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Transport Ministry Seeks 30-Year Financing For Infra Projects  |  December 12, 2019

Sneha Sharon Mammen

In a bid to ease financing for infrastructure projects, the road and transport ministry has sought an approval from the Reserve Bank of India's (RBI) for 30-year financing instead of the existing 20 years. Union Minister Nitin Gadkari confirmed that the RBI Governor had no objection to the proposal if the banks are ready to finance for 30 years. He also added that securing finance from banks for a long term is difficult but the department is looking at insuring these infra projects. A proposal in this regard has been submitted to the finance ministry. "In place of two per cent of the bank guarantee now, we will make insurance for the project that will again clear the problem," the minister said.


Reasons for undue delay


The cost overrun of delayed infrastructure projects in the country is estimated to be Rs 3.88 lakh crore while a total of 355 infrastructure projects are behind schedule.


The online computerised monitoring system (OCMS) of implementing agencies shows that cost overruns were fuelled by underestimating the cost of projects, change in rate of foreign exchange and statutory duties, cost of environmental safeguards and rehabilitation. Other reasons include high cost of acquiring land, forest clearance, cost incurred to hire skilled labour, change in scope of projects, pricing of equipment,  pricing by vendors, as also inflation.


However, this is not new.


Last year, the cost overrun of 359 infrastructure projects these in India has been estimated to be Rs 2.18 lakh crore. Another 104 projects reported cost and time overruns. There were 73 projects which were running as late as 60 months or above.


Out of 758 infrastructure projects across India on the radar as of May 2015, 323 were behind schedule, roughly 40 per cent of the total.  In February 2016, of 1,071 infrastructure projects, 341 projects were delayed and 238 others reported cost overruns of about Rs 1.6 lakh crore.


How Do Infrastructural Delays Impact Homebuyers?


Due to these delays, the price climbs and rising stocks, housing has suffered a huge setback over the last couple of years. On the whole, delays have created uncertainty and coupled with issues such as economic growth or a change in the ruling power, most potential buyers decided to wait before they buy.


On paper and in word, India has an ambitious infrastructural goal ahead of it including Smart Cities Mission, Weather Port project expansion, Financial City Project in Gujarat, New pipeline project, State Highway project in Bihar and Maharashtra, road widening projects, expressway projects, international airports, railways and related developments projects, among others. While these projects have been allocated funds worth millions the housing industry indirectly banks on all these to woo homebuyers and simplify their lives to up the livability quotient.


Unfortunately, time lags have wreaked havoc and although tired of it, all that buyers do is sit back and not buy. This has cost us a lot.


For instance, the Bandra-Worli Sea Link, the Rs 300-crore project which was set to be completed by 2004, incurred a five-year delay and a cost of Rs 1,600 crore. One of the key reasons behind such lags is definitely land acquisition. This issue occurs as local communities pose heavy opposition because either they are opposed to the idea of shelving their property or are not offered fair prices. The registered values of the land and the market prices are different and this comes to the fore only when an infrastructure development is planned. Did you know? As many as 112 projects of the National Highways Authority of India (NHAI) are delayed on account of land acquisition.


Almost the entire real estate fraternity has been voicing their concerns over the need for a single window clearance system. Land title and clearance, building approvals, zonal clearances, services and utilities installation, occupancy certificate, environmental clearances are all paper works that need to be completed within a stipulated period of time and these cause unnecessary delays. Single window clearances would facilitate faster approvals and maximum transparency. The Centre has been working on this and perhaps by the end of the year, developers may be in for a treat. Railway projects worth Rs 10,000 crore were stuck due to clearance issues in 2016.


Most of us believe in the cooperative efforts of Public-Private Partnerships (PPP). More often than not, these are quick, efficient and an effective way to tackle the problem of lags. Of approximately 5,293 projects in the country, 1,237 are under this model and the size of the investment is expected to be around Rs 7 trillion. In a study titled Collaborative Service Delivery: What Every Local Government Manager Should Know, the motivations for exploring PPP ranged from cost reduction to external fiscal pressures, tax restrictions, better processes, relationship building, better outcomes, leveraging resources and believing that it is the right thing.