Even as the government is hoping to push through core sector projects in order to spur economic growth, state-run India Infrastructure Finance Company Ltd (IIFCL) said it is, at present, largely lending to projects in the renewable energy sector and there is no “immediate revival” in the infrastructure sector.
“We are currently not getting many projects in thermal power, which used to be the largest share, we are not getting any hydel power but we are getting a lot of renewable energy particularly solar and some wind … I am not seeing an immediate revival. There are still a large number of projects which are stuck, particularly power sector,” said SB Nayar, CMD, IIFCL.
Speaking to The Indian Express, he said that a large number of power and road projects are still stalled due to delays in land acquisitions and cost over runs as well as aggressive bidding by promoters.
IIFCL’s UK subsidiary too is registering muted demand.
“Unless the overall investment climate improves, it is difficult for it to lend. To lend, more projects have to come up before it can lend,” he said, however, adding that the UK subsidiary is doing well financially.
His comments come at a time when even the finance ministry is concerned over stalled infrastructure projects. In a review meeting in April, the Reserve Bank of India and finance ministry also chalked out plans to get 85 such projects back on track.
IIFCL was set up in 2006 by the government with the objective to boost funding to core sector projects by channelising long-term investments in the sector. Its subsidiary in the UK — IIFC (UK) Ltd was incorporated in 2008 to lend to Indian companies implementing infrastructure projects in India, or to co-finance their external commercial borrowings for such projects, for the capital expenditure outside India.
To further ease infrastructure funding norms, IIFCL has also proposed to the Reserve Bank of India to increase the 10 per cent cap on cost overruns in a project that banks and NBFCs are currently permitted to finance without treating the loan as a restructured asset.
“There are many projects which are more than 10 per cent so lenders even if they find it viable are not willing to lend it as they are afraid it may be classified as NPA. So many projects are stuck because of that. We have taken it up with RBI,” Nayar said.
He also expressed hope that the 5:25 scheme announced by the RBI would also help get some existing infrastructure projects. IIFCL reported a 47 per cent rise in its net profit to Rs 765 crore in 2014-15, as against Rs 521 crore in year-ago period. It disbursed Rs 60,220 crore of funds to 344 infrastructure projects by December 31, 2014.