The minister tells Subhomoy Bhattacharjee that he wants to set up a financing corporation for the road and shipping sectors, which will throw up a business opportunity of Rs 25 lakh crore!
Union Minister for Roads, Transport and Shipping Nitin Gadkari says he wants to set up a financing corporation for the two sectors. And, push the bureaucracy to take quick decisions to make banks plough more money into projects.
A proposal for setting up the corporation will be placed before the Cabinet for approval. "It will give a sense of security to banks to deal with projects from these sectors," he said in an interview with Business Standard.
According to him, these will be the fulcrum of his plans to revive investments in the infrastructure sector, which had slipped badly in the past few years.
According to Gadkari, the proposed corporation will be in addition to the role of the National Highways Authority of India, which, too, raises finances for the road sector.
Gadkari's ambitious proposal widens a similar one mooted by a former road minister in the United Progressive Alliance government, shot down by the finance ministry.
The latter had argued that with banks already keen to finance road projects, it made no sense to create a similar organisation like the Power Finance Corporation for the power sector, as the costs of raising the money would be higher.
The minister's interview was timed to coincide with the completion of two years in power by the National Democratic Alliance government.
The minister said he needs such an entity as the financing for roads had dried up, especially from the banking sector. "Because of the projects that have overshot their completion date, I hardly see any additional financing by the banks to this sector."
He said this is despite efforts to cut down the volume of languishing projects from the sector. This included closing 43 unviable projects, including the once-prestigious Kishengarh-Jaipur-Alwar expressway, surrendered by GMR Infra.
The minister, however, did not put a timeline as to when all the languishing projects will be sorted out.
Reserve Bank of India data show zero growth in funding for the road sector from the banking sector till May 2016.
"A M Naik, chairman of Larsen & Toubro, had told me sometime ago that he was withdrawing from bidding for projects in the sector. His board withdrew from them despite paying the associated penalty. It was a reflection of the problems the sector has run into," the minister said.
"I consider it an achievement that the same company has returned to bid for a Rs 15,000 crore (Rs 150 billion) investment for a road project near Dewas."
L&T Infra had told the government in September last year that due to delays in land acquisition and traffic estimate mismatch, two of its projects in Gujarat and Tamil Nadu would be classified as non-performing assets by banks.
Gadkari said the proposed financing company would be able to tap into both domestic and foreign funds for the sector. He said he had recently met the banks and multilateral institutions and they were supportive of the plan.
He also acknowledged some of the problems banks have faced vis-a-vis the road sector were due to the slow pace of decision making in his ministry.
"I don't blame anyone for this except myself. Decisions taken by committees even at the inter secretarial level often has a lead time of two to three months before they are acted upon. But I will reform it," Gadkari said.
According to him, the road and shipping sectors would throw up a business opportunity of Rs 25 lakh crore for the proposed financial entity in five years.
Giving an estimated break-up of the funds he expected to raise annually, he said these included annual earnings from tolls of about Rs 10,000 crore, which "if securitised for 15 years would yield returns of above Rs 1.3 lakh crore," he said.
On top of it, the ministry has an annual budget of about Rs 55,000 crore (Plan Budget for 2016-17); another Rs 1 lakh crore from 100-odd projects the ministry has executed for the government topped up with an elbow room of Rs 70,000 crore (Rs 700 billion) for tax-free bonds, which the minister claimed gave him a purse of about Rs 3.5 lakh crore.
He expected this sum would balloon with the effect of inflation and give him the leverage necessary to reach his desired level of financing for the sector. "So, I am not dependent on handouts from the finance ministry to reach the investment I envisage for the sector," the minister said.
On whether he would offer land adjacent to the proposed expressways to the developers as had been given to the Jaypee Group for building the Yamuna Expressway by the UPA government, the minister said no decision was taken as yet. "It is being worked upon and we should have something to say on this soon."
According to him, land acquisition for road projects would follow the models that Andhra Pradesh and Gujarat had adopted. This meant the government would acquire the land and return about 40 per cent to the owners after developing it.
"It is a feasible model and our projects would be built around them."
The roads, transport and shipping ministry plans to set up a logistics park beyond Delhi's municipal limits.
"We are in talks with Delhi Chief Minister Arvind Kejriwal to set up the logistics park along the eastern and western peripheral expressways for the land," Gadkari said.
These are innovative models that can raise money and de-congest Delhi to reduce its pollution footprint, he said, adding: "I support the move to reduce pollution in Delhi."
Gadkari also said he supported the need to move to an automobile sector that consumed less diesel. "But it cannot happen all of a sudden, which is what we have told the Supreme Court," adding the move to ring in Euro-VI emission norms by 2020 has a long way to go to reach this goal.
Photographs: Amit Dave/Reuters; Sivaram/Reuters