Indian infrastructure investment to reach US$ 500 billion by 2012

By Richard High24 June 2009

The 600 m cable stay Bandra Worli Sea Link joins the northern suburbs of Mumbai with Worli on the so

The 600 m cable stay Bandra Worli Sea Link joins the northern suburbs of Mumbai with Worli on the south side of the bay in India. The bridge opens to traffic in the first week of July 2009.

India's Government is planning a US$ 354 billion investment in its infrastructure by 2012, with another US$ 150 billion expected to come from the private sector, according to the latest report by PricewaterhouseCoopers.

The report - Infrastructure in India: A vast land of construction opportunity - said "liberalisation of government regulations" and "a deliberate [Government} strategy" to promote infrastructure "spells opportunity for E&C [engineering and construction] companies."

Pprojected spending under the Eleventh Five Year Plan (FY07-FY12), it added, should see the electricity (US$ 167 billion), rail (US$ 65 billion), roads and highways (US$ 92 billion), ports (US$ 22 billion) and airports (US$ 8 billion) sectors receive a total of US$ 354 billion.

The Government is targeting private sector investment of US$ 150 billion, with Public Private Partnerships (PPPs), which are "gaining in importance and benefiting from government support", now increasingly seen as the "funding norm."

Morgan Stanley, Macquarie Group, JP Morgan, Goldman Sachs and Deutsche Bank's infrastructure investment funds, it added, were all looking to make investments in "emerging markets" and each had identified India, and China, as a potential market.

Sector spending

The road sector should see an increase in funding during FY07-FY12 from around US$ 15 billion per year to over US$ 23 billion in 2011-12.

The Indian Government, via the National Highway Development Program (NHDP), is planning more than 200 projects in NHDP Phase III and V, representing around 13000 km of roads. The average project size is expected to US$ 150 to US$ 200 million.

Larger projects are likely to reach the US$ 700 to US$ 800 million range. About 53 projects with aggregate length of 3000 km and an estimated cost of around US$ 8 billion are already at the pre-qualification stage.

Existing infrastructure gaps and capacity constraints mean "large scale investment over the FY07-FY12 period" in the rail sector, with 40% of the earmarked US$ 65 billion investment expected to come from the private sector.

The capacity of India's existing ports infrastructure is also "not sufficient to handle the increased loads that come with sustained economic growth", noted the report. The US$ 22 billion allocated to the sector from FY07- FY12 will see the National Maritime Development Programme, which includes 276 projects, receive about US$ 15 billion, with private investment targeted at around US$ 8 billion.

Airports will also benefit from Government investment plans, with projected investment of about US$ 8 billion from FY07-12. Private sector participation, it added, is expected to play a key role.

The electricity (power generation and supply) sector's US$ 167 billion in FY07-FY12 should see a plethora of hydroelectric power projects being constructed. While the supply grid will also be expanded and updated.

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