India's Leading Infrastructure Companies

India's Leading Infrastructure Companies 2015

Development of any country is directly linked to the development of its infrastructure. Infrastructure has been identified as one of the key drivers for economic development by the Indian government. The Union Budget this year has provided a good push for the infrastructure sector. A target of 8500 Km of roads and 15000 Km of gas pipeline and allowing banks to raise long-term funds with minimum SLR, PSL, and CRR requirements, would help boost investment in the infrastructure sector. Further, revision of FDI (Foreign direct investment) in the real estate sector would provide valuable development, helping India move closer to having modern marvels such as smart cities and bullet trains. This step would simultaneously increase the FOREX inflows, which would strengthen domestic currency in the global market. Increased focus is expected on infrastructure development in new townships/rural areas and bridging the rural urban gap. Tier III and Tier IV cities would emerge as the new growth areas due to space and resource constraints in urban areas as they become overpopulated with increasing workforce migrating from rural areas and small towns.

BRICS in Global Competitiveness:
According to WEF Global Competitiveness report 2014-15, India is experiencing a slowdown in economic growth since 2011 and has been dropping for six consecutive editions on Global Competitive Index, currently ranking 71 out of 144 economies, standing lowest among the BRICS economies, with China being the highest ranked BRICS nation.

Current Scenario
During the year ending 2013-14, cumulative growth rate of eight core infrastructure sector industries in India slipped to 3.1% compared with 3.7% in 2012-13.

There was a fall in output across the sub-sectors namely coal, cement, and refinery. Sectors such as power, steel, and fertilizers showed growth.

Many infrastructure projects are stuck due to issue of land acquisition and environmental clearance, affecting the financial viability of these projects. According to the RBI, as on May 1, 2014, out of the 727 central infrastructure projects worth about र 1.5 bn and above monitored by the Ministry of Statistic and Program Implementation, 39% are delayed and 41% are without a completion date.

In 2013-14, to boost investment in the infrastructure sector, a series of government initiatives such as establishment of the CCI and the Project Monitoring Group (PMG) to expedite the clearance of key mega infra projects, enactment of new legislation for land acquisition, rehabilitation and resettlement, treating debts due to the lenders as ‘secured’ loan in the case of PPP projects, relaxation of external commercial borrowing (ECB) norms for infrastructure finance companies, and facilitation of infrastructure debt funds (IDFs) were taken.

Some of the highlights and initiatives for infrastructure development taken by government during budget are:

Roads and Highways:
In the Union Budget 2014-15, the government declared allocation of र 378.8 bn in National Highways Authority of India (NHAI) and State Roads including र 30 bn for the North East. Moreover, the Union Budget indicated that approximately 8,500 km of roads will be constructed in the current year. Compared with र 79.7 bn allocated to states for roads and bridges in the 11th Five Year Plan, the 12th Five Year Plan seems to be more promising since it has allocated र 124.1 bn.

In the Union Budget 2014-15, the government declared allocation of 𹛊 bn for accelerating the development of the railway system in the border areas and 1 bn for development of metro service in various cities. Further, there are many new initiatives underway, which will materialise during the course of the 12th Plan. Some of them are flagship projects such as the Western and Eastern Freight Corridor, the Mumbai Elevated Rail Corridor, and the High Speed Corridor.

As per the Working Group report, airlines in India are expected to add around 370 aircrafts worth र 1,500 bn to their fleet by FY17. It was proposed in this year’s Union Budget to launch new projects in Tier I and Tier II cities. Further, the Public Private Partnership (PPP) model has been successful in airport infrastructure (international airports constructed in major cities such as Delhi, Mumbai)

In Union Budget 2014-15, the government has announced 16 new port projects to be awarded this year with a focus on port connectivity. Around र 117.4 bn will be allocated for the development of Outer Harbour Project in Tuticorin for phase I. SEZs would be developed in Kandla and JNPT, two of the major ports in India. Further, there is a proposal to develop a project on the river Ganga named ‘Jal Marg Vikas’ between Allahabad and Haldia to cover a distance of 1,620 kms.

Rural Infrastructure:
In the Union Budget 2014-15, the government proposed Shyama Prasad Mukherji Rurban Mission for integrated project based infrastructure in rural areas. Further, allocation of र 143.9 bn for Pradhan Mantri Gram Sadak Yojna (PMGSY) was proposed to improve rural connectivity.

Urban Infrastructure:
In the Union Budget 2014-15, the government has enhanced the corpus of Pooled Municipal Debt Obligation Facility from र 50 bn to र 500 bn. Furthermore, 500 urban habitations are to be provided with support for renewal of infrastructure and services in the next 10 years through PPPs.

The infrastructure sector had been facing various bottlenecks for the past few years and the PPP model still remains an underutilized card in various segments. However, the government has provided with the much needed push. Consequently, vibrant growth across various segments of infrastructure is expected, given the renewed emphasis on infrastructure sector by boosting infrastructure financing coupled with initiatives to enhance physical infrastructure such as roads, railways, shipping, airports, rural, and urban infrastructure. The investment in physical infrastructure is expected to increase sharply.