Multi-Modal Transport Policy, Lower Cost of Capital to Spur Infrastructure

New Delhi, India, 5 November 2014 – The Bharatiya Janata Party-led government is committed to achieving a target of building 30 kilometres of roads and highways a day within two years, taking the rate up from three kilometres a day currently. For this, the government is working on solving problems associated with land acquisition, creating a multi-modal transport policy and reducing the cost of capital to make investment in infrastructure viable, said Nitin Jairam Gadkari, Minister of Road Transport, Highways and Shipping of India, in a session entitled “Mind the Trillion-Dollar Gap”.

Within five months of coming to power, the government has cleared 17 projects for building 2,000-plus kilometres of roads; given a golden handshake to concessionaires involved in some 4,000 kilometres worth of projects; and is working on resolving issues pertaining to some 1,800 kilometres, Gadkari said. He admitted that land acquisition and environmental and forest clearances remain big hurdles. He blamed the courts for passing “impracticable” rulings and the media for hyping up minor opposition to infrastructure projects, and asserted that, as a poor country, India needs to create jobs and spur economic growth as much as it needs to preserve the environment.

Gadkari said another hurdle in the way of building infrastructure is that the sector is administratively divided among several ministries – different ministries are in charge of shipping, roads, airports and railways. But the government is working on a multi-modal transport policy in which waterways, roads as well as sea-, rail- and airports would be developed together.

The government is also aware that the current model concession agreement is weighed against the concessionaire and discourages banks from lending. A committee has been mandated to recommend a model concession agreement at par with international norms. Gadkari said he has also written to the prime minister and finance minister on the need to reduce the cost of capital to encourage investment in infrastructure.

Ajit Gulabchand, Chairman and Managing Director, Hindustan Construction Company, India, said the dispute settlement mechanism has failed, and instead of resolving issues it has become a means of assigning compensation for delays. However, he said, the minister is aware of this and is working to tackle the problem. He said the numerous scams and allegations of scams that the previous government faced have created an unnecessary environment of fear-mongering where bureaucrats are afraid to make decisions and sectors such as infrastructure, where the government and private sector need to work together, have been paralysed.

Mark Spelman, Global Managing Director, Accenture, United Kingdom, said that, internationally, confidence in India is high, and what the country needs to do is ensure predictability in policy, process and growth. He suggested that the conversation should shift from inputs to outputs to focus on the results achieved through the efforts that have been put in. He said that many countries have infrastructure gaps, so India is competing with the rest of the world to attract investment. He also welcomed the initiative by Minister Gadkari to integrate politicians, businesses and the financial sector for building infrastructure.

Yorihiko Kojima, Chairman of the Board, Mitsubishi Corporation, Japan, a Co-Chair of the India Economic Summit, said infrastructure companies always invest cautiously in India, partly because different states have different laws and taxation regimes. “Many companies made losses in India,” he said, adding, however, that he is impressed with Prime Minister Modi’s ambition for the country. He said of all the infrastructure India needs, electricity is the most important. India should use its abundant coal in addition to natural gas and renewable energy which is an important source though expensive.

Following almost three decades of collaboration, the World Economic Forum and the Confederation of Indian Industry (CII) are hosting the India Economic Summit in New Delhi from 4 to 6 November 2014. Over 700 participants are convening under the theme, Redefining Public-Private Cooperation for a New Beginning.

The Co-Chairs of this year’s summit are: Shobhana Bhartia, Chairperson and Editorial Director, HT Media, India; James Hogan, President and Chief Executive Officer, Etihad Airways, United Arab Emirates; Yorihiko Kojima, Chairman of the Board, Mitsubishi Corporation, Japan; Anand Mahindra, Chairman and Managing Director, Mahindra & Mahindra, India; and Sharmeen Obaid Chinoy, Documentary Filmmaker, SOC Films, Pakistan.