INDIA’S INFRASTRUCTURE – Issues and Prospects PRESENTATION BY SS Kohli Chairman & Managing Director INDIA INFRASTRUCTURE FINANCE COMPANY LTD NEW DELHI

INDIA GROWTH STORY India’s economic growth is attracting wide attention India & China are enjoying high economic growth In India’s growth was 9.4% Economic prosperity is placing huge demands on infrastructure India is the third largest economy behind USA and China

Infrastructure Requirements World Economic Forum has noted that India’s annual investments in infrastructure between 1998 and 2005 averaged 4% of GDP compared to 8.2% for China Government of India is addressing the infrastructure requirements 11 th Five Year Plan ( ) calls for more than doubling the financial outlay for infrastructure

Investment requirements Total financing requirements $492 billion in the next five years Of this, $147 billion to come from private investment Share of private investment in total to rise from 17% to 30% by Investment to touch $1.48 trillion by 2017

Interest of international investors Strong interest evinced by international investors in India’s infrastructure This includes Private Equity 3i, Blackstone etc International banks Citigroup, Macquarie Bank (Australia), Mizuho (Japan), Deutche Bank Multilateral institutions including ADB, World Bank, IFC, JBIC, KfW

Challenges before India India growth story likely to continue Strong economic growth will fuel further demand on infrastructure India should absorb the large investments in infrastructure sector to sustain growth momentum Indian rupee has appreciated against the dollar by 5% over the past year and 20% in the past five years

Development of PPP market in India PPPs in India are at a nascent stage Slew of measures by government 100% foreign investment allowed in infra sectors Model Concession Agreements evolved Viability Gap Funding (VGF) Setting up of IIFCL Regulatory institutions (Telecom Regulatory Authority, Port Tariff Authority) PPPs in India are accelerating 118 projects valued at $13.4 billion are progressing in roads, ports, airport sectors

Transport Sector – the potential in India Aviation infrastructure 100% foreign direct investment allowed $ 9 billion programme to upgrade 25 airports Delhi and Mumbai International airports – two PPP projects with estimated investment of $3.8 billion 19 greenfield airport locations identified Airport Economic Regulatory Authority being set up

Air transportation - growth Passenger traffic is projected to cross 100 million passengers p.a. by 2010 Cargo traffic to grow at over 20% p.a. over the next five years - To cross 3.3 million tonnes by 2010 Maintenance, Repair and Overhaul (MRO) growing in a big way MRO market expected to grow by 10%

Roads and Highways India has the second longest road network in the world of 3.3 million KMs Expressways and highways constitute only 2% of the above US $54 billion earmarked for the sector Cargo traffic expected to grow by % over the next 5 years

Roads - Potential 100% foreign direct investment allowed Incentives: - 100% income tax exemption for a period of 10 years - Grants/viability gap funding for marginal projects available - Model Concession Agreement formulated Opportunities in construction equipment (earth moving, material handling equipment etc), tolling equipment services and advisory (architecture, structural design, soil investigation etc)

Railways India has one of the largest railway networks in the world (63,000 route KMs network) Accounts for 30% of total freight traffic Traffic volumes set to double by 2012 Potential for rolling stock, locomotives, passenger coaches, track equipment, signalling equipment

Ports India has coastline of 7500 KMs 12 major ports; 187 minor ports Traffic has grown by a compounded average of 8.5% Traffic expected to reach 880 million tonnes by % of India’s exports & imports moved by sea India expects to double its exports to $150 billion in the next five years

Ports 100% FDI under the automatic route is permitted for port development projects 100% income tax exemption is available for a period of 10 years Tariff Authority for Major Ports (TAMP) regulates the ceiling for tariffs charged by Major ports Investment needed in the next 5 years $18 billion

Ports - Opportunity Opportunities exist in Development of greenfield ports Development of container and bulk terminals Logistics infrastructure Dredging services Port related equipment Ship building, ship repair, maritime training

Role of IIFCL IIFCL is a SPV to provide long term finance to infrastructure projects Overriding priority to PPP projects Finance projects in sectors like roads, airports, ports, power, urban infrastructure etc Since inception in April 2006 Financed 77 projects to the tune of $4.3 billion with a total project cost of $31 billion

Conclusion Investment requirements of infrastructure sector huge India growth story to continue 50% of the population is below 25 years Huge domestic demand Need to bridge infrastructure gaps to sustain economic growth Opportunities for international investors significant India can leverage on its vast human capital to successfully adopt the PPP model

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