We are hearing a lot about slowdown in infrastructure investment and in GDP growth in last couple of years. I have tried to analyse sector wise key concerns in infrastructure
Power sector- In the last few years there have been not a single Power purchase agreement (PPA) signed by any discom and due to lower demand the merchant tariffs have decreased a lot. This has impacted the topline of the power producers. Moreover due to increase in coal price of imported coal EBIDTA margin of companies has decreased. The problem is more for power plants which are located far away from mines and ports and this increases the transportation cost ( presently coal transportation cost is about Rs 1~1.5 per tonne per km).
Hydro power projects- hydro power projects are dependent on rainfall. moreover many hydro projects are facing delay in implementation due to geology risks.
key steps required to increase investment in infrastructure:
1. Granting external commercial borrowing for takeout financing and refinancing of rupee loan
2. Restricting the provising requirement due to delay ( esp hydro projects) to 2% from the existing 5%
3. Ensuring Gas supply to gas based power plants
4. Effective and prompt dispute resolution mechanism for road sector projects
5. Allowing Banks to floats infrabonds with tax incentives
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