Private sector infrastructure investment may stay elusive for another year
At the start of financial year 2016-17, there seemed to be a clear government push to increase public sector spending to revive private investment cycle in the infrastructure and energy space. As the sector steps into the current financial year, there appears to be little progress; the wait for private investments could get longer by another year, industry experts believe. It will take time for private investments to come up. There is excessive capacity in manufacturing, so investments might not be forthcoming. In infrastructure, there is uncertainty. There are issues of funding, as banks are wary of lending to these projects with non-operating asset concentration, says Madan Sabnavis, chief economist, CARE Ratings. In the financial year 2016-17, in addition to budget allocations made to the infrastructure and energy sectors, public sector companies operating in these segments have also made significant investments. Industry analysts are of the view that while these investments have helped various private companies survive, the next 12 months would decide if private investments will trickle in. Public sector investments made in the energy sector includes state-run power producer NTPC’s Rs 17,520.68 crore in the first nine months of FY17, as against Rs 16,156.50 crore in the same period last year, according to data shared by the company. Data sourced from Petroleum Planning and Analysis Cell (PPAC) shows state-run oil companies in the April-February 2017 period spent close to Rs 91,781crore, higher than the combined target of Rs 87,603 crore. The construction companies have seen their order books filling up, and the construction cycle has picked up due to government spending. However, private investment in infrastructure remains muted. Though some new developers are emerging, solving the NPA issue remains a prerequisite to brining back private investment. With early signs in deal activity, and government considering ways to resolve the financial stress, the next 6-12 months could be interesting, said Manish Agarwal, partner, leader & infrastructure, PricewaterhouseCoopers Pvt. Ltd. In railways, Business Standard earlier reported according to the sources, railways had spent Rs 68,059 crore till December 31, in the first nine months of the last financial year. “In railways, where there is scope for private investments to come in is in the station development segment. In this segment, I expect commitments to be made in the current financial year, which actual private investment would start coming in only after 12 months time. Other ambitious projects like the bullet trains and the DFIC projects will take longer to see any private investments being made, said Vishwas Udgirkar, senior director, Deloitte India. In the road sector, National Highways Authority of India (NHAI) in the April-January period has awarded engineering, procurement and construction (EPC) projects worth Rs 17,967.87 crore. Data for the awarding remaining two months of the last financial year are yet to be shared. Udgirkar added the current financial year may see some private investments trickling in based on the financial closures achieved for hybrid annuity model (HAM) projects in the last financial year. For roads again, through HAM, commitments of some private investment has been made in the last financial year, we may see this forming in capital investments being in the current financial year. As far as EPC projects and public spending through these EPC projects are to be spoken of, it has helped the private companies survive, whether it has helped make the private sector financially healthy to re-invest would be difficult to say,” he added. Even as private investments may elude for a little longer, some public sector companies are expected to continue with their capital expenditure plans. NTPC Ltd looks to invest another Rs 30,000 crore on a standlone basis in the current financial year. The capex shall be used for capital expenditure of NTPC’s up-coming hydro and thermal projects over 21,000 MW in construction along with new Solar, wind capacities, new expansions etc. the company said in an email response. Hindustan Petroleum Corporation Ltd (HPCL) on the other hand said it plans to spend Rs 7,000 crore in the current financial year, which would be marginally higher from its last financial year capex. Chris Thompson Jersey
Gadkari keen to achieve 40 km a day road construction target
Union Transport Minister Nitin Gadkari today said that efforts are being made to further improve the road construction target to 40 km a day from the current 23 km per day. The minister said that 8,144 km of roads were constructed last fiscal. His ministry, Gadkari said, on an average has recorded road construction of 23 km a day as against 2 km a day when the UPA government was in power. “I had fixed the target of 40 km per day but I was not able to achieve that but… I am hopeful of achieving this target,” he said while addressing a national conference on the steel sector. The minister further said he intends to complete infrastructure work worth Rs 25 lakh crore in five years. Gadkari said all these initiatives would give a huge boost to the steel and cement sectors. Till March 31, the ministry has already alloted projects worth Rs 5.5 lakh crore in roads and ports sectors, he added. The government has decided to increase the length of national highways from the existing 96,000 km to 2 lakh km. “We have fast-tracked the decision-making process for the projects,” he added. Gadkari said there are also plans to make 11 expressways including Delhi-Katra and Delhi-Jaipur. “We will complete these two projects before August 15,” he said, adding that work on Mumbai-Baroda Expressway would start in three months’ time. Vladislav Namestnikov Womens Jersey
20 road developers exit projects worth Rs 12,327 cr in 2 years
With the relaxation in exit policy norms, nearly 20 road assets worth around Rs 12,327 crore have been monetised during the past 24 months, says a report. Sponsors in around 20 road assets involving a total cost of Rs 12,327 crore have monetised their assets as against around Rs 7,000 crore in the preceding 50 months, says a report by domestic agency Icra. “Asset sales in the road sector have picked up over the last 24 months with the relaxation in exit policy,” it said, adding three out of the 20 of these assets are state road projects and the remaining are national highway projects. Out of the 17 highway projects, 16 were awarded before 2009 and are the direct beneficiaries of the policy decision on relaxation of the exit policy for projects awarded before 2009 in May 2015. In May 2015, the Cabinet Committee on Economic Affairs relaxed the exit policy for projects awarded before 2009, allowing 100 per cent equity divestment by the developers as against 74 per cent earlier. This move not only attracted private equity players who are more comfortable when they own 100 per cent stake in projects, but also enabled the unlocking of additional 26 per cent of the developers’ equity invested in about 5,600 km of national highway projects in the PPP model, Icra said. This can result in freeing up of around Rs 4,500 crore of equity that can support equity contribution towards building 1,500 km of national highway projects in PPP mode. “In about 31 per cent deals, the return to developers is negative, indicating loss on investment. Developers with a weak credit profile are the ones who disposed of their assets at a loss as liquidity took precedence over profit-making for them,” Icra’s K Ravichandran said. He said the projects with highest returns are secondary sale transactions wherein the sponsors are private equity investors. “With the increase in headline inflation and the continued healthy growth in traffic, the toll collections are expected to grow by 10-11 per cent over the next two years. As the valuations have improved following a favourable outlook on toll collections and decline in interest rates, the asset sales are expected to gather further momentum,” he added. Brookfield Asset Management of Canada, Canadian Pension Funds, Macquarie Australia, I Squared Capital of the US (Cube Highways), Abertis Infraestructuras of Spain and IDFC Alternatives are the major investors currently looking for assets in the sector, the report said. Global pension funds are also increasingly looking at acquiring road assets and staying invested for the long term, Ravichandran said. M&A opportunities in the road sector are the highest among various infra sub-sectors with around 88 operational national highways projects totalling 7,192 km with a total project cost of Rs 69,327 crore and a median operational track record of four years, Icra said. Bradley McDougald Womens Jersey
Rajasthan denotifies highways within city limits
Rajasthan has denotified certain sections of state highways passing through populous towns, days after the Supreme Court order banning liquor vends within 500 metres of national and state highways came into effect. The chief engineer of the Public Works Department, however, said that the process of denotification has nothing to do with the apex court directive.Shivlahri Sharma said the status of state highway has been revoked for only those stretches passing through populous areas where bypass roads had been constructed.“When a bypass is constructed, the old section (of the highway) which passes through the city and town become left—out stretches. Since there cannot be two highways of the same number at the same location, the left—out sections come under the local body and lose the status of highway,” he said.As per an estimate, nearly 450 liquor shops were located on such stretches.“The status of state highway has been relinquished only for those stretches which are passing through the limits of local bodies and are connected through a bypass,” Sharma said.He said that the order was issued recently for such roads on approximately 20 locations in the state and the same will be done in case of such left—out sections of state highways where bypasses have been constructed.The officer said the same provision exists for national highways as well.“This process has no connection with liquor shops,” he claimed. According to the state excise department, close to 2,800 shops were located on national and state highways.The Supreme Court in its March 31 order had said that liquor vends within 500 metres of national and state highways would have to shut down from April 1.Recently, the apex court also reduced the distance from 500 meters to 220 meters in municipal areas having population less than 20,000. Luke Glendening Authentic Jersey
To bypass SC’s highway liquor ban, Punjab denotifies 12 stretches passing through cities
The Punjab government has found a way to reduce the effect of the Supreme Court’s orders banning sale or serving of liquor within 500 metres of national and state highways. The state government on Tuesday denotified 12 such highway stretches that pass through cities and towns but for which bypasses were already built. Due to the ban, the state had apprehended a loss of Rs 1,300 as revenue this fiscal for the excise and taxation department that governs liquor sale. Now, sources said, the denotification of the bypassed stretches would offer some respite, though that would be quantified only later. The seven state highway stretches denotified by the public works department are in the districts SAS Nagar, Pathankot, Moga, Hoshiarpur, Patiala, Fatehgarh Sahib, and Nawanshahr. The excise department is now calculating how many liquor shops, including bars, were on these stretches before the SC order came into effect from April 1. The notification says, “The government over the years constructed a number of bypasses on state highways to decongest select cities. As a consequence, the bypassed parts of these highway passing through the cities are no more required to be state highways.” The five NH?stretches denotified, thus realigned, include NH-1 from Shambhu to Attari border with bypasses in Ludhiana, Jalandhar and Amritsar; NH-15 from Pathankot to Abohar with six bypasses; NH-64 from Zirakpur to Bathinda with bypasses in Patiala, Dhanaula and Sangrur; NH-344A from Phagwara to Rupnagar with a bypass in Phagwara; and NH-95 from Kharar to Ferozepur with a bypass in Morinda. The excise department had apprehended removal of 1,500 liquor shops and bars on the highways. Bars inside hotels and restaurants were expected to fetch about Rs 1,400 crore before the ban, but Rs 800 crore of that was from bars within the 500-metre ban radius. The department is expecting revenue of Rs 5,400 crore from liquor this fiscal. “We will examine the notification and see how much of the loss can be recovered,” said additional excise and taxation commissioner Gurtej Singh. Neighbouring Rajasthan has declared state highways passing through inhabited areas as urban roads or district roads to circumvent the SC order. Bo Horvat Jersey
Over 47,000km of rural roads constructed under PMGSY in FY17
The government built 47,350 km of rural roads under the flagship Pradhan Mantri Gram Sadak Yojana (PMGSY) in 2016-17, the most in seven years. That compares with the 36,449km of roads constructed in 2015-16 under PMGSY and 36,337km in 2014-15, the rural development ministry said in a statement on Tuesday. The faster pace of road construction is expected to boost the rural economy, enabling farmers to transport produce to markets quicker. It will also improve access of rural Indians to education and healthcare. During 2011-14, the average rate of construction of PMGSY roads was 73km per day, which increased to 100km per day in 2014-15 and 2015-16, the ministry of rural development said in a statement. In 2016-17, the pace of construction rose to a record 130km of rural roads per day, the highest average annual construction rate in the past seven years. Some 11,614 habitations were provided connectivity by the construction of PMGSY roads in 2016-17 or an average of 32 habitations were provided connectivity every day. To reduce the “carbon footprint” and environmental pollution, PMGSY is aggressively encouraging use of “Green Technologies” and non-conventional materials like waste plastic, cold mix, geo-textiles, fly-ash, iron and copper slag in rural roads. PMGSY was launched in 2000 by the previous National Democratic Alliance (NDA) government with the objective of providing all-weather road connectivity to unconnected rural habitations. It is being seen by the present NDA government as a key tool to spur domestic economic growth, given that the global economy recovery remains weak at present. Finance minister Arun Jaitley had announced an allocation of Rs19,000 crore for the programme in the 2017-18 budget—the same as in 2016-17. Chris Carpenter Jersey
NHAI To Soon Invite Bids To Operate Highways Under New Model
India’s government-run road builder will soon invite bids for long-term leases to manage a dozen stretches of national highways as it eyes foreign institutional investors for funds to improve the country’s road network. The National Highways Authority of India is expected to initiate the bidding process in May for 10-15 operational highways of the 75 selected under the new Toll-Operate-Transfer (TOT) model, a senior NHAI official told BloombergQuint on the condition of anonymity. The model offers 30-year contracts to operate and maintain highways on a one-time upfront payment. GVK Power and Infrastructure Ltd. will consider bidding in the auction, said the company which built airports in Mumbai and Hyderabad and operates the Jaipur-Kishangarh highway in Rajasthan. Since the asset will not be carried in a company’s books, the model will be preferred, said Isaac George, company’s director and chief financial officer. India’s highway construction has failed to meet targets amid lack of funds and delays in land acquisition and environmental clearances. A recent report by ratings agency CRISIL Ltd. estimates that over the next two financial years, highways would require investments of Rs 2.2 lakh crore, more than twice the previous two financial years, as execution of publicly funded projects improves. Luring Foreign Institutions Canadian Pension Plan Investment Board, Macquarie Group and other institutional investors from Europe and Asia, who are equipped to make long-term investments of at least $250 million, have shown interest, said the NHAI official quoted earlier. An email by BloombergQuint to NHAI seeking details did not elicit any response. The CRISIL report estimates that the 75 highways could fetch up to Rs 40,000 crore, lower than Rs 50,000-80,000 crore the government expected. The TOT model can fetch an annual toll revenue growth of 7-8 percent and return on equity of 14-16 percent, it said. This may not be aggressive but road operators are positive, Ajay Srinivasan, director at CRISIL and one of the authors of the report, told BloombergQuint over the phone. “TOT is an asset-light model. We would definitely like to participate in it once the bids open,” said a spokesperson for MEP Infrastructure Pvt., which is the toll operator for five entry points to Mumbai and also manages the Hyderabad-Bengaluru national highway. The model would allow the company to work on a longer tenure, which is always a better option, the spokesperson said. TOT Vs OMT In the Toll-Operate-Transfer model, a private player is expected to operate and maintain the highway and collect toll for 30 years after making an upfront payment, without having to build the highway. The funds generated would be spent on other road projects. “Bidding through special purpose vehicles set up by infrastructure investment trusts (InvITs) or transferring TOT projects to InvITs after two years would also aid better management of risks,” said Srinivasan. The Cabinet Committee on Economic Affairs had in August last year authorised the NHAI to monetise around 75 national highways which are operational and generating revenues for at least two years. The government preferred TOT over the existing Operate-Maintain-Transfer (OMT) model, which requires the selected road operator to manage the project for six to nine years. The OMT model was not successful because there was a fixed annual increase in payments to NHAI irrespective of traffic, the CRISIL report said. The shorter tenure led to poor maintenance, it said. The government hopes the TOT model would facilitate efficient toll realisation through the private sector. It would result in better maintenance of assets, said the NHAI official cited earlier. Paul Hornung Womens Jersey
Highway construction highest ever, but 45% short of target
Highway construction in 2016-17 touched all time high at 8,144 km, which is 33% more than last year. Similarly award of works also increased to the maximum at 16,031 km, which is 60% more than last year. However, this is much less than what highway minister Nitin Gadkari had set as target for National Highways Authority of India and his ministry. Gadkari had set 15,000 km as target of construction and 25,000 km for award. Data accessed by TOI show that the maximum share of the achievements have come from the ministry, which executes projects through the state Public Works Departments. For example, while NHAI completed construction and expansion of 2,628 km of national highways (NH) till March 31, the ministry achieved widening of the over 5,500 km. While works undertaken by NHAI involves four-laning and six-laning, which requires more fund, land and resources; most of the projects executed by the ministry are confined to widen highway stretches to only two and half lanes. “It’s an accepted fact that the quantity of construction will come from ministry and the quality will come from NHAI,” said an official. In the case of award of projects, NHAI has tendered works for 4,335 kms while works for the rest 11,696 km were awarded by state PWDs. “The high rate of award for works will result in pushing construction in the next two years to a new height. All works awarded till March end will either get completed or near completion by 2019,” the official said. Recently, the ministry had told Parliament that “The slow speed of construction of NHs are mainly due to land acquisition, utility shifting, non-availability of soil/ aggregates, poor performance of contractors, environment/ forest/ wildlife clearance, rail over bridge and rail under bridge issue with railways, public agitation for additional facilities, arbitration/ contractual disputes with contractors etc.” Nick Shore Jersey
NMPT records 12.25% growth in traffic handling
New Mangalore Port Trust (NMPT) registered a growth of 12.25 per cent in traffic handling during 2016-17. The port handled 39.94 mt of cargo during 2016-17 as against 35.58 mt in 2015-16. A press release said here on Monday the port also achieved a growth of 5.11 per cent over the target of 38 mt fixed by the Shipping Ministry. Increase in the handling of crude oil for Mangalore Refinery and Petrochemicals Ltd (MRPL), coal for Udupi Power Corporation Ltd and iron ore for KIOCL Ltd contributed significantly to this growth, it said. NMPT handled 16.68 mt of crude oil and 3.53 mt of coal for MRPL and Udupi Power Corporation Ltd, respectively, during 2016-17 as against 15.88 mt and 3.31 mt in the corresponding previous fiscal. The port handled 94,928 TEUs (twenty-foot equivalent units) of containers during 2016-17 as against 75,709 TEUs in the previous fiscal, recording a growth of 25.39 per cent. Phillip Danault Jersey
JICA’s Rs 400 crore loan to smoothen traffic on Delhi expressway
Japanese lending arm JICA will provide Rs 400 crore loan to India for computerised traffic control on the under-construction Delhi eastern peripheral highway linking Haryana. It will cover 135-km tolled access control highway starting at Kundli in Sonipat and ending at Palwal, Faridabad. An Intelligent Transport System (ITS) will be deployed on Delhi Eastern Peripheral Expressway to monitor traffic volume and control congestion at toll gates, JICA stated today. The National Highways Authority of India (NHAI) is constructing the Delhi Eastern Peripheral Expressway (EPE). “We expect that this project would not only promote regional socio-economic development, but improve urban environment through mitigation of traffic jams and decrease of pollution caused by increasing vehicles in urban area,” Takema Sakamoto, Chief Representative, JICA India, said in a statement. The Advanced Traffic Management System (ATMS) will be launched to reduce traffic congestion and accidents and the Toll Management System (TMS) will shorten queues at toll gates. ATMS will collect information on road, traffic and weather conditions at traffic control centres and transmit it to road users 24 hours per day throughout a year. TMS will manage toll via radio frequency identification in which a unique tag – FASTag – is attached to passing vehicles and tolls are collected directly from a pre-paid account linked to a central server, removing the need to stop and pay at gates. The agreement was signed between JICA’s Sakamoto and S Selvakumar, Joint Secretary, Finance Ministry. Japan International Cooperation Agency’s (JICA) Official Development Assistance(ODA) will have to be repaid at 1.4 per cent interest for project activities and 0.01 per cent for consulting. The loan tenure of 30 years includes grace period of 10 years. Alex Wood Womens Jersey