Infrastructure builders blame government for woes

MUMBAI Sun Nov 13, 2011 7:54pm IST

Rajiv Lall (L), Managing Director and CEO of India's Infrastructure Development Finance Company (IDFC) speaks during an interview with Chrystia Freeland, Editor of Thomson Reuters Digital, on the sidelines of the World Economic Forum (WEF) India Economic Summit in Mumbai November 13, 2011. REUTERS/Vivek Prakash

Rajiv Lall (L), Managing Director and CEO of India's Infrastructure Development Finance Company (IDFC) speaks during an interview with Chrystia Freeland, Editor of Thomson Reuters Digital, on the sidelines of the World Economic Forum (WEF) India Economic Summit in Mumbai November 13, 2011.

Credit: Reuters/Vivek Prakash

Kishore Pandey, 82, lies on a bed as his daughter, Usha Tiwari, holds him and a priest stands by them (L) at Mukti Bhavan (Salvation House) in Varanasi, in the northern Indian state of Uttar Pradesh, June 19, 2014. REUTERS/Danish Siddiqui

Waiting to die at Salvation House

The city of Varanasi is Hinduism's holiest city and many Hindus believe that dying there and having their remains scattered in the Ganges allows their soul to escape a cycle of death and rebirth.  Slideshow 

MUMBAI (Reuters) - Government paralysis, bureaucratic stonewalling of projects and corruption.

Indian infrastructure firms on Sunday vented their frustration during a World Economic Forum event in Mumbai at what they saw as needless brakes on growth in a sector key to the country's prosperity.

Asia's third-largest economy plans spending $1 trillion over the next five years to expand its clogged roads, tackle huge power shortages and overhaul its creaking railways.

Lacking the financial muscle that China has to bring its infrastructure up to speed, the government has turned to the private sector to fund half of that target.

"The government has, by necessity, given lots of space to the private sector," said Rajiv Lall, chief executive officer of Infrastructure and Development Finance Co.

"But having unleashed this genie, it has struggled to keep pace with it ... enthusiasm and skills of private developers far outpace the government's ability to provide support."

However, India's ambitions have been crimped by corruption scandals that have sparked huge protests against Prime Minister Manmohan Singh's government and slowed decision-making on big projects.

Ajit Gulabchand, the chairman and managing director of Hindustan Construction Co Ltd, said there is a "huge slowdown" in infrastructure-building in India.

"There are many reasons for it: the scams have created a lull in decision-making, people are afraid to take decisions," he told Reuters in an interview on the sidelines of the event.

"India has hurt itself by stalling projects," he added.


Infrastructure developers complain that the government has not kept its side of its bargain by failing to create a policy framework to allow the sector to grow.

"There is no sector where the policies are consistent, where policies are long term, where policies are really thought out," said Ravi Sharma, chief executive officer of Adani Power, a unit of one of India's largest private sector infrastructure players.

"And therefore most of the time, when the sector starts doing well, suddenly it trips," he said.

This matters. Losses from poor infrastructure shave an estimated 2 percent off India's GDP and add to pressure on inflation that remains above 9 percent.

"If goods are transported from Gurgaon to the Mumbai port, they pass through 36 checkposts and can take up to 10 days," said Rudolf Hug, chairman of Switzerland's Panalpina Welttransport Holding, a freight mover.

The distance between those two cities is about 1,400 kilometres (870 miles).

The pace of construction in almost every sector, from power to highways to ports, has slipped behind New Delhi's targets. A top government official has said India is likely to miss its $500 billion infrastructure-building target for the five years ending in March 2012 by 10-12 percent.

"There is a policy pause," said Subbarao Amarthaluru, the chief financial officer of GMR Infrastructure Ltd, whose projects include an expansion of New Delhi's airport. "Things will slow down," he added.

The slow pace of change in India has prompted firms to scout for construction opportunities overseas, including Africa, Harpinder Singh Narula, chairman of DS Construction, said on Sunday.

Firms struggle to acquire land for projects, while obtaining clearances from the environment ministry and other regulators can take years. Bureaucracy and corruption mean the pace of contracts being awarded remains slow, firms complain.

HCC's Lavasa project is a textbook case. A $31 billion township in the hills of the western state of Maharashtra, Lavasa was stalled for 12 months due to wrangling between the state and central government over environmental clearance, costing the firm $400,000 a day.

The project won conditional clearance on Wednesday to resume construction.

The lack of clarity surrounding Lavasa's approval, and similar tussles over other projects such as South Korean steel major POSCO's plant in eastern India, have spooked investors and harmed foreign interest.

"It is imperative that we quickly turn the atmosphere around by bringing some speed into the decision-making and keep some old promises of reforms and quickly pass them so that we get the feeling India is going places back again," said Gulabchand, whose group has a turnover of $1.6 billion.

For more Reuters coverage of the World Economic Forum India Economic Summit, click: here

(Additional reporting by Prashant Mehra; Editing by Tony Munroe)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

India-Nepal Ties


Tackling Food Prices

Tackling Food Prices

India to free up extra 10 million tonne wheat in open market  Full Article 

Facebook Results

Facebook Results

Facebook beats Wall Street targets, stock hits record high  Full Article 

GM Recall

GM Recall

GM recalls 717,950 vehicles in U.S., not for ignition switches  Full Article 

Hyundai Motor Results

Hyundai Motor Results

Hyundai Motor Q2 profit slips as firmer won, U.S. discounts hurt  Full Article 

Nokia Results

Nokia Results

Nokia raises networks outlook after Q2 profit beats estimates  Full Article 

Factory Sector

Factory Sector

China July HSBC flash PMI at 18-month high of 52.0   Full Article 



Apple winds up earnings hope for new gadgets  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage