A K Bhattacharya: Infrastructure is a classic case where constraint on all factors of production - land, labour, capital and ownership - exist. Since we all keep hearing that land need not be a problem for public sector companies, Mr Roy Choudhury, can you give us a perspective on what kind of land problems you perceive and are an issue?
Arup Roy Choudhury: Without land, there is no project. Is the project being conceived in the garb of land grabbing? Once we do that, everybody gets into doing their best possible design to see that they need minimum land. We must also understand acquiring land and setting up a project is not good enough. We need to have linkages to the land - road, railway and water.
A K Bhattacharya: Mr Uppal, Mr Choudhury talked about one section of the issue. Where has industry gone wrong in creating this impression of land grabbing?
When it comes to determining the extent of land, we should be very careful. In some case the land is wet, and there is an emotional connection. The bare minimum land should be chosen.
Once identified and established that it's for a good cause, there shoudn't be a question if the land will be given.
A K Bhattacharya: Economists keep arguing that you must buy land when you don't need it. What is your perception of land acquisition being an issue going forward?
Santosh B Nayar: There is sector-based discrimination about how many people's consent you need, depending on whether it is a public or private or public-private partnership.
A K Bhattacharya: Mr Basu, what is your perspective on this?
Rathin Basu: Land is critical for the infrastructure sector, as much as infrastructure for the growth of the economy. There is a strong political commitment to resolve this issue. We cannot dream of annual eight or nine per cent gross domestic product (GDP) growth if we do not have a smooth land acquisition policy.
A K Bhattacharya: Is there a change, Mr Ganguly?
Aniruddha Ganguly: The sentiments are positive but if you ask the question in real time, the answer is no, not yet.
A K Bhattacharya: Mr Roy Choudhury made an interesting point of acquiring land in small parts and in a gradual process.
Rathin Basu: I would say that the public sector is privileged. Unlike the private sector, they have less hurdles. For example, if a private sector unit has chosen a project and starts procuring land piece by piece, by the time they try to procure the last 10 per cent, the price would have shot up. That is not the case for the public sector.
A K Bhattacharya: Mr Roy Choudhury, this was almost an accusation that public sector is in a privileged position.
Arup Roy Choudhury: There are three more aspects to being a public sector - the social, economic and political.
Aniruddha Ganguly: There is a provision for land banks that has not been fully utilised by the states. It presents a great opportunity for states to acquire land and then take it up for future development. Not many states have done it, though.
Vinayak Chatterjee: Most of this discussion has become redundant post the ordinance, since it clearly states that infrastructure is public purpose and amenable to acquisition without social assessment impact and consensus. Unless the ordinance is repealed, much of this discussion is historical.
A K Bhattacharya: So, more than the law, it's the social factor and political factor along with implementation that's required?
Chatterjee: Absolutely. Also, I think that we have a social and moral responsibility, outside the law, for a social assessment of the projects.
A K Bhattacharya: Mr Chatterjee, what did you think of the proposition of new instruments and institutions being availed for financing projects?
Vinayak Chatterjee: Most of the infrastructure drive is going to come from public expenditure but that doesn't equal the Consolidated Fund of India. So, how do you increase the corpus available? PSUs are sitting on cash-rich reserves which can serve the drive there are pension funds, sovereign wealth funds.
A K Bhattacharya: Mr Nayar, what's your perspective?
Nayar: The banks will be unwilling for more exposure. So, we have come to a stage where it's important to look at alternative sources of financing.
Arup Roy Choudhury: Is NTPC a public sector enterprise or private sector? There has been no contribution to NTPC's funds by the government for long but NTPC has paid over Rs 45,000 crore to the government.
If everything else is being done, PSUs should also be freed of the compulsion to raise over 70 per cent of their money from Indian banks.
Aniruddha Ganguly: I wanted to extend the argument which Mr Uppal made. There is a requirement to have a focused approach on the issue of funding and foreign financing. For example, if you look at the financial planning of the discoms, it is a great area of vulnerability. Year after year, regime after regime, we have been putting good money into bad. And, these kinds of tendencies are being looked at very closely by foreign institutional investors and pension funds. They are generally conservative and they see this kind of behaviour from a country, they get very concerned.
The issue of retrospective tax, it is somewhere up in the cloud. Regarding GST, we are seeing a logjam, we are seeing a logjam between Centre and states.
Rathin Basu: India has to resolve many of its issues. One is bank interest, where there is a huge difference. Second, the huge India Inc debt. In 2015, two things should be done. One is to clean up the non-performing assets where the 5.5 scheme is a good initiative. Second is RPA and bankers need to sit together to extend the loans because the distressed developers have a huge problem. Allow India Inc to come back to life.
A K Bhattacharya: Mr Nayar, do you think we are over the hump or do you think we may have rough days ahead?
Santosh B Nayar: We are over the hump. I think there is a lull because there are no new projects coming up. Once the new projects come up, banks neither have the appetite nor the regulatory approvals to lend their substantial deposits. Very soon, the Basel-III norms will come up too.
There is a need to develop alternate ways of financing. Anybody developing any kind of institutions or financial projects is welcome because our need is so high.
Vinayak Chatterjee: One needs to ask for a drastic rate reduction on the entire interest rate regime. But it is really the RBI governor's call. What are the things which we can do to reduce the cost of capital? One, projects deemed to be in national interest or for public purpose - provide interest subvention. You can give interest subvention up to two to three basis points. Two, institutions like Mr Nair's and others can do credit enhancement. By credit enhancement, you increase the rating of the project, and the interest rates come down.
A K Bhattacharya: Let us go to the ownership issue. We still don't know which model to use for infrastructure development. Mr Uppal, what do you think is the proper model when it comes to ownership in infrastructure sector?
Ravi Uppal: Both the sectors (public and private) are indispensable. There is a bigger role for the private sector because our whichever sector is opened up for private companies be it ports, telecom or renewable energy, it has brought huge amount of buoyancy. On the other hand, if you look at sectors such as railways, which has remain untouched, you see low growth. In a PPP model, things need to be defined more.
Aniruddha Ganguly: On a lighter note, the GMR way of doing PPP is patience, passion and perseverance in the Indian context. Patience plays a very important part.
Vinayak Chatterjee: The government has gone to town on PPP. Every new project is in a PPP format. The bid expectation from the country at large is that the PPP format is going to be reset. For that, the finance minister in the last Budget said talked about 3P India.
Rathin Basu: Public sector is necessary because of their domain expertise and monopoly. The private sector, on the other hand, exists because of its efficiency. Third is the PPP model where the developers thought they could manage everything but when things went bad, they were able to manage nothing. The PPP model needs to have a dispute resolution platform.
Arup Roy Choudhury: Without land, there is no project. Is the project being conceived in the garb of land grabbing? Once we do that, everybody gets into doing their best possible design to see that they need minimum land. We must also understand acquiring land and setting up a project is not good enough. We need to have linkages to the land - road, railway and water.
A K Bhattacharya: Mr Uppal, Mr Choudhury talked about one section of the issue. Where has industry gone wrong in creating this impression of land grabbing?
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Ravi Uppal: I think we should move away from that kind of paradigm. We should justify value for land, while keeping it a bare minimum. Different states have different procedures of land acquisition.
When it comes to determining the extent of land, we should be very careful. In some case the land is wet, and there is an emotional connection. The bare minimum land should be chosen.
Once identified and established that it's for a good cause, there shoudn't be a question if the land will be given.
A K Bhattacharya: Economists keep arguing that you must buy land when you don't need it. What is your perception of land acquisition being an issue going forward?
Santosh B Nayar: There is sector-based discrimination about how many people's consent you need, depending on whether it is a public or private or public-private partnership.
A K Bhattacharya: Mr Basu, what is your perspective on this?
Rathin Basu: Land is critical for the infrastructure sector, as much as infrastructure for the growth of the economy. There is a strong political commitment to resolve this issue. We cannot dream of annual eight or nine per cent gross domestic product (GDP) growth if we do not have a smooth land acquisition policy.
A K Bhattacharya: Is there a change, Mr Ganguly?
Aniruddha Ganguly: The sentiments are positive but if you ask the question in real time, the answer is no, not yet.
A K Bhattacharya: Mr Roy Choudhury made an interesting point of acquiring land in small parts and in a gradual process.
Rathin Basu: I would say that the public sector is privileged. Unlike the private sector, they have less hurdles. For example, if a private sector unit has chosen a project and starts procuring land piece by piece, by the time they try to procure the last 10 per cent, the price would have shot up. That is not the case for the public sector.
A K Bhattacharya: Mr Roy Choudhury, this was almost an accusation that public sector is in a privileged position.
Arup Roy Choudhury: There are three more aspects to being a public sector - the social, economic and political.
Aniruddha Ganguly: There is a provision for land banks that has not been fully utilised by the states. It presents a great opportunity for states to acquire land and then take it up for future development. Not many states have done it, though.
Vinayak Chatterjee: Most of this discussion has become redundant post the ordinance, since it clearly states that infrastructure is public purpose and amenable to acquisition without social assessment impact and consensus. Unless the ordinance is repealed, much of this discussion is historical.
A K Bhattacharya: So, more than the law, it's the social factor and political factor along with implementation that's required?
Chatterjee: Absolutely. Also, I think that we have a social and moral responsibility, outside the law, for a social assessment of the projects.
A K Bhattacharya: Mr Chatterjee, what did you think of the proposition of new instruments and institutions being availed for financing projects?
Vinayak Chatterjee: Most of the infrastructure drive is going to come from public expenditure but that doesn't equal the Consolidated Fund of India. So, how do you increase the corpus available? PSUs are sitting on cash-rich reserves which can serve the drive there are pension funds, sovereign wealth funds.
A K Bhattacharya: Mr Nayar, what's your perspective?
Nayar: The banks will be unwilling for more exposure. So, we have come to a stage where it's important to look at alternative sources of financing.
Arup Roy Choudhury: Is NTPC a public sector enterprise or private sector? There has been no contribution to NTPC's funds by the government for long but NTPC has paid over Rs 45,000 crore to the government.
If everything else is being done, PSUs should also be freed of the compulsion to raise over 70 per cent of their money from Indian banks.
Aniruddha Ganguly: I wanted to extend the argument which Mr Uppal made. There is a requirement to have a focused approach on the issue of funding and foreign financing. For example, if you look at the financial planning of the discoms, it is a great area of vulnerability. Year after year, regime after regime, we have been putting good money into bad. And, these kinds of tendencies are being looked at very closely by foreign institutional investors and pension funds. They are generally conservative and they see this kind of behaviour from a country, they get very concerned.
The issue of retrospective tax, it is somewhere up in the cloud. Regarding GST, we are seeing a logjam, we are seeing a logjam between Centre and states.
Rathin Basu: India has to resolve many of its issues. One is bank interest, where there is a huge difference. Second, the huge India Inc debt. In 2015, two things should be done. One is to clean up the non-performing assets where the 5.5 scheme is a good initiative. Second is RPA and bankers need to sit together to extend the loans because the distressed developers have a huge problem. Allow India Inc to come back to life.
A K Bhattacharya: Mr Nayar, do you think we are over the hump or do you think we may have rough days ahead?
Santosh B Nayar: We are over the hump. I think there is a lull because there are no new projects coming up. Once the new projects come up, banks neither have the appetite nor the regulatory approvals to lend their substantial deposits. Very soon, the Basel-III norms will come up too.
There is a need to develop alternate ways of financing. Anybody developing any kind of institutions or financial projects is welcome because our need is so high.
Vinayak Chatterjee: One needs to ask for a drastic rate reduction on the entire interest rate regime. But it is really the RBI governor's call. What are the things which we can do to reduce the cost of capital? One, projects deemed to be in national interest or for public purpose - provide interest subvention. You can give interest subvention up to two to three basis points. Two, institutions like Mr Nair's and others can do credit enhancement. By credit enhancement, you increase the rating of the project, and the interest rates come down.
A K Bhattacharya: Let us go to the ownership issue. We still don't know which model to use for infrastructure development. Mr Uppal, what do you think is the proper model when it comes to ownership in infrastructure sector?
Ravi Uppal: Both the sectors (public and private) are indispensable. There is a bigger role for the private sector because our whichever sector is opened up for private companies be it ports, telecom or renewable energy, it has brought huge amount of buoyancy. On the other hand, if you look at sectors such as railways, which has remain untouched, you see low growth. In a PPP model, things need to be defined more.
Aniruddha Ganguly: On a lighter note, the GMR way of doing PPP is patience, passion and perseverance in the Indian context. Patience plays a very important part.
Vinayak Chatterjee: The government has gone to town on PPP. Every new project is in a PPP format. The bid expectation from the country at large is that the PPP format is going to be reset. For that, the finance minister in the last Budget said talked about 3P India.
Rathin Basu: Public sector is necessary because of their domain expertise and monopoly. The private sector, on the other hand, exists because of its efficiency. Third is the PPP model where the developers thought they could manage everything but when things went bad, they were able to manage nothing. The PPP model needs to have a dispute resolution platform.