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Wanted: Models

Wanted: Models

Urban infrastructure is a multi-billion dollar opportunity, but just who’s coming to the party?

In today’s world of trillion-dollar bailout packages, $20 billion seems small. But it’s not an amount to be sneered at either, especially when it’s the size of the investment required in just the water and waste water management business in urban India by 2020. Add roads, solid waste treatment and transport systems, and the opportunity is huge.

“Compared with the NDA regime, whose best contribution was the Golden Quadrilateral project… the UPA’s primary achievement has been its declaration of intent,” says Sanjiv Paul, Managing Director, Jamshedpur Utilities & Services Company (JUSCO), which manages amenities across cities. Paul gives the UPA full marks for focussing on water and sewage management. “The results of their intentions will show in the coming years,” he says.

The Jawaharlal Nehru National Urban Renewal Mission (JNNURM), launched in 2005 to cover 63 cities, seeks some Rs 1,20,536 crore, with almost half for seven mega-cities— Delhi, Mumbai, Chennai, Kolkata, Bangalore, Hyderabad and Ahmedabad. So far, it has sanctioned 442 projects adding up to Rs 47,794.30 crore.

Then, water. Coastal areas could use desalination plants. GE Infrastructure is looking at Gujarat, Andhra Pradesh and Tamil Nadu, and water recycling plants in dry Rajasthan and Gujarat.

French major Veolia’s Indian unit is already supplying water in Chennai, Nagpur and Karnataka. “Initially, we were handed 10 per cent of the city… and gradually other parts were given to us,” says Promod Mitroo, Director, Veolia India. In terms of revenues, Veolia charges the civic bodies, which, in turn, bills the consumers.

Next, mass rapid transport.
Every city wants a metro service, so Delhi Metro Rail Corporation is playing consultant in nine cities. The investment required: Rs 83,000 crore for 750 km of rail track.

So, why isn’t there a rush? Ajit Gulabchand, CMD, Hindustan Construction Company (HCC), cites three reasons. First, most cities don’t have a third-tier of governance empowered to take funding decisions. Second, people are still reluctant to pay for services so far subsidised. “Lastly, private sector players require viability gap funding,” he says.

Hemant Kanoria, CMD, Srei Infrastructure, says opportunities for the private sector in the JNNURM are very few. “There are not many successful public-private partnership projects that can be used as a model… More importantly, there needs to be a financial model in place,” argues Kanoria.

Besides, as Neeta Ramnath, VP, Feedback Ventures, points out: “Unless we are talking about an Outer Ring Road, which is more of a real estate play, or waste treatment, the other projects are not commercially viable.” Mega-infrastructure projects like highways, airports and ports are what private equity is looking at for investments.