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Land acquisition behind infrastructure project delays

Land acquisition behind infrastructure project delays
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First Published: Thu, Feb 11 2010. 12 03 AM IST

 Road ahead: Feedback Ventures chairman Vinayak Chatterjee (left) and Gammon Infrastructure managing director Parvez Umrigar.
Road ahead: Feedback Ventures chairman Vinayak Chatterjee (left) and Gammon Infrastructure managing director Parvez Umrigar.
Updated: Thu, Feb 11 2010. 12 03 AM IST
Mumbai: Infrastructure remains a pivotal sector in India’s growth story, but delays in getting these projects up and running has been a major hurdle to speeding up the economy. In 2009, delays in projects were blamed on a lack of funds and failure to achieve financial closure. Experts say the funding problems are fading but the major hurdle to infrastructure projects now is land acquisition. In an interview, Vinayak Chatterjee, chairman of infrastructure services firm Feedback Ventures, and Parvez Umrigar, managing director of Gammon Infrastructure Projects Ltd gave their perspective on the road ahead for the sector. Edited excerpts:
Road ahead: Feedback Ventures chairman Vinayak Chatterjee (left) and Gammon Infrastructure managing director Parvez Umrigar.
Has the scene shifted because Reliance Infrastructure Ltd actually gave money to get a couple of projects? Is it that road projects have now become profitable?
Chatterjee: One can’t answer that question in general. The profitability of road projects depends very heavily on the location, the stretch and the traffic going through. So in some projects, developers give the government money, which is called a negative grant, and in some projects the developers ask the government for money, which is a positive grant...It is very project specific.
What is the bulk of the National Highways Authority of India projects—the 25 that are on offer? Will there be negative grants in them? Also, what could be the percentage?
Umrigar: As a thumb rule, one should take it that a negative grant should be by way of an exception. What we have seen three years back when seven out of 10 projects went on negative grant was certainly bad bidding. Yes, there would definitely be certain stretches—like if you were to take Mumbai as a hub, stretches on Mumbai-Delhi, Mumbai-Chennai, Pune, etc.—which may come under negative grant but it is all about the quantum.
In build-operate-transfer projects, promoters said a 1 percentage point increase in interest rates could completely change the scenario. What is the outlook there?
Chatterjee: In such cases (negative grants) where there is inherent reasonably high profitability, a 1% swing in interest rates, to my mind, is not as material. But where projects are at the border, if you are looking for a 16-18% return on your equity at the edge, and in those situations whether to bid or not to bid for a project, of course a 1% swing in the interest rates makes a difference.
cnbctv18@livemint.com
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First Published: Thu, Feb 11 2010. 12 03 AM IST