 Good morning everyone and welcome to this session on renewing infrastructure finance an important subject I'm Victor mallet the South Asia bureau chief of the Financial Times, and I'm moderating the session And we're very pleased to welcome two places from my left the minister Venkaya and I do his minister of urban development Housing and urban poverty alleviation and for parliamentary affairs, and he's going to be talking a little bit specifically about urban infrastructure and then over there on the Far left or my far left your right Rick summons who's head of the Center for the global agenda and a member of the managing board of the World Economic Forum here then Next to him Alan Davis chief executive officer of for diamonds and minerals of Rio Tinto of the UK and then Puneeta Kumar Sina She's founder and managing partner of Pacific Paradigm advisors a former senior MD of Blackstone and an expert on infrastructure Investment Specifically then then the minister as I mentioned and then next to me summit Muzumda the president of the CII the confederation of Indian industry and We're just going to have a brief discussion People will make a few points, and then we hope that you towards the end will will come in with with whatever questions or comments That you may have on this on this topic The numbers are very big India We know needs something like a trillion Dollars of inch of new infrastructure in the next few decades and a lot of that is urban Infrastructure as as I'm sure the minister will will tell us and the issue of course is how this the building of this infrastructure Is going to be financed especially we after some problems and obstacles that have confronted previous infrastructure deals And that have left companies in debt and some banks with bad loans as a result The latest World Economic Forum competitiveness report So India move up a respectable 16 places to at 55th But in infrastructure only up six places to to 81 And it was interesting to look at the biggest problems that business identified When it came to doing business in India because a lot of them actually in one way or another do relate to to infrastructure corruption policy instability which of course is very important for long-term infrastructure contracts Inflation access to financing again something we're going to talk about today and then straightforward Inadequate infrastructure and I hope we'll have time maybe to look a little bit at how India compares Not not just India's own issues and how it's dealing with them, but also how it compares with with other countries I happen to be in the Philippines the other day and the the finance secretary Was telling telling me that they have Double the infrastructure spending in five years in admittedly in local currency terms, but still a very substantial increase And he said they were moving from spending 1.5 percent of GDP on infrastructure to 4 percent this year and he said 5 percent next year so You know, it's not a it's a moving target. Everybody's trying to build up their infrastructures including countries that are competing with with India So I'm going to start with Sumit is going to just give us a brief sort of overview of the infrastructure issues in India as he sees it from the business Community point of view and and the financing needs. So thank you Victor Honourable Minister The panelists ladies and gentlemen a very good morning It is indeed really a great pleasure for me to be here this morning and Participate on as Victor said this very important subject of what refinancing of infrastructure projects Infrastructure development over the last 20 or 20 plus odd years without a doubt has played a Significant role in in the sustainable growth of our country So infrastructure without a doubt is the development of infrastructure without a doubt is paramount for our country to move forward You know, we can look around and see all all that has happened Look at look at the Bombay airport the Delhi airport the Delhi metro all the roads and highways that we see that have come up You know in the mining sector the reforms in the mining sector and I can go on and on all that that has been happening on Infra, unfortunately, there's so much that needs to be done on Infra that we seem to be catching up Not catching up and we just not getting to what needs to be done Along with this has been some of the problems that the infrastructure sector has been facing over there over the recent years and One of the prime ones that we will I think the panel is going to talk about is how Banks are overstressed with infrastructure funds 25% I believe of the NPA is are related to infrastructure projects and a lot of this is as this has happened Because of the ecosystem that existed in the in the contracts, you know, the dispute resolution system What how a contract should be executed whose responsibility was it to obtain the land whose Responsibility was it to get the clearances in the recent reforms that have been announced Lot of this has been addressed For instance now they'll be talking about a PPP model, which really hasn't worked They're talking about a hybrid between an EPC and a PPP or or an EPC in certain cases funding of stuck projects And you know various other reforms have been announced But the problem that still is we are faced with is the funding the banks are reluctant to loan the companies Most of the companies are unfortunately in the infrastructure space are highly leveraged and this is a concern and I hope By the time we are through we would have some Solution to these problems that the infrastructure is facing. Thank you. Thank you very much And thanks for reminding us at the start there that infrastructure has actually improved a lot I mean when I first came to India flying was a nightmare and now it's just like flying in any other country, you know Really good airports Efficient systems at the airport. So, you know, not not everything is is a problem. I think we must remember that I'm gonna turn now to Alan Davis to sort of perhaps explain a little bit how it seems from the ground when you're Somebody who needs infrastructure and somebody who makes infrastructure Well, thanks very much Victor and it's a pleasure to be here and honorable minister very good to share the panel with you today So Rio Tinto has been around for 142 years and you know, we have operations in 46 countries and we supply into many many more We need infrastructure to obviously transport our product to markets And we have a multiple of models and how we've done that around the world We have exclusive infrastructure where we financed off our own balance sheet We have multi-use infrastructure where we've aligned with multi lateral organizations and brought in, you know, the economic development potential of a country such as in Madagascar and what we're doing in Guinea Infrastructure, you know is is part of nation building and the mining and metals Companies that use infrastructure are part of that catalytic process of stimulating growth within a country So they can be an original user They can be a foundation user which actually goes to a couple of the points that we'll talk about Which is terms of the risk reward balance in terms of getting the infrastructure bankable but over The years we need transport infrastructure whether they be railways energy telecommunications, you know the whole gamut of infrastructure so we have You know a lot of experience in terms of being a user of infrastructure but of course We supply into the manufacturer and the construction of that infrastructure as well, which we've seen You know in India improving, you know with the road system and the like here at the moment. So from a private sector point of view, I mean clearly making infrastructure as we move into the next phase of minerals and metals developments required to continue to supply into the growth Now we are going through a period of oversupply of some of those commodities But the world will continue growing So at some point in the future not too distant future There will need to be new developments that require new infrastructure To continue supplying the metals and minerals that the world needs to continue developing So from a private sector perspective, you know the real focus is on how do you make that infrastructure bankable? So that you're not effectively renting the balance sheet of the mining companies you know to be a foundation customer and full financier of what is nation-building infrastructure, you know as countries grow And very briefly. I mean, what are the the goods and the bads about this in India? What what's your experience been? There are a number of states that are you know the ease of doing business, which I know has been quite a focus Has been quite facilitative where the rules are quite clear And you can use it and its multi-use for example, and there are other elements where there are an absence of rules as an absence of process which allows you to get visibility over Using infrastructure for 20 25 years, which is what some had said in his introduction Thanks Now Puneeta, how does this seem from an investor's point of view? Financially is it is it is it bankable to finance infrastructure in India? Has it been bankable? What what are the what are the issues that you see them as? It's just putting in context a little bit about the opportunity set in India for investors in the infrastructure space There's a lot of opportunities both for portfolio investors and for private equity investors in the infrastructure space But the returns haven't been commensurate with the opportunity at least in the past and the number of reasons for that the most obvious ones that we've heard even from others today is that a I think the a Lot of the corporates or private sector that entered into this space ended up taking too much debt And then finance some of their these projects and use debt in lieu of equity to finance the projects and now The projects have got stuck because of whether it was Land issues whether it was cost overruns whether it was dispute resolution not being speedy enough And so now they're facing these challenges that they are they become NPAs or are likely to become NPAs So there's no more funding available and the investors who invested in these companies and in these projects are stuck and their exit mechanism isn't there Unless these promoters are willing to sell at steep discounts So that's what has happened with the old investors But there isn't a lot of opportunity now for investors who come today And I think there's a lot of brownfield projects as a result of all of this distress That are available for sale particularly in the road sector and other such sectors And if the sponsors of these projects are willing to take steep haircuts And write off some of their these projects on their balance sheets then the new investors are going to be able to see in a pretty decent Eels of about 15% or so and these are operating assets that can be transferred To new investors, so I think investors coming in today Have opportunities to capitalize and make money and returns and also that one of the issues that The banks have faced and lending to this sector is that the cash flows from these projects We're not matching the repayment of interest Or interest payment schedule, but now that has also changed so earlier It was really short-term debt financing long-term projects and now The new regulations allow for 25 years of Repayment before you know you actually have to classify something as an NPA and you have every five years You can refinance it so I think a lot of things are happening today That will make it possible for new investors, but the old investors have bad memories. They have been Have seen a lot of pain and therefore unlikely to invest a lot more today Now I also wanted to put in context a little bit about from a portfolio investor perspective Which is what I focused on there are the number of listed companies in the infrastructure space is actually phenomenal I mean you have companies listed in shipyards your companies listed in ports You have construction companies listed you have Airlines you have airports You have you know just pretty much across the gamut and that's that opportunity set is bigger than what you say in many other Asian countries however India these companies are at much earlier stage of the development versus Companies similar companies listed in China Malaysia Thailand You know China has a number of toll road operators listed where both private and public equity investors and Western But these are operating assets and give you know pretty good yield in India Most of these don't have any yield to speak of similarly airports Indian airports, you know just Relatively new in China and in other countries including Singapore and you know you have airports that are you know Giving very good returns and therefore commanding higher multiples. So India's infrastructure Opportunity set has much more upside than other countries because those are more mature But they don't have the yield and the returns and therefore I think there's a lot To be desired. Thanks very much. Just one quick question Is there a danger that these new investors will not want to get involved in brownfield projects that are sort of in a morass of Problems and will instead want to do something totally different and that will then leave these kind of unresolved issues Or are they very much going for those brownfield projects because they're potentially cheap, you know if they can persuade Which which of the two I think it's a buyer's market There's a lot to choose from there are a lot of projects on sale a lot of operating assets on sale that are good and There are fewer buyers today, but I think if they get 15 to 20 percent Yield they will be happy to buy these projects. I think I'm hearing Transactions are happening. There's a lot of interest Coming the kinds of investors are somehow different. So I think the new investors are more sovereign wealth fund pension funds less so the private equity investors who've already burnt Their hands on you know the old projects and we're waiting to monetize some of these So there are a new set of investors that are coming in which Who have a longer term horizon and I think You know most whether it's portfolio investors or private equity investors the fund size a fund life is about seven years So you need more permanent capital type of structure to invest in Infrastructure projects in particular and those kinds of funds that have those Indefinite life Will be the ones coming in and that includes pension funds and sovereign wealth funds. Thank you very much We've heard a little bit about China. I mentioned the Philippines I mean Rick is this kind of conversation. We're having is this similar to conversations in other emerging markets Or is is India uniquely focused on infrastructure? This this conversation is absolutely occurring in parallel In many many parts of the world I might add developed as well as developing even developed countries don't quite have the public private framework Right in many cases including my own country the United States, but maybe to add a few Concrete elements here about the international context It's it's clear that this is the biggest part of the sustainable development goal agenda that requires financing It's equally clear and increasingly recognized that the numbers are so large both covering Greenfield and Brownfield that it the old model which was primarily a publicly financed model will not be sufficient and every country is grappling with this core question of how to create frameworks and incentive incentives for the more efficient blending of public and private capital at both the domestic and International levels and the international community is beginning to mobilize in a much more concrete way in parallel to the steps like The Indian government is taking domestically in this regard just to give you a couple of concrete Illustrations in this regard the G20 itself last year in its cycle Decided to create an information hub that we based in in Australia And this is an attempt to create a set of best practice frameworks metrics regulatory Policy models that can be more easily scaled So the learnings from one region and for what works on the public private side can can be moved And people don't have to reinvent the wheel in various different countries That's an important potential development The World Bank has is creating this thing called the global infrastructure facility It is basically an attempt to to Marshall and coordinate the here-to-forth two disparate efforts of the various multilateral development banks To to combine their expertise their technical assistance and even some of their financing on big and complex infrastructure projects Even those two things while they're important We think from the forum standpoint still misses a big part of the problem which is connecting the investment processes of a range of different of private financial Institutions along the investment chain whether you're talking about the intermediaries the banks Or you're talking about sovereign wealth funds pension funds insurance companies that have good Good opportunity on their balance sheets to match with long-term infrastructure assets both domestically and In developing and emerging countries and internationally And so what we have been doing in the last year or so and this will be announced more formally in Davos is Helping to structure two important new pieces of public private financing International architecture that can partner with countries like India that the two pieces are the following one is What what is called a sustainable development investment partnership? this is if you will a coalition of a range of donor governments and there are about eight or so donor governments so far Building a range of emerging and developing country governments a Spectrum of banks and other players in the private investment a chain We have four major banks in this regard and a some pension funds and we're talking to sovereign wealth funds as well All of the development all the multilateral development banks And this is a club or a coalition if you will that will take a look at projects that are not quite bankable That come up from countries like India That need a bit of risk mitigation that need a bit of of capital structure Stacking if you will to get to the right risk return profile in order to access where the big money is and that is in the Institutional investors the pension funds and sovereign wealth funds etc That's one part of it the second part is an electronic platform that the Canadian government in particular is funding to create an electronic Portal if you will that helps to layer the appetites the risk appetites and investment appetites of various types of investors and link that with the the PPP pipelines of various Companies and countries so that it's there's an easier way to sort and match potential interests Again that the point here is between these two things one is a passive platform to match interests public and private and one more is a working Partnership to begin to mobilize much better across the international community the public private packaging of financing for for Infrastructure now this has great potential I think in here in India because you've got a you've got a situation that's mobilizing here There's a there's a big effort here on renewable energy Where the government is putting together and we're trying to provide some support a clean energy alliance Which I understand is being discussed at the highest levels of government right now and similarly on the water side I can talk about that a little bit later As well as urban infrastructure, so I think the main message. I just want to end with here is that While the domestic work In the enabling environment is the sine qua non. It's the absolute precondition For for scaling progress on urban and power and other types of infrastructure getting that Financing public private architecture and cooperation right is important as well and that there's movement in this area Thank you very much Now we're going to turn to minister. Naidu here We are in one of the world's largest mega cities and for some reason whenever the world economic forum comes We seem to have a terrible outbreak of smog. I think it's the the time of year But obviously there are huge challenges that you face you're trying to build I think a hundred smart cities and In you know with with probably not enough money to do what you need to do How are you going to go about meeting that challenge and what are the issues that that are your priorities in terms of urban infrastructure? Since the formation of this government The focus is more on development and good governance that apart as we have realized that this Urbanization has become a reality and more and more people are moving towards urban area The government is focusing more on urban infrastructure In the urban infrastructure, we have full few projects. That is one is the smart cities to act as a lot of light houses for Other cities to follow then we have some 500 Amru cities also where Urban infrastructure is going to be upgraded and the better Civic communities are going to provide to the people and the third major program is housing for all by 2022 and one small program is Developing some heritage cities. What we find is that What is required and the government is working on? Three yams. One is the mindset The mindset has to change second is the models We have now plenty of models successful stories then the mechanisms World over now that There are a lot of good practices and experiences and India in the recent past were very clear with this government That we have to open up. We have to allow private participation also in a big way and then Government believes in public private partnership model one. Secondly, we are also liberally allowing foreign direct investment also into various sectors and thirdly Change of mindset is happening among the urban people because they want to have better living conditions Better living conditions are possible only if you have better infrastructure be its water be its sanitation Be it solid waste management be its transport The government is focusing on all these major areas. We are also coming with innovative projects like waste to energy We are bringing a policy on that waste to compost that also we are going to mandate make it mandatory if you want Urea you take two bags, then you have to take one bag of compost also There's going to be subsidy for this also in sure you to start with similarly the Is of doing business my colleague a finance minister might have debt with that as for the urban development is concerned And you want a foreign direct investment and you want private investment the question people ask is of the time That is consumed for getting permissions and approvals. That's one major area of concern after I took over as the minister I have Studied this subject and then I had so far four meetings with my colleagues and recent We had the fifth meeting by November 30th We will be getting sort of a notification by the government about easy approvals because even to construct a tall building in Hyderabad or Tiruvannanthapuram one need to come to Delhi for getting permission from the civil civil aviation authority We are going to do with all those things civil aviation ministry urban development ministry consumer affairs ministry Environment ministry defense ministry and culture ministry. We all sat together We have discussed the water the permission that are required and there is like to be Like a single window clearance, which is in the offing by the end of November that is a deadline We have set for ourselves broad homework has been completed one that it comes into operation the problem of this Belies in approvals that we've addressed to the second problem is about The end of the day we are a three-tier system in our country's central government state government and urban local bodies Three of us has to work together the central government Frames broad policy guidance the state government is the monitoring agency and Implementation with the urban local bodies now what we have found the urban local bodies capacity has to be increased That's being taken up on a massive scale. Secondly. We have also decided to convert this into a special purpose vehicle for each of the cities For different projects so that there is a focused approach going by the earlier bitter experience of PPP model This special purpose vehicle have been thought of in certain areas It's doing really good and whatever challenges that are coming up the government of India Had a three meetings with all the municipal commissioners across the country may have selected representatives Sensitize the states instead of the local bodies reference of the World Bank ADB They were also there and then a Bloomberg the former mayor of New York and team his team has come here. They have also sensed right one of the challenges in urban development But we saw it's a smart cities all these are being to address to the government of India has set apart around a 50,000 Crores to start with for these smart cities that money will not suffice. I'm aware of it The states also are going to provide a matching Equal amount, but at the end of it you need a huge amount of money that has to come from the market National market international market the advantage we have today is There is no confidence Because we have an able leader and also a stable government some of the reasons for the bitter experience earlier about the Some of the people becoming a non-performing assets banks not willing to lend them further was because Decisions were struck at various stages I don't want to appear to be political because they're in decision inaction a Timely inaction that has really didn't cost overrun and also some of these projects getting struck Otherwise if you see the same projects during a very wise period in fact, he's the He was the initiator of this Infrastructure politics in the country that it is airways or National highways or the rural roads or the ports or the or the telecom revolution He brought in that connectivity revolution now This government is keen to take it further and whatever hurdles are there in that the government is willing to address them Also, as far the housing is concerned. We have allowed FDI. We have also relaxed the norms of FDI Then we have also given certain income tax construction for individuals also now my ministry has come with a new policy For the affordable housing the government will be providing six point five percent Interest subvention as I know the interest is somewhere around ten percent ten point two five percent for the housing sector If the government of India is going to I hope that it will come down further. I've been persuading my colleague But once you the economy improves Which is improving also then only we'll have that cushion of Reducing the interest rates. So the six point five percent interest subvention And allowing private sector to participate in a big way and providing safety wall for the consumers through way of Real estate development bill these are the some of the measures which are attracting a lot of companies lot of foreign companies are Even seeing interest. I have met at least 25 to 30 Foreign country delegations and also embezzlers who are keen in participating this smart city project whether it is metro whether it is in BRT transport are in water supply are solid waste management people are showing interest I'm sure it will catch up further in the coming days Thank you very much there obviously Big opportunities as you say the government and state governments and everybody's been trying to clear away the kind of bureaucratic obstacles To getting things done to getting infrastructure done I'm still a bit unclear as to how you're going to actually attract the private sector money You mentioned subsidies for certain for interest rates subsidies for example But how are you gonna actually get the private sector whether it's foreigners or whether it's Indian companies to come in and invest and and How does this SPV system actually work? Does that mean that the government puts in money and then the private sector puts in money and then how are you actually gonna Can it draw them in first time? I'm going to allow these urban local bodies to use money given by me as a seed capital So that they can get finance from the banks and also a little bit attraction because without money Urban local body coming into the plan will not survive. We are also sensitizing urban bodies to make them Aware there is a need to bring reforms with regard to Clearances with regard to transparency with regard to accountability more than anything else We are sensitizing our urban local bodies to become credit worthy Credit worthy so that people will have guaranteed that the money will be paid back earlier The system was everything will be done by the government now people are realizing that they have to pay for the extra Services they are getting at this model is successful. I can assure all the investors There is a clamor for free or subsidize everything, but you also have examples like Gujarat. There's no free power But there is there was a shield power 24 into 7 people are paying happily and there is a shield power now and such a Now the mother place is following the same chest is that is following the same Rajasthan is picking up one good thing That is happening in respect of political color different states. They are all now trying to Work and then keep up this momentum. That's a positive thing in India which was a little Missing or disturbed in earlier Rajasthan and all now there is a new awakening people want this development in their respective areas Also, that's why there will be Coming forward to pay service charges user charges one secondly The models like the models that are there in certain parts of the world are certain parts of India They are also making the people to believe. Yes, this can be implemented in our places. Also. Thirdly, India is a huge market There are great opportunities and there is a there is a leadership at the center, which is very clean to keen which is very keen to Focus more on ease of doing business business for what for them profit for me also the economy will improve It will revive and the country spends purchasing power also increase unless you increase the purchasing power of individual Whatever infrastructure we create it will not be What you call they will not be able to get the required returns So both things are happening and if you if you go through what is the World Bank saying or other Agents are saying India is going to grow between seven point five to eight percent in the backdrop of a world economy Looking down and China also being little Negative so there are great opportunities India and I am sure that the companies International companies are the domestic companies. They will be enthusiastic They are enthusiastic in fact and they are showing interest and they will all join this momentum Thank you I'm submit and feel free anybody to button, I mean There seems to me there are two sort of broad issues here in in attracting finance for infrastructure the first one is the overarching problem of Confidence in the government and the minister mentioned problems in the past where people had lost confidence in the state So obviously that needs to be restored Is it you know, I'm going to ask you is it being restored? Do people have sort of overall confidence that the government is is on is on the right track and therefore that they can invest But then there's the more specific nuts and bolts issue of the kind of actual investment Structure or the way that the money that the way that they can make a profit essentially the mechanism through which they can Invest profitably in infrastructure on both of those two issues How do you think India is doing now 18 months into the Modi government as far as the infrastructure space? Let's let's look at the roads and highways In the previous regime what happened was the contract would be issued Whoever took the contract would have to get the land would have to get all the clearances So the delays were absolutely unpredictable and that meant cost overruns That meant all the problems that got created now what the government is doing is what they call letter of Appointment of I forget what Loa Award letter award when 90% of the land is being acquired before Giving out the contract so so you know the reason for delays are being addressed and this I believe is a huge step The government has done and they've even gone to the extent of for letter of intense They will get 80% of the land before they give it So this has been addressed very largely and this is building the confidence what what the what the What the investor community is really other infrastructure building community is really now Grappling with is how to do the funding because of past sins or past ailments or whatever you call it That's the issue, but I have a question for the minister if I may of course Sir, you know in your urban infrastructure building the same issue about land and all this Will that be taken care of by the government or will the developer would have to would have to tackle that Private developer the private developer has to purchase the land from private people That's what has been happening and happen in future also if it is for the government projects The government has to acquire the land and in this instance It is the state governments, which will be acquiring the land as for the urban infrastructure particular housing is concerned land is an important component and because of the because of the Social impact the state governments also willing to come forward to acquire land as for the housing is concerned and other projects of course there is a big debate going on in the country as You rightly said now the one advantage is earlier project used to be Sanction and then subsequently you have to go for land acquisition and all for years together spending But now that will not be the case. No money will be struck. You know any project secondly as you rightly mentioned One is acquisition of the land making it available Second is as I told you ease of getting approvals. That's one area of concern That's being addresses seriously and as for the states are concerned morning. I had a meeting with the Maharashtra chief minister They are all very keen in other place chief minister Tamil Nadu chief minister But not Karnataka in not one party or other. Everybody is keen. They are all encouraged by my interest subvention scheme for The affordable section. They're very happy about it And and I also give liberty to the states if they want to alter the project and add something more Earlier it was not allowed now. He said I will give this much whatever you want to add add whatever you want to alter I'll tell also that also is now liberalized that way. They're very happy The government is proactive in addressing the problems because we don't differentiate between public sector and private sector Earlier unfortunately in this country private sector means as if You are giving away national asset to somebody else that mindset Well, I don't say cent percent. There are still some people who believe in that model But majority of the population over the majority of the population have reconciled to the reality that we have to erase this difference between Private public or private and so-called public this thing and all you have seen the examples of airports Which have come in various parts of the country? You have seen the national highway project also You have seen the ports some of the ports. I might from my place small place Nellur There is a Krishnapatnam port wonderful things are happening in a Krishnapatnam port So there is there are success stories and I am sure in the urban sector also because Area is limited You can manage it but in a better manner and then you can also Oversee the returns how it is going to come and all after proper assessment of the project I don't want to sound like the spoil sport But for a linear infrastructure project like a road is 80 or 90 percent enough I mean we had this problem. I seem to recall that the road to Bangalore Airport You remember for many years was delayed. I think because there was one Property owner that didn't want to sell am I right? I forget the details, but You know in a sense it unless you've got a hundred percent of the land For anything like rail or road It's it's not going to be enough because you're still not going to have the confidence in the current system Or is that is that unfair? You know the way I'd react is from a zero to 90 percent is huge And and the 10% I'm sure they'll find a solution because the states many of the states have the acquisition rights also You know if 75% of the land is already acquired then they have the right to acquire the balance 25 So there are states which have that rule. So I'm more bullish about this now Then I was a recent past the Prime Minister has agreed to give all these powers of land acquisition to the states because some of the changes Just wanted it also the power the Nithya yoga planning earlier planning Commission There was a discussion and most of the GM said we're going to leave it to states PM said I'm willing to do it That also is best up in the direction of There's work that's needed on both the risk and return side of this Particularly in a country like India where you know, it's a lower middle-income country So for a lot of the projects the given the income levels of the population You're you know an outside arms-length investor looking at this as they might look at a developed country prospect may not have as as big an appetite and so not only does the Domestic enabling environment need improvement as we've been discussing thus far, but the development banking industry or Organizations that enabling environment has to adapt to better serve countries like India and limit Let me explain more specifically in this regard part of the risk problem is in the preparation of the projects and many state Governments not just in India, but around the world don't have extensive Internal capacity to prepare these properly. This is exactly a type of grant financing from the development banks Where they should be focusing activity have a very good bank destruction and property so that you have a better chance of receiving a favorable audience from a private investor second of all the public Institutions both the government's domestically and these international financial institutions that are basically taxpayer institutions as well They can be much more efficient in the way they use the capital by taking the upfront risk to a larger extent Let me give you an example again invoking Australia. I'm I'm assuming you're Australian. I'm not exactly sure so his government recently decided to optimize Better its use of funding by basically recycling some of the mature projects that are still on its balance sheet Selling them off to the private sector getting more financing available to take on the risk that only the government can really take properly The front end of the construction Process similarly these the World Bank and the multi-level development banks instead of just lending and holding for a long period They could do a much better job because they have a relationship with the government. They understand the risk better that the governments are much more hesitant to get into a Non-performing situation with a with an official institution if they again took the upfront share of the risk and then recycle their portfolio syndicated it out because Recycling you know refinancing risk is a big one for a lot of investors and then third and lastly There are philanthropic institutions as well as donor agencies that are prepared to provide soft lending or even some grants to Basically change the return profile in a way that makes it more interesting For a wider variety of private investors the forum in its global challenge initiative On long-term investing infrastructure and development basically is trying to work with other parties to get this International enabling environment better so that the international community both public and private can be a better partner with countries like India The last thing that's required though is for the countries to get specific and that's what's encouraging here Is that in the water and sanitation area? This is a big area where there's potential appetite for investment But what is needed is a specific effort in this regard to build a pipeline of projects and the same thing on the on the energy side Specific effort in the sense of laying out exactly what needs to be done and more than that Building a pipeline of project preparation. Yeah, yeah, that that produces some concrete propositions But again with not entirely relying upon itself bringing in the private sector bringing in some of the technical assistance That that donor funding can support a penny to you and it says yeah I think what you said is actually very right and we're seeing that happening in India that the government is actually now stepping up spending So from being private sector funded now We're seeing a lot of the new at least particularly in the road sector being funded by the government and the private sectors only doing EPC and that's exactly because they don't want to take on the risk of These other issues and either do they have the capital? So the government has to Step up in the middle and they're doing that effectively at least there's a lot of road projects that are underway and I think the private sector is more likely to invest in mature projects particularly the operating assets and I think We are going to see a huge amount of MNA activity in India in the infrastructure space where a lot of investors are going to Pick up brownfield operating assets than the many of those where the project is actually sound It's the sponsor Who's not sound and so the sponsor is going to have no choice but to monetize sell those assets They're all capital starved and they will not get any more funding from the banks or any other institutions So I think in the near term and this national investment Infrastructure fund is a step in that direction as well I think that's going to also step up the public investment along with you know partnership from other sovereign funds I'm going to open to the floor in a minute. So if you think of some interesting questions Well as the minister or the other panelists, but while we're on this this topic. I mean where what kind of Structures is India going to end up with I mean is the PP is the basic PPP model completely dead There's all this talk of BOT hybrid of PPP hybrids annuity models EPC as you said, which is essentially the government just handing out a contract and the private sector doing it You know what what? Where are we heading to I mean I noticed the other day there was a road project In Himachal Pradesh, I think just a 23 kilometer stretch of road and there were no bidders for the Project under I think this was a BOT hybrid or something so the there was an element that was I Come over his operations of maintenance But anyway, there was a it was a sort of new attempt to set up a hybrid model that was better than the old PPP model But what do you think we're going to end up with in in in India? That's going to work essentially If I Have to clarify this This was the problem in between In between yeah, initially all these road projects BOT annuity or EPC all of them were successful in Because of indecision lack of policy direction in between certain project gets struck and there were no bidders for as many as 11 Highway projects not even one bidder earlier. There used to be competition people used to come recommendation also to politicians Etc. Now the situation has changed. I can share with you during the course of this 15-16 months of this government in every cabinet meeting there will be two or three road projects approval or a Power project approval or a port project approval and whatever concerns were there of these people investors were are the Contractor-ceiver executors. They are being addressed to by the cabinet. We have relaxed most of the problem Whatever is there now it's picking up people are coming now forward and bidding for many of these projects also And I see a new enthusiasm among the people which was evident in the early days of 2000 when the Vajpayee was the prime minister and all so I don't think that will be major problem models of course they may vary depending on the success and also the location of the project and also the Viability of the project that has to be studied varies from project to project Main thing is the government is proactive the minister is waiting Earlier people used to feel shy to meet contractors. They may meet in the evening, but not do it now There's no problem come meet discuss and then decide because there is a green signal from the top Privacy is very clear. He wants things to happen. The interpretation is Modi means Maker of developed India, so do whatever is required. That is the that is the guidance from the leader I'm not trying to boast my leader. I'm telling you I have experience. I've worked with Vajpayee's government I worked earlier in between as a position also now in the government also I am seeing how to address the concerns or the challenges are the problems That's the favorite area of my prime minister. So he's sitting don't come with problems come with solutions also That's what the cabinet is discussing Normally, we are not supposed to discuss and they was what is happening in cabinet, but this is how this is how we are moving So you might be approving the odd project this afternoon at your cabinet meeting. We hope Anyone else want to say anything on that issue? Looking at experience around the world. I think it's very important to understand exactly what a government Is trying to get out of a particular piece of infrastructure to pay off for a government on economic development and growth is huge and It's very uncommon to actually measure the contribution for that infrastructure You know in terms of GDP growth because the taxes that come from economic activity Do actually I know there are some commentators in the United States that say we can borrow You know a hundred percent of our requirements for infrastructure and it pays itself back over time because of the economic activity that it generates So the other important aspect to look at is where is the source of the cash from the return coming from is it actually just a Disguise transfer from a government risk balance sheet or does a user pay So is it a electricity where a user would normally pay or is it a toll road where we've seen some communities here Not wanting to pay the tolls so that particular way of accessing the return for the private Participant you know is actually then the government balance sheet So then what does the government get out of introducing specialist operators or maintainers or whatever? It's actually importing world's best practice So there's another return arbitrage that governments get by having performance structures in place that actually require a foreign bidder for example or an Indian Company to perform at world's best standards, which then you're in a virtuous circle of economic growth Again, so understanding that and then they need to each moral Which is why airports work. Yeah in India because they have to work. Yeah or transport systems Yeah, you know that again Australia did you know under the Victorian government? You know decades ago Thanks See, you know infrastructure is a big big space So their pockets that are doing well like renewable energy etc. The pockets that are not doing well So you you can't really use one brush to paint the whole sector. Well, maybe we've got some investors here So anybody who has a question or even a comment If you don't mind just saying who you are and then I believe there's a beer microphone. Yes, there is a microphone So any two microphones, so anyone have a question for the minister or anybody else? Yes, gentlemen here The question is for mr. Sammons. Just tell us who you are if you don't know my name is Sunil Parekh Have you classified the types of infrastructure projects under your model? Or do you want to have a broad macro solution for all kinds of infrastructure project? Is that for Rick? Yeah. Yeah. No, we we not We've not classified all these infrastructure projects and what we were really trying to do is just Create a structured platform for The parties to find each other and to self identify their interests and hook up their investment processes We have done a series of analysis about what are some of the impediments to better infrastructure? Both the operation planning Maintenance and financing, but we have not done what you have just described Which is to get into a classification of different areas and types Somebody else anyone else have a point or a question? Yep front row here. Yeah My question is to mr. Naidu. My name is Anamika. I represent Hitachi and with my manager Mr. Nakagita son As you know a lot of investments are coming from globally into India and especially on the infrastructure come Multinational like Hitachi and many others want to invest in the country But is there a specific model in infrastructure that we can follow so that you can have a win-win strategy on PPP because the challenge has been there are delays as It's are getting Becoming NPAs, but the worst situation is there's a lot of organized chaos going on I would congratulate you mr. Naidu for creating some sense of sensibility, but honestly multinationals get very confused. So what is your? You know Suggestion to multinationals and what your government is planning to do so that the PPP model and the hybrid models become a Reality rather than a lot of talk. So things are better, but they're not yet Perfect or where you'd like them to be in terms of the model even perfect We are going in the direction as he rightly said it's 18 months But on ground to see real things happening which we can follow replicate and make it happen as a success Is something which we are still speculating. Yeah, are you are you able essentially to create a? Certainty in the minds of investors that the model is there. It's fixed It's gonna work and it's gonna work beyond the life of this government obviously because the issue with infrastructure is we're talking 20 years and the Impression Are the perception? Cannot be changed overnight, but fortunately in this short video itself The impression and perception has changed if you have seen the World Bank rating if you have seen honest and young Assessment also if you have seen even the economic forum study the other day and all Perception has changed radically in the about the country because people can invest Secondly with regard to models some beginning has been made Unless you move a little more further you will not be able to have many success stories Some success stories are there in particular models in PPP model in annuity model or in a beauty model In other models there are success stories, but we are still they have to go a long way. We have Really opened up really opened up in a big way one in the recent past as You are our friend of panelists was resisting Unless you improve the economy of the country Viability of the projects or whatever initiative you see take people must be having the capacity to pay Pay back the government is first on priorities trying to One change the perception create a project for favorable environment and thirdly Revive the economy in big way. Please try to understand what we have inherited fiscal deficit revenue deficit trade deficit current account deficit above all trust deficit now These deficit have been addressed now the confidence has come up and the market also comparatively showing up in the international Community also showing interest, but it will take time because a huge country economic disparities also are there There are people in the lower state of society. You cannot expect them to pay immediately for the services so for that I have a differential rate of Service charge also for the poor up to a particular level I may give free or I may give it a little lesser rate for the rich and affordable people who are drawing more water Drawing more power and then suppose even on the road a truck a truck has to pay more Whereas the bus compared to less or a car less and then tractor I made it free because agriculture is cannot so like that There has to be granted system what I am suggesting to say is it will take a little more time for the people to realize What are the? Paca success stories where they can bet in this sort of thing for example ring roads Ring roads across the metropolis in the country. They're a huge success Ring roads you understand about the ring road Across the city of either Surat or even Hyderabad or even Bangalore also. They're getting huge Revenues also one and secondly The recent initiative of the Prime Minister why he has come up with a new program called a missy DC We see this is the name given by me, but program is Prime Minister. Yeah, my make in India Yes, I skilled India. Dia is digital India see I clean India this digital India Why why are you are going to computerize all the services? The filtherage is going down and the revenues are also Increasing by this method also lot of foreign companies are coming with the new apps And they are also finding it that this is a interactive thing Attractive thing and my ministry is also going to fund this digital project process also in a big way to all the urban Local bodies and all slowly one after another we are trying to address these issues It will take a little more time ma'am to say these are the successful projects and all that takes some more time I guess one of the problems is it's not only the central government that needs to inspire confidence You've also got the judicial system. You've got the the state governments. They're a democracy Absolutely, I mean the other day the I think the Supreme Court It was ordered the collection of a of a toll for trucks coming into Delhi Essentially to make them go around earlier not come into the city to help with pollution But the toll operator and I don't know if that was a private sector toll operator I presume it was said they couldn't do it. They didn't want to do it I mean I suppose partly because if they start living that toll the trucks won't come through and they won't get any Toal at all. They weren't let alone the the fee for the the environmental fee, but anyway, so it's it's never easy Yes, there's a couple of questions one the lady back there and then the gentleman here. Yeah So you spoke about sorry, can you just briefly introduce us? Representing the wef global shapers the young shapers community You mentioned about the need to empower urban local bodies I was hoping if you could throw some a bit more light on the specifics because as we know with the new economic survey and Devolution on the 14 finance commission has been a greater devolution of funds to states But again the money that actually reaches the urban local bodies or Pinchart's is determined by the state in terms of the specifics So how are you trying to get a sense of competition and cooperation? In urban local bodies in country, especially like China where we talk about the large-scale infrastructure development You know the mayor system which which is very competitive has you know has has been a key reason For growth of large cities and so on so if you could just absolutely I mean every time you go to an Indian city You think what the city needs is a mayor to get things done. Is there any chance that we'll see a powerful? Municipal body or leader in India was it? I know the structure isn't there yet But is it possible that we would see that in the future you can't compare Indian system with Western system where? For example mayor of New York has the police force also in India. We don't 73 and 74th Constituent Constitution amendment has mandated 29 subjects to be devolved to the urban local bodies Unfortunately, it has not happened fully. It has happened partly now What this government have done is we have straight away? Central government money if you have 100 rupees 42 rupees go to states Five rupees go to urban local body two rupees goes to natural calamities So the urban local bodies first time are getting directly Directly funding from the central government into their account earlier The money used to go to states and states were not passing on to the local bodies now that has been taken care It's it will be it has to be in a dedicated account and that money has to be spent for a particular purpose That's one thing secondly the prime minister believes that what sort of a city they want It is should be left to them. He said don't prepare a prototype of thing in Delhi smart city means this What are the parameters you decide? But what are the priorities? What sort of facilities they want in that particular city? They did that do they prefer metro do they prefer a Tram or do they prefer some other? Transport mode leave it to the city consultation involvement of the people in planning of the city development and Choice of the facilities they want it is entirely left to the cities now for the last one year I am engaging with the urban local bodies mayors and other people to explain to them This is the new thinking and the part of the government of India. You decide what sort of a smart city you want You decide what sort of a Amru city you want and come out come out come up with proposals. This is what I am offering This is what I am offering. This is what we are doing and I think our local bodies are we have to go a long way And you compare with the Western countries where they have more powers, but here slowly some beginning has been made Thank you. I think gentlemen. Yes With the glasses just there. Yeah, so it's coming My name is SK Jane from South Asia gas age. We are developing a transnational gas pipeline project I was one I wanted to ask minister sir Why a pipeline oil and gas pipelines are not covered under fully under infrastructure Only here of roads and bridges and Verify whether pipelines are also under infrastructure So what why are you saying? Why are the pipelines not government infrastructure? I don't know the answer Yeah, this is a question. It has to be pointed over I will convey to both finance minister as well as Petroleum minister also it's a relevant question because that's really one way. It's an infrastructure But whether it is categorized or need to be categorized. I'll discuss with my colleague Thank you I'm responsible for the government business for Tata consultancy services my two questions are for the honorable minister first, sir, there is Rapid slum development in urban cities in India. I wanted to understand your perspective about using prefabricated technology for rapidly redeveloping slums That's the first question What are your thoughts on that because you know one of the crucial items is time time to outcome The second question is that under your ministry and your leadership. Are you providing some? Technological support to the municipal bodies around the country so that they can have a common IT system so that the service delivery levels of Performance to the citizens can also be even rather than everybody discovering their own and the evolution taking forever These are my two questions to you, sir information technology is one area. My ministry is going to Equip the urban local bodies where I'm going to fund also just now. It's said about digitalization Oh, etc. The second one is with regard to slums slums are coming up in a big way because there's migration People are coming for education employment and retirement economic activity to cities. These are the five reasons We the question you asked about this free fabricated housing, etc. The idea is good I mean interacting with the number of companies but in urban areas question is of a Scares available to a land so one has to go vertical in the slum Because the number of people living in the slum are more and you cannot have independent houses there But if you go vertical about this free fabricated this thing PM recently sent one gentleman to me from China He was telling that within 29 days. He could construct some 32 floors of the building 29 days 32 floors And in India also some companies have come forward saying that we have a Technology where we can go for multi-storied also that has to be first of all Experienced by the people there has to be some pirate projects with regard to multi-storied buildings through free fabricated material They know the public will be convinced, you know the mindset of the poor people They feel by this free fabricates means this may not be secure and all but I'm inclined I'm inclined to use free fabricated material because that will solve my problem of time consumption I have a huge task 2022 housing for all in urban has itself my shortage around two crores in the rural area It's four crores. So altogether six crore houses to be constructed in a matter of seven years So that being the case one option is going for new technology and free fabricated houses and My government my department is going to give permission for the This sort of houses also wiring. They can get this interest of mention Thank you. I'm afraid we're running out of time. So we could have one more question, but that's it unless I think we're we're done I just want to Round it up by asking which I think what I think is an important question that we haven't really addressed which is the Maybe each of you can look at it and then maybe you know draw any conclusions you've had from our from our discussions But that is how important Is the development of financial markets? For this because obviously one of the problems is that is the lack of long-term financing in particular You know, we've heard a lot about the importance of international financial institutions like the World Bank and the Asian Development Bank But obviously I would guess that what India needs is the development of a big pension front industry and then you'd have less of a mismatch between the the needs of investors and the The companies that are doing the infrastructure building Maybe start with you Rick and and any other conclusions you want to draw We're having a discussion about this in the in the regional business council community here yesterday and My understanding is that there's about a trillion dollar need in financing for infrastructure between now and the end of the decade or so Which probably a quarter of that would be equity three-quarters debt seven hundred fifty million or so in debt now I It's it's my understanding that the total outstanding corporate debt is about a hundred and sixty or seventy billion dollars So you have a scale here. It just makes your your point It also makes my earlier point that it can't we got to look at this internationally You know, we have to optimize the allocation of cap. There's a lot of capital sitting on books in northern funds Searching for yield searching for yield in this very lower. No interest rate. No yield environment But but the long so I look at this in the following way that that international dimension is almost like a bridging strategy The world needs to move in the next 10 or 15 years. We're not going to develop a deep and liquid So capital markets in a lot of the key So you use the foreign investment first and then as a bridging but very importantly the the the ultimate Solution to this financing puzzle this public private financing puzzle is in fact for both governments like India's and the international community to mobilize more quickly in the development of Domestic capital markets in various dimensions to your point Alan brief concluding comment from you on that or any other issue That strikes is important. Yeah, well the Public partnership model as I developed the point before is I think fundamental You know you talk about the trillion dollars required here. Well, there are you know, I think there's 25 trillion dollars required around the world You know over a reasonably short period of time Yeah, decades So there is a lot of money around But it doesn't find a home because the risks aren't fully understood or fully housed in the right place so there is a need for a global solution on a Model and I know it's being looked at and developed. You know that does actually look at some of the Known risks which can be priced But then you've got the unknown risks which actually you need someone to step in and manage that and that is where the government the Multilateral institutions, you know do actually need to facilitate Puneeta, what do you think of Rick's model of a sort of foreign finance as the bridging loans? So to speak for the next 10 15 years as India's financial markets finally developed Does that make sense for the infrastructure investment equity capital? Yes on debt financing I think it's risky given the you know that there is a currency risk that these You know you're taking on if the rupee depreciates then the cost of debt can actually be higher than domestic debt But then domestic debt is constrained because all the development financial institutions that were doing infrastructure lending and now become banks So, you know, you don't really have a development financial institution for infrastructure anymore So maybe that's something that needs to be reconsidered. I So I think it is going to be a challenge, but the government of this national investment fund Changing the you know the repayment terms like to extending the loans to 25 years will help domestic capital Also be involved in infrastructures. I wouldn't rely on international debt financing Given, you know the vulnerability on the currency I think you know both there's a learning in the last decade that people should take away both the sponsors and the government the sponsors of course because I think they really didn't Manage the risk well and took on too much debt and have actually hurt the country in the process and the government By not having a proper dispute resolution mechanism and also I still think that the government receivables to private sector And every sphere is still very high and the government receivables need to be worked out Thank you. Thank you. Yes. So, I mean minister briefly. Are you confident that you can? Recreate the confidence that has clearly been lost among investors for infrastructure projects. I'm very much confident because Day by day the confidence is going up the real challenge lies in working out the workable Financing models to mobilize resources particularly keeping in view the Risks including Financial and revenue risk exchange rate risk, etc. The one is the pension funds That's one area second is as madam has said that Indian Institutions most of them have now become banks and banks are all funding that alone is not sufficient Your central government is also focusing on here marking good amount of money for infrastructure That also may not be possible. You have to create more confidence Among the investors and then attract more and more investment even domestic reals International investors are coming, but as I told you about the volatility of the rupee and this thing and all that there is some amount of risk in that for the People, but I'm sure going by the trend and also the commitment of the government for reforms And more trust on infrastructure things will improve in the near future. Thank you very much I'm summit. Perhaps you could conclude are you do you think the private sector is going to come up with I'd like to make two comments. Yeah, first one is, you know, the trillion dollar you talk about is The 12th five five year plan or which three years is already over and that trillion dollar has been revised to 670 billion dollars Okay. Now based on what has been spent in the last three years. I don't think you're going to meet that 670 billion either that's going to be a challenge So it won't be that much the second comment I want to make is in the previous session, I know Alan you were there and the finance minister talked about Financing the modernization of the railways now I recognize railways is government don't and they've worked out a special deal with Life insurance cooperation, which is hugely rich and is a big investor in India. They've worked out in very soft Interest rate terms and they've organized funding for the railways Is there some way we can look at with with sovereign guarantee or something, you know to to To get over this impasse that we are facing right now Well, they talk about bringing the private sector to do contracts, you know for the row. Yeah Yeah, but but the prime borrower would be the railways So is there some way we can replicate that here because that would be a huge infusion of funds That's something we can we can discuss because the LIC is often the lender of last resort or the buyer of last resort of Government assets. I just want to thank you all very much. Rick Allen, Puneet the minister and Sumit Mazumdar, thank you very much for an excellent panel. Thank you