensure a holistic approach to infrastructure creation with a common vision. It would join different departments for a coordinated development of projects — from road to railways, aviation to agriculture. Not just central departments but states and even the private sector can be partners in this initiative.

Announcing the launch of Gati Shakti late last year, Prime Minister Narendra Modi said: “Just as JAM (Jan Dhan, Aadhar, Mobile) trinity revolutionised the access of government facilities to the people, PM Gati Shakti will do the same for the field of infrastructure.”