Infra Finance Corp
To effectively tackle the acute cash crunch currently plaguing the country's infrastructure sector, the new government in partnership with Japanese investors is setting a finance corporation with a corpus of Rs 1 lakh-cr to take care of the financing requirement of the infrastructure sector, said official sources, claiming that in the new entity the Japanese partners are likely to have a 26% stake with assured returns of nine%. In order to prepare a roadmap to this effect, the concerned minister had already held meetings with the officials of ministries involved and a decision is expected very shortly. The toll revenue of around Rs 5,000cr, which the road transport ministry gets, would be reworked to generate funds for the purpose. In view of the prevailing financing shortage private investors have been shying away from bidding for projects in the tough economic environment coupled with land acquisition and environmental clearance tangles. As a matter of fact, a weak economy also meant slow growth in traffic, especially commercial traffic and this has made developers' initial revenue assumptions go haywire. Softening its stance on this score, the Centre even had to come out with a policy to reschedule premiums for road developers.

Due to drastically dwindling funding resources, in 2012-13, of the 7,464-km build-operate-transfer (BOT) target, only 1,115.75 km were actually awarded and in the last fiscal out of the targeted 5,000 km through the public-private partnership (PPP) mode, only 287 km were awarded and when the bids did not find takers among private-sector players the government awarded 2,500 km of projects under the EPC model. Similarly, for the current financial year, the government has set a target to award 3,000-3,500 km of projects through the BOT route and another 5,000 km via engineering, procurement and construction (EPC) route. It is worth mentioning here that unlike the BOT model, the government funds the entire project under EPC and developers carry out construction work. But under the BOT model private-sector developer generates and invests money for construction of roads at its own risk, while the National Highways Authority of India acquires land for projects. As of now, road projects worth Rs 83,000cr have been pending since 2009, only three projects have been completed, adding only 315 km to the country's existing highway network.