Infrastructure debt funds expected to stage a comeback this fiscal
Infrastructure Debt Funds (IDFs) could stage a revival this fiscal on the back of lighter investment regulations and more flexibility in raising resources, experts say. Last week, the Reserve Bank of India (RBI) had allowed Infrastructure Debt Fund-non banking financial institutions (IDF-NBFCs) -or investment vehicles sponsored by NBFCs with investments from domestic and offshore institutional investors mainly for refinancing debt of infrastructure companies -to raise up to 10% of their total outstanding borrowings through shorter tenure bonds and commercial papers, giving them the much-needed flexibility to manage their assets and liabilities. Analysts said borrowing through a shorter tenure will allow these companies to reduce their cost of funds by timing some of their borrowings through these instruments, especially when interest rates are down. “They can now afford to time the market and borrow cheaper funds,” said Karthik Sriniva san, co-head financial sector ratings at ICRA. “For example, the one year commercial paper currently is less than 8% while a bond of the same tenure is around 8.5%. This will generally mean some cost saving for IDFs, but the saving will be limited because such short-term borrowing is capped at 10%,” he said. RBI’s easing of regulation on borrowing for IDF-NBFCs followed other important measures announced in May 2015. The central bank had then allowed these funds to invest in public-private partnership projects even without a government-backed authority, opening the possibility of even private infrastructure projects receiving funds, provided they have completed at least one year of satisfactory commercial operations. RBI also did away with a requirement for the IDF to sign a three-way agreement with a government agency like NHAI as one of the party, making it simpler for these funds to invest. “The changes in May had eased the asset side of our business because it allowed us to invest of our business because it allowed us to invest even in non-PPP projects. The latest changes will ease our liability side as it gives us scope to raise short-term funds,” said Sadashiv Rao, CEO of IDFC IDF. Three NBFC IDFs -IDFC IDF, L&T IDF and ICICI Bank-backed India Infradebt -are currently active with total consolidated assets under management of around Rs 6,000 crore. However, these funds are still miniscule compared with Rs 1 lakh-crore infrastructure loans given by banks. “The newest RBI regulation will provide these funds with additional flexibility because they can use these short-term instruments to bridge their asset-liability gaps. But this flexibility will not result in any extraordinary jump in these companies’ profits or margins,” said Abhishek Bhattacharya, co-head for banks and financial institutions ratings at India Ratings & Research. Bhattacharya said IDFs face challenges in choosing the right kind of projects because the infrastructure sector has still not recovered fully. He estimated that around Rs 12,000 crore of renewable energy projects and at least Rs 2,600 crore of road projects will be up for refinancing soon, for which IDFs can bid. LaDainian Tomlinson Jersey
India offers $100 million for infrastructure fund to Papua New Guinea
Seeking to strengthen bilateral ties and ensuring energy security, India today offered a USD 100 million line of credit for development of infrastructure in Papua New Guinea (PNG) and agreed to jointly develop new avenues of cooperation to explore and develop the Pacific nation’s vast oil and gas resources. India, during a meeting between visiting President Pranab Mukherjee with his PNG counterpart Sir Michael Ogio, also offered a coastal surveillance radar system and Coast Guard patrol vessels to the country as part of its commitment for the mutual maritime security initiative. After the completion of the maiden two-day visit to PNG by President Mukherjee, the two sides in a joint statement highlighted various international and regional issues including terrorism, India’s candidature for permanent membership of the UN Security Council and maritime security. The two sides agreed to establish a mechanism for regular consultations between the foreign ministries of both countries aimed at diversifying bilateral cooperation in areas of shared interest. “Keeping in view India’s desire to achieve energy security, PNG agreed to develop new avenues of cooperation with India in exploration and development of Papua New Guinea’s vast oil and gas resources through joint ventures and Indian public and private sector investment in new and existing projects,” the joint statement said. A deal for extending an Indian line of credit of USD 100 million for development of infrastructure in PNG was also signed. PNG announced a visa-on-arrival facility for Indian tourists travelling to the Pacific Island as a “gesture of reciprocity” as India has already approved a similar facility for the nationals of all Pacific Island countries since last year. India also announced providing retro-viral drugs and equipment for the treatment of 20,000 HIV patients in PNG for a period of one year. Both leaders also witnessed signing of the Memorandums of Understanding on agriculture research cooperation between University of Technology in Lae in PNG and the Indian Council of Agricultural Research (ICAR). The two sides finalised and signed a MOU for broad ranging cooperation in the health sector. Cincinnati Bengals Jersey
India-Singapore urban management programme launched
With an eye on improving urbanisation process in the country with assistance from Singapore an urban management program organised by Temasek Foundation (TF) and Singapore Cooperation Enterprise (SCE) and NITI Aayog got underway here on Wednesday for over 50 participants from seven Indian states. This is in accordance with an MoU which was signed during PM Narendra Modis visit to Singapore last year. Officials from 7 States (Tamil Nadu, Andhra Pradesh, Gujarat, Maharashtra, Delhi, Uttar Pradesh & Assam) are participating in this Programme that would cover areas of Urban Planning & Governance, Water, Waste Water & Solid Waste Management and Public Financing (PPP) of Urban Infrastructure. The best practices of Singapore in these areas are being shared by TF and SCE. Vice Chairman of NITI Aayog, Dr Arvind Panagariya chaired the Launch Programme which was attended by the Member NITI Aayog, Dr Bibek Debroy, High Commissioner of Singapore to India, the CEO of SCE and the CEO of Temasek Foundation. The state participation is at the level of Secretaries of Urban Development, Municipal Commissioners and other senior officials of State Government. The Programme has been designed by NITI Aayog, Temasek Foundation and SCE under the platform of the Memorandum of Understanding signed between NITI Aayog and the SCE to tap the expertise of Singapore in urban sector to build capacities in State Governments and ULBs. During the program, experts from Singapore would impart training in highly interactive workshops and share Singapore’s and international experiences with the participants. The workshops and advisory sessions would focus on Urban Planning & Governance, Water and Wastewater Management, Solid Waste Management and bringing in private sector efficiencies in urban infrastructure. Urbanisation level in India, which was around 31 per cent in census 2011 is estimated to increase and reach 40 per cent by 2030 in percentage terms, the urbanisation level may appear to be modest, however in absolute numbers it is very large. Urban population of India is more than the entire population of United States of America or Brazil. The urban economy has also witnessed significant growth and is contributing to around 60 per cent of GDP. However, to reap the full benefits of urbanisation, it is important that it is efficient and sustainable. Set up by Temasek, an investment company based in Singapore, Temasek Foundation is a Singapore philanthropic organisation that seeks to build a more prosperous, stable and connected Asia through building human and social capital. SCE was set up by the Ministry of Trade and Industry and the Ministry of Foreign Affairs of Singapore in 2006 to respond effectively to the multitude of foreign requests interested in Singapore’s development experience. SCE works closely with Singapore’s 15 ministries and over 60 statutory boards to scope out and tailor possible solutions to match the needs of foreign governments, and help meet their development objectives. SCE also serves as the focal point of access to expertise from Singapore across its public agencies. SCE is now an integrated arm of International Enterprise Singapore, the government agency driving Singapore’s external economy. Nino Niederreiter Womens Jersey
Greening of highways can be linked to NREGA: Nitin Gadkari
Government plans to provide ‘green canopy’ on national highways at an estimated cost of Rs 5,000 crore and may link that with NREGA to boost rural economy, creating a large number of jobs. “Roads must be viewed as green highway opportunities. Aside from the environmental and aesthetic aspects, they have a huge potential to generate jobs and can immensely benefit the rural economy. It may even be linked with the NREGA scheme,” Road Transport and Highways Minister Nitin Gadkari said here at an event. Addressing a workshop on Greening of Highways, jointly organised by NHAI and TERI, Gadkari said at least Rs 5,000 crore would be spent on providing a green cover on national highways which would be game changer for rural economy and can employ multitudes of women and children. Under the Green Highways policy, which will be implemented from June this year, the government has made it mandatory to set aside 1 per cent of the total project cost of any highways contract to a “Green Fund” corpus for plantation. Gadkari said that so far road contracts worth Rs 1.5 lakh crore have been awarded and the number would swell to Rs 2 lakh crore by next month. “In total we are going to award at least Rs 5 lakh crore worth of highways projects and Rs 5,000 crore would exclusively be meant for greening of highways and transplantation of trees,” he said. He invited investors to take up experimental projects. “If needed, we will provide technology and financial support as well to the selected agency. Three winners from each state every year will also be awarded for exemplary work.” The minister said the projects will be monitored through satellite technology with payments to be made only after the successful implementation. He said the government plans setting up 1,200 highway villages along the major sections which will house restaurants having local cuisines and cultural parks to showcase local produce. Talking about environmental benefits that will accrue from greening of highways, the minister urged the use of biofuels in machines to be employed in the project and organic fertilisers for transplanted trees. NHAI Chairman Raghav Chandra said: “We have set aside 1 per cent of our project cost for transplantation, plantation, beautification and maintenance. We have adequate funds and we intend to use it for setting SOPs, build capacity and imbibe the best global practises.” TERI Director General Ajay Mathur said: “Given the fact that land for new plantation is limited, additional tree cover would come out from approaches such as intense plantation along highways. The creation of the National Green Highways Mission will help identify and resolve challenges associated with the issue.” Erik Swoope Womens Jersey
AP govt to spend Rs 4000 cr for development of towns
The TDP government will spend Rs 4,000 crore for the development of infrastructural facilities in various towns of the state, Andhra Pradesh Finance Minister Y Ramakrishnudu has said. At present, 27 per cent of the state’s population lives in towns, which, he said have been seeing a rise in migration from people in the villages. The state government is taking all necessary steps, including development of infrastructural facilities in towns to meet the needs of people who migrate and those already living there, Ramakrishnudu said here on Wednesday. “The state government has decided to spend Rs 4,000 crore for development of infrastructural facilities,” he said, hoping the move will also increase employment opportunities. He expressed happiness at the selection of Kakinada and Visakhapatnam by the Centre to be developed as ‘smart cities’ in Andhra Pradesh. The minister said the TDP government will utilise funds, both from the state and the Centre, for the development of Kakinada as smart city, he added. He also called for the need to facilitate the reach of the state’s welfare programmes for the benefit of poor and other sections. Dikembe Mutombo Authentic Jersey
Smart city project: 40 cities to be selected in second round
Forty cities will be selected for the second phase of the Smart City Mission, which is likely to be announced by June, Rajya Sabha was told on Thursday. The first batch of 20 cities, including Bhubaneshwar, Pune, Ahmedabad, Chennai, Bhopal and NDMC area of Delhi, were selected for Narendra Modi government’s flagship smart city project in January. “It is expected that the results of the next phase will be announced by May/June,” Urban Development Minister M Venkaiah Naidu said in written reply. Assured water and power supply, sanitation and solid waste management systems, efficient urban mobility and public transportation, IT connectivity, e-governance and citizen participation are some of the highlights of the smart city project. Under the Smart City Mission, 100 cities across the country will be developed as smart cities by 2019-20 with the Union government providing financial support to the extent of Rs 48,000 crore over five years–on an average Rs 100 crore per city per year for five years. An equal amount will be contributed by the state/urban local body and the balance funds would be mobilised through various sources such as public private partnership and municipal bonds. Around 54 cities, including Varanasi, Nagpur, Muzaffarpur, Ghaziabad, Agra, Kanpur, Kota and Gandhinagar will compete to find a place in the second list of 40 cities for the smart city projects. Stephen Strasburg Authentic Jersey
Four Laning of National Highway 91
Ghaziabad to Aligarh section of Ghaziabad – Aligarh – Kanpur National Highway No. 91 is in good condition and from Aligarh to Kanpur, it is being maintained in motorable condition through maintenance work. Out of total length of 126.30 kms of NH-91 between Ghaziabad and Aligarh, 4-laning in 121 kms has been completed. For 4-laning of Aligarh to Kanpur section of this National Highway, preparation of detailed project report (DPR) is in progress. The remaining work of 4-laning of 5.30 kms length between Ghaziabad and Aligarh is likely to be completed by December, 2016 after resolving the bottlenecks on account of availability of hindrance free land. As regards 4-laning of Aligarh to Kanpur section, it is premature to indicate the date of completion. David DeCastro Jersey
Training/Awareness Programmes on Traffic Management
Ministry of Road Transport & Highways (MoRTH) is sponsoring training programmes for State Transport / Traffic Department personnels to keep them abreast with developments of the road transport sector. During financial year 2015-16, MoRTH sanctioned 54 training programmes for State Transport/Traffic department personnels to be conducted through seven leading institutes of the country namely, Central Institute of Road Transport (CIRT), Pune, Automotive Research Association of India (ARAI), Pune, Engineering Staff College of India (ESCI), Hyderabad, Instiutute of Road Traffic Education (IRTE), Faridabad, Indian Institutes of Technology (IIT), Delhi, Petroleum Conservation Research Association (PCRA), Delhi and Indian Institute of Petroleum (IIP), Dehradun. The training programmes are designed in such a manner so as to give the participants exposure in all spheres of governance in road transport sector and to enable them to face the emerging challenges. Out of the fifty four programmes, one three-days training programme was conducted by CIRT, Pune on the topic ‘Road Traffic Management’. Another five-days training programme on the topic ‘Advanced Automotive Technology and Indian Road Traffic Pattern – Challenges & Opportunities’ was conducted by IIP, Dehradun during 2015-16. Nolan Patrick Authentic Jersey
Panel okays Punjab road project
The Public Private Partnership Appraisal Committee (PPPAC) has cleared a road project in Punjab with an estimated project cost of Rs. 1169.61 crore. This approval came at PPPAC meeting held here on Monday under the Chairmanship of Economic Affairs Secretary Shaktikanta Das. PPP Projects implemented by Infrastructure Ministries and Departments of Central Government are cleared by Institutional Mechanism. Sidney Jones Authentic Jersey
‘IRFC funding infrastructure good for nation’
In recent times, the Indian Railways has been able to raise funds at costs lower than the government through its fund-raising arm, the Indian Railway Finance Corporation (IRFC), which enjoys the same credit rating as the government. This is because the IRFC is backed by the revenues of Railways’ rolling stock, such as the engines, wagons and coaches. But, as the public enterprise gets into project financing for the Railways, the cost of funds for the Railways is likely to increase. However, according to Sanjoy Mookerjee, Financial Commissioner, Indian Railways, the Railways is taking this route to make cost of funds cheaper for the nation. Speaking to BusinessLine recently, Mookerjee shares how Railways has controlled costs and discussions with Finance Ministry on dividend payout. Excerpts: How has the Railways controlled costs? Traditionally, fuel was considered a fixed cost for the Railways. But, through inventory management and better efficiency, this has now become a variable cost. We are also reviewing the electricity contracts keeping in mind that lower average peak load should give us a substantial reduction. In our colonies, we are going for renewable energy and pre-paid card-based payments which are lowering costs. For all renewable energy usage on such projects, we also get rebates of up to 40 per cent from the Ministry of Renewable Energy. We will save on diesel in Rajdhanis and Shatabdis by drawing energy directly from engines instead of generator power cars. The power cars can be replaced with two coaches, which will generate revenue. The Railways also saved some fuel on account of drop in net tonne kilometre and gross tonne kilometre, which count railways’ distance and loading productivity. So, in 2015-16, the Railways saved ?3,500 crore in fuel account. It also saved over ?10,000 crore over the Budget estimates by controlling staff allowances. We had a shortfall of almost ?15,000 crore in revenues, but through these savings, we were able to reduce our fall to ?5,000 crore. Staff and pension costs are your largest fixed cost. Will the government share your pension costs? Staff cost is in two parts: first is salary and dearness allowance and pension, which are the fixed costs; second is the variable or staff allowances. Staff allowance has been tackled. Till now, we mostly do cash-based accounting. As regards pension, we manage it through a fund that is credited from our internal revenues every year, based on the number of pensioners and the statistics that we get from banks. We do not or cannot formulate a fund that will pay for itself through its investments. The National Pension Scheme is a contributory scheme for those who joined after 2004. So, accrual accounting is required to find out the liability for the next 20 years. What we see is that around 2020-21, there will be a peaking, and then it will start falling. So, we are working on the accounting reforms project, which will take another year to roll out. I don’t think we can have a dialogue with the Centre or any pension fund till the accounting reforms project is complete. With IRFC now funding infrastructure, will the Railways’ cost of funds be impacted? We are going for a little bit of international funding with due hedging. Tax-free bonds give us a rate of 7.2-7.8 per cent, which is cheaper than what the government borrows from international market. For the tax-free bonds, the weighted average cost to the Railways is 7.37 per cent with an average tenure of 13.51 years. Now, Life Insurance Corp funds, which cost about 7.98 per cent for 30 years with a five-year moratorium, are exclusively for infrastructure project finance. The question is do I go to the government, ask for more gross budgetary support and the government borrows money to pay us? This route may be cheaper for the Railways, but will be more expensive for the nation. India wants to reduce its fiscal deficit to 3 per cent. If this is done, India’s rating will go up. As a government department, it is our endeavour to help the government in this effort. Will there be a change in the proportion of IRFC funds deployed for rolling stock and infrastructure? Very little, we are doing something like ?20,000 crore annually. With the enlargement of the freight basket, we will need more wagons from IRFC. This will help the coal industry to some extent. Also, we are going for shipping and ports. So, coastal shipping and rail bridging has become a reality. Ports and companies are investing in mechanised loading and unloading on rail wagons and rakes are moving out from ports. This is a new phenomenon. On the dividend payment by the Railways to the Centre, has there been any breakthrough? Government of India is our owner. We are duty-bound to pay them dividend. Decision on dividend is based on two factors — what is the market cost of the capital and the recommendation of the Railway Convention Committee. When the market is down and cost of capital is less, obviously dividend will fall. But for the Railways, the final recommendation comes from the committee, which is then taken up by the Cabinet and finally approved by the Parliament after due consultations with the Finance Ministry. For example, the recommendation for 2015-16 has been made for 4 per cent, which is one of the lowest. We hope the Cabinet and Parliament approve this. But, non-dividend bearing funds have also been assigned to us. Of the gross budgetary support of ?45,000 crore, the Centre has provided ?10,780 crore, which is from the Central Road Fund or the diesel cess. This is a four-fold increase from the Budgetary support. Last year, we could get only get ?2,661 crore. We also hope to get something from the Swachh Bharat Fund for our bio-toilets. This is also a safety issue since human waste and water corrode our steel tracks and bridge girders. Right now, the Railways are using own funds, such as depreciation reserve fund (DRF), to