Transport Minister Kamal Nath has called for foreign investment in the construction of roads and other infrastructural projects in India.
"I've been here as part of an effort to sensitise the investors, consultants, contractors on the new road program," Nath told the Indian media after concluding his week-long tour to the United States.
"Roads in India are not merely a matter of connectivity but is an important component of inclusive growth," he said, adding that the new road program, announced by Prime Minister Manmohan Singh on August 15, aims to lay down 20 kilometers of road everyday.
The total project costs for 2009-2010 is estimated at $20 billion and both debt equity and pension funds are being invited to participate in this program. The share of private sector investment in this will be about $12 billion.
Over the next few years, out of the total projected investment of $80 billion, the private sector investment is estimated to be $45 billion. This makes the road project the largest Public-Private Partnership in the world.
To get a diverse set of investors on board, the Minister has travelled to Singapore, London, Zurich and NYC to listen to their concerns.
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"While India remains an attractive investment destination we have to see that the model of our projects are also investment attractive," he said.
Nath also announced the construction of at 18,000 kms of expressways in the country. "We're going to set up an expressway division in the next fortnight and I propose bringing in legislation for expressway authority," he said.
The minister has also negotiated a project with the World Bank for USD three billion to transform 6,300 km of single lane roads into two lane highways.
"They have for the first time informed me that they will be willing to fund the viability gap funding and also fund 50 per cent of our annuity project," he said.
The CEO of ICICI Bank Chanda Kocchar noted that the 20 billion dollar-road program offered an attractive opportunity for both equity and debt investors.
"The roads asset is an asset class that provides a very steady and stable return to the investors," she said.
"What we have been doing working with the government in the last few months is to try and look at the facilitative factors that can make all the road projects even more economically viable," she added.
Ajit Gulabchand of Hindustan Construction Co said the road project will create two kind of investors; those who are solely developers and those who want a steady annuity from it by investing in a toll.
"Those who wish to simply develop the road, build it, put into operation, operate it for two years and then can actually get an exit," he said.
This is leading to new opportunities for investors who previously engaged in engineering, procurement and construction can move to development area, Ajit said.