$60 billion infrastructure investment outlined by Indian government for highways and road development; majority of funding coming from local and global developers

 

About US$40 billion will be invested by the Indian government to bridge road deficits. The government is depending on the private sector to fund the bulk of the $40 billion needed for the investment in its five year programme to clear the road deficit. The investment requires about $60 billion from which it expects the private sector to contribute $40 billion.

 

Indian Highways Minister, Kamal Nath said that the government expected other global players to bring in $10 billion for the government’s 20km-a-day road building projects.  The Minister was hopeful that the resources needed would be raised for the highways with almost two thirds to be toll based, raking in Rs 10,000 crore yearly for the investors.

 

At the same time, he confirmed that the Indian government was in talks with other multilateral agencies for soft funding of these key infrastructural projects. Commercial borrowing is also under consideration by the National Highways Authority of India (NHAI). The Minister added that resources were available from the NHAI borrowings, the World Bank and the ADB.

 

60% of the roads are to be built under BOT and foreign investors, particularly in the construction industry, are showing interest in the investment. The government has a target of 35,000km of additional highways under the UPA-II’s regime. The NHAI estimates that it’s per annum borrowing from the domestic and the international market will maintain at up to Rs 20,000 crore for the coming 15 years.

 

The government expects that foreign players in such infrastructural investments, even though on the periphery currently, would become senior partners in the coming years. It hopes that equity firms will also show interest in the infrastructural construction sector as India offers a huge investment opportunity for foreign and local investors given its 33% growth in the Automobile industry.

 

Highways will potentially offer huge investments options in the near future in the country.  Even though the Minister admitted that the project was challenging when compared to the UPA-I projects, progress will definitely be made.  As at now, the most important task for the government is capacity building with the aim of ensuring substantial amount of work in progress at any one time. However, the capacity of the NHAI to handle such large sized investment projects was an area of concern that the government Minister would need to address. Regardless, he exuded confidence that the contract for the construction of 12,000km of roads would be awarded this fiscal year.

 

May 29, 2010.