The word ‘infrastructure’ has become one of the most important terms in the vocabulary of every private and government company operating in the field of power.
The word ‘infrastructure’ has become one of the most important terms in the vocabulary of every private and government company operating in the field of power, roads, ports and urban and rural development.
The private sector is bullish about the infrastructure sector like it has been for the service industry in the past. The investors too see the sector as big opportunity, as the huge response to IPOs of infrastructure companies has shown.
The big plans of private companies, however, need a push from the government since the gestation periods in infrastructure projects are relatively higher.
The government effort at promoting public-private partnership through viability gap funding is one step in this direction.
A Planning Commission estimate had recently shown that if the economy has to grow by 9% and if the government wants to sustain the interest shown by private players, the country would require whopping Rs23,74,952 crore ($492 billion) during the Eleventh Plan period (2007-12) for investment in infrastructure. This would be an increase of 2.45 times over the estimated investment made during the Tenth Plan period.
Power sector, a laggard in infrastructure growth, may show the biggest gains in coming years with several companies from across industries foraying into power generation. Unlike earlier years, several transmission and distribution companies, which were behind, have also announced major capacity expansion plans.
Ultra mega power projects (UMPPs) at Sasan in Madhya Pradesh, Mundra in Gujarat and Krishnapatnam in Andhra Pradesh are expected to be the next level of growth for the power sector.
Three UMPPs have been awarded over the past year but power sector has been unable to attract foreign participation. Prime Minister Manmohan Singh had few months back expressed concern that expressed concern that unlike telecom, electricity generation has been unable to attract foreign capital.
Experts feel that the coming year would see more and more companies moving over their core expertise announcing plans in sectors like engineering and construction.
Analysts put it in a different way. “Companies will start moving up the value chain,” they say. This means that companies which were earlier into executing smaller and simpler projects, will move towards projects with more and more engineering and technical complexity. “Larger projects will be the buzz word,” said an analyst.
With regard to urban and rural infrastructure, the government spending may further increase. Jawaharlal Nehru National Urban Renewable Mission (JNNURM) scheme, under which the central government is committed to pitch in Rs50,000 crore, will see further mobilisation. Total outlay of projects under JNNURM is Rs1,26,000 crore.
After being conferred industry status, the road infrastructure development companies have tried and tested the public-private partnership (PPP) model quite successfully.
Against the proposed 13% investment under the PPP model, the actual achievement has been 20% till November 2007. In line with common perception, more public offers, increased foreign participation and more dependence on technology are the shape of things to come in the infrastructure sector in the 2008-09.
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