Financing Infrastructure Projects

- Mr. Suneet K. Maheshwari,
CEO L&T Infrastructure Finance Co

Mr. Suneet K. Maheshwari, presently CEO of L&T Infrastructure Finance Co., having over 26 years of rich experience in Pvt. Sector like ICICI / SREI Infrastructure / Financial Feedback Ventures Group, spoke to Mr. Pai, Financial Advisor of MEDC. Before moving to Private Sector Mr. Maheshwari was Member Secretary of the Inter-ministerial Govt. of India Task force on Telecom Sector reform in India as a part of a World Bank-ICICI team during 1992-94.

Brief excerpts of discussion are as under highlighting the problems faced by Infrastructure industry in almost all the states. During the dialogue, Mr. Maheshwari tries to answer the various issues in his down to earth style covering issues / opportunities / challenges above all his long term vision.

How do you compare the risk factors in Financing Infrastructure Projects as against others such as manufacturing and services sectors?

No doubt the risk factor in this line of industry is comparatively higher mainly on account of longer gestation period and regulated pricing structure partly controlled by concerned authorities.

Given the option which line of credit you would prefer to extend Debt / Private equity / Venture Capital?

Since the industry needs finance under all various channels we would certainly meet their requirements in a balanced proportion rather than preferred choice of our company. That is how in a way we try to meet social responsibility simultaneously.

How financing options available in developed countries for the sector are different from the ones in India?

The basic difference is availability of long term funds there in the range of 15-25 years as against shorter period in India. The lending institutions and banking industry in our country presently are not geared up to extend the finance beyond 10 / 12 years. The very fact the long gestation period calls for longer repayment period in a moderate range of 15 / 20 years is not practised here. This is where Government of India has to support lending institutions with necessary sops in extending long term finances. The talk of SVP has yet to take off in a significant measure not withstanding the announcement made by the Finance Minister in the budget couple of years ago.

What are your views on Public Private Partnership – PPP- so far as Infrastructure sector is concerned?

Of course according to me that is The Path for Assured Success as it is widely practiced in other countries our spend target for the next years is in the range of USD 250-300 bn. that is about 50 bn. annually. In reality we are hardly managing less then 30 bn. till now. Of this private investment is only 10 bn. Long way to go. True it is difficult but not impossible. With clear concept and commitment we can make it happen. I am quite positive about it.

Can you tell us something about the success stories in Public Private Partnership particularly in Infrastructure sector?
Unfortunately there is none worth mentioning because we don’t have adequate framework for PPP such as project preparation / implementation to address the concerns of stake holders.

It is true and sadly so in almost all projects irrespective of the industry sector wherein the government has taken initiatives, we start with no clarity and commitments. My proposals to these chronic problems are:

• Expedite process – rope in competent advisors if necessary
• Offer of infra tax benefits should be with a long term view
• If benefits are withdrawn, compensation to be automatic
• RBI to create a separate class of registration for Infra holding allowing borrowing / venture capital investments
• Finance Ministry, Planning Commission and RBI need to work out strategy of how funds could be made available for infra development – one of them could be concrete steps to introduce long term finance from insurance and pension fund as done in many other countries.

Dear Sir, before we close one last question what according to you is the practical solution?

Yes, that is a good question. Let us observe the reversal of NATO (no action talk only). We should talk less and act more and so with total focus on selected and result oriented agenda.

Mr. Pai, You will agree I have attended to you first (though briefly) as promised”.

The CEO gets up to rush to the adjoining chamber to attend the auditors. Before he leaves hands over 50 datasheets to me, enough material for week long homework.

(As told to Mr. V. T. Pai of MEDC, Views expressed here by S. Maheshwari are personal).