Investment in infrastructure development by multilateral or bilateral financial institutions, be they private, domestic or foreign entities, is an ‘informed decision’ that hinges on a careful analysis of potential risks and expected returns. The risk spectrum is broad and spans political, administrative, regulatory and market-based adversities. Traditionally, public capital expenditure on the creation of public utilities has had only a limited assessment of risks and financial returns (also so of private investment in this field). However, a paradigm shift is underway as we move from sole reliance on public capex to incorporating private investment for infrastructure development. Therefore, promotional measures and de-risking strategies for investment have become crucial. The Indian government has encouraged private and foreign investment through various promotional measures, such as a liberal FDI policy, Ease of Doing Business measures like a National Single Window System, fiscal incentives, and the establishment of agencies like Invest India, among others. Alongside, a range of investment de-risking measures have also been introduced, leveraging technology, an integrated approach in planning, rationalized risk-sharing mechanisms, etc. The triad of PM Gati Shakti, Project Monitoring Group (PMG) and public private partnerships (PPP) forms the backbone of these de-risking measures.
PM Gati Shakti seeks to revolutionize infrastructure development through a ‘whole of the government’ approach: a digital Geographic Information System (GIS)-based platform and an institutional arrangement. This initiative aims to develop plans for integrated multimodal infrastructure for the efficient transportation of goods and people. Its national master plan has integrated over 1,460 GIS data layers representing infrastructure assets, with topographical as well as geographical features, and data related to 15 social sectors. By bringing together various ministries and departments on a single digital platform, PM Gati Shakti enables data-driven decision-making for project planning and implementation. More than 38 ministries/departments of the central government, 28 states and eight Union territories are already part of it.
The traditional process of inter-ministerial consultation at the planning stage of projects has been substituted by a collaborative evaluation at the national level by a Network Planning Group (NPG) to foster synchronized decision-making and reduce administrative risk. Land acquisition risk, common in infrastructure development, is also minimized by using the planning tools available on the GIS platform. The land-use and ownership data available on the master-plan platform helps expeditious decision-making based on objective assessments of land acquisition risk. The NPG has met 51 times in the last 11 months and evaluated 85 projects with an estimated cost of about ₹5.4 trillion. At the state level, an Empowered Group of Secretaries created under PM Gati Shakti and NPG has evaluated more than 200 projects in 2022-23.
PM Gati Shakti also emphasizes multimodal connectivity to economic nodes and cargo hubs. This enhances the commercial viability of network projects as well as the infrastructure or manufacturing units connected to it. Implementation risk, to the extent foreseen at the planning stage, is minimized through the PM Gati Shakti mechanism. Further, at the implementation stage, the project is subject to another de-risking mechanism in the form of the Project Monitoring Group, which also has an administrative set-up and digital dashboard. This operates as a special cell in the government’s Cabinet Secretariat. Currently, the ministry of commerce and industry and Invest India are providing secretarial support and operating the dashboard. This group monitors the implementation of projects worth over ₹500 crore in investment or lower if deemed critical for national development.
The Project Monitoring Group takes up issues related to Central and state-level ministries/departments for quicker resolution, including clearances, permissions, land acquisition, grants of right-of-way/use, licensing or leasing needs, and forest and environmental clearances, apart from law-and-order and contractual issues, etc. Thus far, this mechanism has resolved a multitude of issues related to various projects, both public and private. Over 7,528 issues related to 2,388 projects with an estimated value of over ₹65.38 trillion are being monitored through this mechanism. Around 6,356 issues related to 1,398 projects worth over ₹50 trillion have been resolved since inception (up to 2023); 336 issues across 188 projects have been resolved in 2023-24 alone.
The PPP model is another mechanism for an equitable and rational distribution of risks and rewards between public authorities and private partners. Over the past three decades, PPP in India has evolved from being merely an extra budgetary resource for project financing to a robust tool, attracting private capital along with state-of-the-art technologies and best practices in infrastructure development. After 1991, this mechanism led to the infusion of private capital amounting to about ₹68 trillion with over 9,200 infrastructure projects. Looking at trends over this period, the last decade has clocked an almost equal number of projects, worth about 40% of the total PPP investment so far. This growth is significant and can be attributed to de-risking measures.
The PM Gati Shakti National Master Plan, Project Monitoring Group and Public Private Partnerships form a triad of investment de-risking and promotional measures taken by the government that have accelerated infrastructure development by mobilizing private capital and technology.
Intensifying these measures is likely to boost investor confidence and attract further investments, laying the foundation for a more efficient and resilient logistics ecosystem, a sine qua non for the greater integration of India’s economy with global value chains. India’s joining a global club of the 10 most efficient logistics ecosystems would be incidental to it.
Source : Mint