Locked promoter equity in the stalled infrastructure projects has slowed down investments in the Public-private partnership (PPP) projects in infrastructure sector, informed a top Gujarat government official here on Friday. Experts expressed the need of fresh equity infusion from foreign funds to bring infrastructure PPP projects back on track.

At an industry meet, J N Singh, Additional Chief Secretary, Finance Department, Government of Gujarat said, “As per the Global Competitiveness Report of 2014-15, India ranks 87 in infrastructure. In the first two years of the 12th Plan, several indications suggest that infrastructure investment has slowed down and there is a likely shortfall of 30 per cent."

Shrinking promoter equity has hampered promoters' interest for such projects, thereby leading to de-growth in infrastructure projects. Slowdown in the infusion of fresh equity from promoters has led to over-leveraged balance sheets of key developers of such projects, risking the bank loans. A large number of delayed projects are also turning bank loans into non-performing assets (NPA), resulting into hesitation from the banks to lend for infrastructure sector. 

"There were 585 projects in the private sector and 161 projects in the government sector that were analyzed. Fresh equity from foreign funds is required on the equity side," said Singh at the conference on ‘Financing Infrastructure: Thinking Afresh’, organized by the CII-Gujarat NRE Knowledge Application and Facilitation Centre in association with the India Infrastructure Finance Company Ltd. and the Gujarat Infrastructure Development Board.

Ajay Bhadoo, Secretary to the Chief Minister of Gujarat and CEO of the Gujarat Infrastructure Development Board, expressed the need of financial intermediation through new sources like pension and insurance funds for such infrastructure projects. "There is an urgent need to bridge the gap by viability gap funding or equity support or by credit enhancement by facilities. There is a need to develop a vibrant bond market,” he said.

Commenting on the Government’s decision to constitute a National Investment and Infrastructure Fund (NIIF), Yatindra Sharma, past Chairman - CII Gujarat stated, "Infrastructure Debt Funds (IDFs) are also getting active in financing infrastructure projects - even under the Union Budget discussion, it has been indicated that India would be spending an additional Rs 700 billion or US $ 11 billion, on roads, railways, ports and other projects next year."

Government has also taken several initiatives to revive PPP in the infrastructure space including reviewing the concession framework, appropriate risk sharing mechanism, fast tracking decision making and increasing public outlay.

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