INDIA’S INFRASTRUCTURE –

Issues and Prospects

PRESENTATION BY
SS Kohli
Chairman & Managing Director
INDIA INFRASTRUCTURE FINANCE COMPANY LTD
NEW DELHI
 INDIA GROWTH STORY
 India’s economic growth is attracting wide
attention
 India & China are enjoying high economic
growth
 In 2006-07 India’s growth was 9.4%
 Economic prosperity is placing huge
demands on infrastructure
 India is the third largest economy behind
USA and China
 Infrastructure Requirements
 World Economic Forum has noted that
India’s annual investments in infrastructure
between 1998 and 2005 averaged 4% of
GDP compared to 8.2% for China
 Government of India is addressing the
infrastructure requirements
 11th Five Year Plan (2007-2012) calls for
more than doubling the financial outlay for
infrastructure
 Investment requirements
 Total financing requirements
 $492 billion in the next five years
 Of this, $147 billion to come from private investment

 Share of private investment in total to rise

from 17% to 30% by 2012.

 Investment to touch $1.48 trillion by 2017

 Interest of international
investors
 Strong interest evinced by international
investors in India’s infrastructure
 This includes Private Equity
 3i, Blackstone etc
 International banks
 Citigroup, Macquarie Bank (Australia), Mizuho
(Japan), Deutche Bank
 Multilateral institutions including ADB, World
Bank, IFC, JBIC, KfW
 Challenges before India
 India growth story likely to continue
 Strong economic growth will fuel further
demand on infrastructure
 India should absorb the large investments in
infrastructure sector to sustain growth
momentum
 Indian rupee has appreciated against the
dollar by 5% over the past year and 20% in
the past five years
 Development of PPP market in
India
 PPPs in India are at a nascent stage
 Slew of measures by government
 100% foreign investment allowed in infra sectors
 Model Concession Agreements evolved
 Viability Gap Funding (VGF)
 Setting up of IIFCL
 Regulatory institutions (Telecom Regulatory Authority,
Port Tariff Authority)
 PPPs in India are accelerating
 118 projects valued at $13.4 billion are progressing in
roads, ports, airport sectors
 Transport Sector – the potential
in India
Aviation infrastructure
 100% foreign direct investment allowed

 $ 9 billion programme to upgrade 25 airports

 Delhi and Mumbai International airports – two

PPP projects with estimated investment of $3.8

billion
 19 greenfield airport locations identified

 Airport Economic Regulatory Authority being set

up
 Air transportation - growth
 Passenger traffic is projected to cross
100 million passengers p.a. by 2010  
 Cargo traffic to grow at over 20% p.a.
over the next five years
- To cross 3.3 million tonnes by 2010
 Maintenance, Repair and Overhaul (MRO)
growing in a big way
 MRO market expected to grow by 10%
Roads and Highways
 India has the second longest road
network in the world of 3.3 million KMs
 Expressways and highways constitute
only 2% of the above
 US $54 billion earmarked for the sector
 Cargo traffic expected to grow by 15-
18% over the next 5 years
 Roads - Potential
 100% foreign direct investment allowed
 Incentives:
- 100% income tax exemption for a period of
10 years
 - Grants/viability gap funding for marginal
projects available
 - Model Concession Agreement formulated
 Opportunities in construction equipment (earth
moving, material handling equipment etc),
tolling equipment services and advisory
(architecture, structural design, soil
investigation etc)
 Railways
 India has one of the largest railway
networks in the world (63,000 route KMs
network)
 Accounts for 30% of total freight traffic
 Traffic volumes set to double by 2012
 Potential for rolling stock, locomotives,
passenger coaches, track equipment,
signalling equipment
 Ports
 India has coastline of 7500 KMs
 12 major ports; 187 minor ports
 Traffic has grown by a compounded average of
8.5%
 Traffic expected to reach 880 million tonnes by 2011-
12
 95% of India’s exports & imports moved by sea
 India expects to double its exports to $150 billion
in the next five years
 Ports
 100% FDI under the automatic route is permitted
for port development projects   
 100% income tax exemption is available for a
period of 10 years
  Tariff Authority for Major Ports (TAMP) regulates
the ceiling for tariffs charged by Major ports
 Investment needed in the next 5 years $18
billion
Ports - Opportunity
 Opportunities exist in
 Development of greenfield ports
 Development of container and bulk
terminals
 Logistics infrastructure
 Dredging services
 Port related equipment
 Ship building, ship repair, maritime training
 Role of IIFCL
 IIFCL is a SPV to provide long term finance
to infrastructure projects
 Overriding priority to PPP projects
 Finance projects in sectors like roads, airports,
ports, power, urban infrastructure etc
 Since inception in April 2006
 Financed 77 projects to the tune of $4.3 billion
with a total project cost of $31 billion
 Conclusion
 Investment requirements of infrastructure sector
huge
 India growth story to continue
 50% of the population is below 25 years
 Huge domestic demand
 Need to bridge infrastructure gaps to sustain
economic growth
 Opportunities for international investors
significant
 India can leverage on its vast human capital to
successfully adopt the PPP model
THANK YOU FOR YOUR ATTENTION