Road building revival offers rare hope for India infrastructure overhaul
Indian government policy changes help revive interest in building infrastructure
K Ramchand, managing director at one of India’s biggest road builders, is doing something unusual to help dispel the gloom pervading much of the country’s infrastructure sector today: bidding for new projects.
His company, IL&FS Transportation Networks, signed a US$300 million contract in April to build a six-lane highway. The project will link an eastern industrial zone afflicted by some of India’s worst traffic snarls to mining districts such as Dhanbad, the nation’s coal capital.
The IL&FS deal marks a sharp turnaround from last year when investor interest in public works plummeted. To rekindle investment in new, modern roads that India badly needs, the government has been rolling out a slew of policy measures, including a strategic shift in how projects are financed.
“Last year, I think, has been a typically bad year,” Ramchand said in an interview at a hotel in the business hub of Gurgaon outside New Delhi. “There is definitely an upswing, there is no doubt about it, because I think the mood is much better.”
The most significant policy change is that the government has moved away from its much-vaunted but troubled public-private partnership (PPP) model to fund projects.
Under the PPP model, developers finance construction out of their own pocket, often in exchange for the right to charge toll fares.