'Infrastructure spending is the only way forward'..........

'Infrastructure spending is the only way forward'
Shaleen Agrawal


Now that reformer Manmohan Singh is all set to reclaim the Prime Minister's throne once again, the infrastructure industry has much to cheer about. Like everyone else, Hemant Kanoria, the chairman and managing director of SREIInfrastructure Finance Ltd, too, has a wish list for thegovernment, which he elaborates on in a chat with DNA Excerpts from an interview:

What is your wish list for the new government?

Whichever government comes in, I hope infrastructure remains its focus. Our wish is that whatever hasn't happened on the infrastructure side yet should be made to happen now. This includes creating an enabling environment so that infrastructure financing institutions can raise long-term money easily, either through external commercial borrowings (ECBs), or through IIFCL, or through bonds.
Another thing required is a set of reforms for the infrastructure sector, whether it is roads or ports. There have been many problems with the set of policies that we have lived through for 20 years. Now is the right time to rejig that, simplify and see that the bottlenecks that have hampered speedy implementation of infrastructure projects are removed. Yet another move should be the removal of multiplicity of taxes, which confuses everyone in this sector. There has to be continuity. It's not very difficult. It just requires a change in mindset.

What are the specific reforms you want to see?

I'll explain them with examples. Today we have open access in electricity as per the Electricity Act 2003, and we are in 2009. As open access is allowed, we should have had lots of transmission companies and lots of distribution companies starting off.But that has not happened.

But that's not the policy's fault. The implementation is faulty...

If one goes back to the policy itself, there are a lot of complications, and that is why the implementation won't happen. If we move at this pace, it will take a lot of time to implement all the infrastructure projects. Everyone has been talking about improving infrastructure for 20 years, but the bridging of the gap between requirements and completion hasn't been done.
How many roads have we been able to complete? How many power plants have come up? How many ports have been build? We have done several small things, but if we want only to trudge along, this is the right way. If we want speedy implementation, we have to find out what is drastically wrong.


In times of slowdown, is it wise to infuse capital into long term infrastructure projects that bear fruit in years instead of spending money towards increasing retail consumption, which would immediately revive the economy?

There is a difference between western countries and India. Europe and the United States are excessively consumer-driven markets, and that is the problem today that the US is facing. Everyone has borrowed money to spend, which is not the right thing to do. Consumer spending is good only up to a certain extent. But if we create infrastructure, it will reduce cost of delivery to the consumers and money will ultimately come into the consumers' hands.
By building infrastructure, we will also buy cement, steel and other things, and generate employment. But by creating consumer spending we will not put money into productive purposes. Also, it does have an immediate impact. The government decided in February that they will see to it that all the projects start coming up faster, and as a result, the cement and steel prices went up immediately. Thus, infrastructure spending is the only way for the government to go forward. The government should also invest in agriculture, as there is huge domestic demand that has also insulated us in this crisis.

Comments:
I have recomended Srei Infra here many times.I don't think I need to revisit all my post here.One can have a look at them in my old post.
Srei Infra is still a buy and I have given reasons for that.Sree also wrote me that it is running like anything.