 |
 |
|
|
Monday, January 3, 2000 |
|
News
Supplements
Express Interactive
|
Business Inc Interview/Abhijit Bhaumik
`Our infrastructure fund will play developmental role with an equity function'Feedback Ventures, a leading integrated infrastructure development group, is catalysing infrastructure projects worth over Rs 10,000 crore. These projects include the International Model Township at Manesar, Haryana, the Nellore and the Kanpur bypass, software park in Mohali, seven growth corridors in UP, four-laning of the Chandigarh-Ludhiana highway, and a world-class residential township in Gurgaon. The group is also in the process of setting up the country's first urban infrastructure fund (U-fund), which will be launched in April. SWATI PRASAD talks to Abhijit Bhaumik, Managing Director, Feedback Infrastructure, a subsidiary of the Feedback Ventures group, on a host of issues relating to infrastructure development and on the U-fund. Excerpts: Then comes legal documentation. All public utilities lie with the government. For instance, there are a lot of legalities linked with building a toll bridge. There are several concession agreements involved. The government has to give a private company the right to levy toll and then protect this right. So tomorrow, if a trucker does not pay the toll, what laws will protect the interest of the private company? Then come the regulatory approvals. If you have to fell trees while undertaking a project, you need clearance from the Directorate of Forests because its illegal to fell trees. Moving high tension wires is another difficult and expensive task. Acquiring land is another crazy issue. Then there are telephone wires, rivers, canals, railway lines that come along the way if the project involves a road,bypass or a bridge. For these, approvals will have to be sought from the various departments. Infrastructure projects are essentially large duration projects and one has to figure out a number of complexities that can take place. These include natural calamities, riots, rasta rokos etc. So a project has to predict situations that may occur and safeguard against them. All these elements are peculiar to infrastructure. Project development has to take a project to a certain extent before executing it. The fund will do all this upfront work. The U-Fund will also participate in equity after the project has commenced. The fund will come out of the project only after it gets operational. I have tried to look for a similar kind of fund across the world and have not found one so far. It is probably not as relevant anywhere in the world as in India. Typically, the government should have played this role.But it does not have the skill to do so. And historically, FIs have never gone into project development. In most other countries, either of the three entities played this role. Since this hasn't happened in India, the U-fund assumes importance. Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
The U-fund, which is the first dedicated infrastructure fund, will play a developmental role along with an equityfunction. In any infrastructure plan, project development is the biggest activity. One has to first find out whether the project is feasible or not, whether a charge can be levied on the service or not...
We are talking to various insurance companies, banks and financial institutions to provide long tenure funds.
Very positive. Around Rs 30,000 crore is lying with financial institutions, banks etc for investment in infrastructural projects. Lack of project development to my mind is the reason why FIs perceive investing in infrastructure projects as risky.
The project will only deal with medium-scale projects of around Rs 100 crore to Rs 150 crore. It's a Rs 100-crore fund. So taking the debt to equity ratio at 2:1, we could probably do about 20 projects over a 10 year tenure, after revolving the fund every three to four years.
Governments don't differ across states. The problem is that policies are not in place. Problems and issues are project specific and don't differ with states.
Foreign investment is primarily flowing into ports and airport projects where the investor would get paid back in dollars. In the case of every other source, they would get paid back in rupees. The key issue here is that of depreciation of the Rupee. With a seven to eight per cent annual depreciation of the Rupee, the risks are huge. And that, to my mind, is the prime reason why its been difficult to attract foreign investment.
There are three kinds of bodies who can enter project development government, FIs and private sector developers. Project development involves high money risks. You incur expenditure on consultation, travel etc and if the project does not take off, the money goes waste. This is why private sector developers never got into it.
