A material ramp-up in government spending in the past few years has meant the share of private investments in infrastructure has fallen to a decadal low of around 25% in fiscal 2018.

The share, which averaged 37% between fiscals 2008 and 2013, fell 600 basis points (bps) between fiscals 2013 and 2017 as a plethora of stalled projects and stressed assets dampened investor interest and risk appetite.

While the highways sector has seen a revival in public private partnerships (PPPs), and the renewables sector some buoyancy, private investments in other infrastructure segments have remained stagnant or weak.

“Resumption and broad-basing of private investments has become critical to sustain the share of infrastructure investments at ~6%of GDP over a medium-to-long term,” said Ashu Suyash, Managing Director and CEO, Crisil Limited. “This requires new PPP frameworks, expeditious resolution of stressed assets, and steps to deepen financing sources.”

The investment trends are reflected in the scores of Crisil InfraInvex, India’s first investability index that tracks the development and investment attractiveness of infrastructure sectors, which was published along with the Crisil Infrastructure Yearbook 2018.

The highway sector saw the biggest rise in Crisil InfraInvex score – from 6.9 in 2017 to 7.4 in 2018 – riding on private sector interest in the hybrid annuity model (HAM) and success of asset monetisation under the toll-operate transfer model.

The Crisil Infrainvex scores of last year’s toppers, power transmission and renewables, lagged a tad given the high suo motu allocations to public sector in the former, and policy and pricing headwinds in the latter. Ports and airports saw an improvement, too, but conventional generation, power distribution and urban infrastructure continue to lag.

“A sustained push to asset monetisation to augment resources for higher public spending, given continued reluctance of private sector to take on greenfield risk, is imperative, and this would require recalibration of PPP models,” said Sameer Bhatia, President, Crisil Infrastructure Advisory. “Asset monetisation, if done effectively, could help raise ~Rs 3 lakh crore in just the highway, power transmission and airports over 3 years. Cumulatively states also have the potential to stump up similar amount.”

Overall, Crisil recommends three steps to change the climate for private investments in infrastructure:

• Empower public counterparties so that they develop the necessary financial and institutional capacity. Simultaneously, build capacity to prepare a pipeline of bankable, shovel-ready projects worth $150 billion annually.
• Deploy a wider range of PPP models, including asset monetisation and investment-light structures that reflect sector-specific nuances, recalibrate risk-sharing, and redraw PPP contracts to broad-base them beyond the highway sector.
• Engender deeper financial markets for competitive long-term financing.