The default crisis that has struck IL&FS, flagbearer of the public-private partnership (PPP) programme, may be the last straw for this once-promising avenue of infrastructure development, experts and executives said, adding that the government will have to take over that role once more The private sector’s enthusiasm for investment in infrastructure has in any case been waning for some time now, they said. India had aimed to fuel its ambitious infrastructure plans through PPP, but delays, the poor health of sponsors, stressed assets and the reluctance of banks to provide funding has derailed many plans with many projects headed to bankruptcy court. Industry believes that if India wants to create infrastructure, the government will have to do it. The infrastructure sector has been having problems since 2013 but the IL&FS case will be a nail in the coffin for PPP, said Hemant Kanoria, chairman and managing director of Srei Infrastructure Finance. India’s PPP story is over and government will have to fund infrastructure growth, he said. Operational projects will change hands, original promoters and banks will lose money. The acquirers, mostly overseas investors, will get a cheap deal and make some money. But nobody will invest in greenfield projects. His company changed tack some five years back and decided not to invest anymore in infrastructure but to focus on equipment lending, which he says is thriving thanks to government-financed projects. According to the Economic Survey, India will need to invest about $4.5 trillion to upgrade and increase the capacity of its creaking, choked infrastructure, of which it should be able to garner about $ 3.9 trillion. Rising income levels and economic prosperity are likely to further drive demand for infrastructure investment over the next 25 years and widen the gap from the estimated $526 billion, experts said. PPP projects were not happening anyway because banks are not giving finance, not even for hybrid annuity, said Ajit Gulabchand.
IL&FS crisis may sound death knell for PPP
