)
Public sector infrastructure financing companies such as India Infrastructure Finance Company and Infrastructure Development Finance Company could opt out of the ambitions ‘Smart Cities’ project, citing lack of guaranteed returns on investments.
The government has approved Rs 1-lakh crore over the next five years for smart cities and a new urban renewal mission initiative. Of this, Rs 45,000 crore will be for 100 smart cities and Rs 55,000 crore for urban renewal projects in cities not on the ‘Smart Cities’ list.
Business Standard earlier reported these amounts could increase over the years and the major bulk of spending will come from the Centre, states, and PSUs.
“The projects to be undertaken under smart cities will not be with the intention of generating revenue. For example, a flyover built under the initiative will not attract toll fees. These projects will be for public welfare. IIFCL (India Infrastructure Finance Company Limited) has to look at returns on its investments for its shareholders. Hence, projects under ‘Smart Cities’ may not be feasible for us,” said a senior IIFCL official, confirming IIFCL may not participate in any of the ‘Smart Cities’ projects.
According to IIFCL’s 2013-14 annual report, the gross sanctions under direct lending amounted to Rs 2,261 crore for 19 projects that year, while disbursements for projects amounted to Rs 5,484 crore. During that year, IIFCL sanctioned Rs 3,292 crore under the takeout finance scheme.
Sources said the same may apply to other public sector infrastructure financing companies like IDFC and Power Finance Corp. As such, non-participation of these companies could create a financing drought for the smart cities, especially at a time when PSU banks have large non-performing assets on their books and the Centre is looking at non-banking finance companies to fund a number of projects.
The push for public investment in infrastructure to boost growth was first mooted by Chief Economic Advisor Arvind Subramanian in his mid-year economic analysis in December. “It seems imperative to consider the case for reviving public investment as one of the key engines of growth going forward, not to replace private investment, but to revive and complement it,” he had said in the report. The idea was taken forward in the 2014-15 Economic Survey and Union Budget.
By delaying the fiscal consolidation road map by a financial year, and by targeting a fiscal deficit of 3.9 per cent for 2015-16, instead of 3.6 per cent according to the previous road map, Finance Minister Arun Jaitley freed up about Rs 70,000 crore for additional investment into key infrastructure sectors, primarily Railways.
The mid-year economic analysis and the economic survey have also accepted that the PPP model has been less than successful. As an example, out of 59 infrastructure projects started in 2013-14, totalling Rs 1.37-lakh crore, only 11 were through public-private partnership. Out of the remaining 48, 20 were by central government entities, and the remaining by private entities.
The government has approved Rs 1-lakh crore over the next five years for smart cities and a new urban renewal mission initiative. Of this, Rs 45,000 crore will be for 100 smart cities and Rs 55,000 crore for urban renewal projects in cities not on the ‘Smart Cities’ list.
Business Standard earlier reported these amounts could increase over the years and the major bulk of spending will come from the Centre, states, and PSUs.
“The projects to be undertaken under smart cities will not be with the intention of generating revenue. For example, a flyover built under the initiative will not attract toll fees. These projects will be for public welfare. IIFCL (India Infrastructure Finance Company Limited) has to look at returns on its investments for its shareholders. Hence, projects under ‘Smart Cities’ may not be feasible for us,” said a senior IIFCL official, confirming IIFCL may not participate in any of the ‘Smart Cities’ projects.
According to IIFCL’s 2013-14 annual report, the gross sanctions under direct lending amounted to Rs 2,261 crore for 19 projects that year, while disbursements for projects amounted to Rs 5,484 crore. During that year, IIFCL sanctioned Rs 3,292 crore under the takeout finance scheme.
Sources said the same may apply to other public sector infrastructure financing companies like IDFC and Power Finance Corp. As such, non-participation of these companies could create a financing drought for the smart cities, especially at a time when PSU banks have large non-performing assets on their books and the Centre is looking at non-banking finance companies to fund a number of projects.
The push for public investment in infrastructure to boost growth was first mooted by Chief Economic Advisor Arvind Subramanian in his mid-year economic analysis in December. “It seems imperative to consider the case for reviving public investment as one of the key engines of growth going forward, not to replace private investment, but to revive and complement it,” he had said in the report. The idea was taken forward in the 2014-15 Economic Survey and Union Budget.
By delaying the fiscal consolidation road map by a financial year, and by targeting a fiscal deficit of 3.9 per cent for 2015-16, instead of 3.6 per cent according to the previous road map, Finance Minister Arun Jaitley freed up about Rs 70,000 crore for additional investment into key infrastructure sectors, primarily Railways.
The mid-year economic analysis and the economic survey have also accepted that the PPP model has been less than successful. As an example, out of 59 infrastructure projects started in 2013-14, totalling Rs 1.37-lakh crore, only 11 were through public-private partnership. Out of the remaining 48, 20 were by central government entities, and the remaining by private entities.
