NHBF Magzine

February 3, 2014 NATIONAL HIGHWAYS BUILDERS FEDERATION
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NEWS UPDATES

TABLE OF CONTENTS:

20 highway projects may go for re-bid if govt approves report
My way on the highway
Half-built flyover spells trouble for motorists
Tiruchi-Karaikudi bypass project on fast track
Flyover, underpass at Hero Honda Chowk gets NHAI, govt nod
How to gain from the fall in inflation
NCDs rise in popularity as a debt instrument
Critical need to improve infrastructure sector to boost growth
India-Japan summit: Infra clearly a growing story
Japan to provide Rs 1,267 cr loan for road project in Bihar
Afghan builders interested to form JVs with Indian firms: Ficci
Ashoka Buildcon selected bidder for KSHIP WAP-2 project
Project monitoring group clears hurdles in 84 mega projects
Work on Rs 800-crore terminal at Cochin Airport to begin tomorrow
Panel on coal linkages to meet on February 19
Abu Dhabi's TAQA to acquire two hydropower assets from Jaypee Group for Rs 12,000-13,000
crore

*Contact for advertisement in this daily e-newsletter:
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BUSINESS STANDARD
20 highway projects may go for re-bid if govt approves report
Manu Balachandran | New Delhi :As many as 20 road projects worth Rs 20,000 crore, awarded
between 2011 and 2013, could be scrapped and might be re-bid if the Cabinet approves the
recommendations made by a panel led by the Prime Minister's Economic Advisory Council
chairman, C Rangarajan, on rescheduling of premiums. The projects haven't taken off because of
unfavourable economic conditions and lack of funding. Developers were seeking lenient
premium-rescheduling norms.
According to experts, the projects have seen an escalation of 30 per cent on account of costlier
land and raw materials. Earlier, National Highways Authority of India (NHAI) ChairmanR P
Singh had also written to the roads ministry about the rising costs. According to the letter,
projects witnessed a 26 per cent rise in costs in the past two years and private developers were
seeking the rescheduling to factor in the rising costs of construction, on the back of an economic
slowdown. "In all likelihood, the developers would walk out of the projects. If they go for re-
bids, that will essentially mean we will not see aggressive bidding or may have to seek the
government to fund the projects," said a senior NHAI official.
ROADBLOCK
Highway projects worth Rs 20,000 crore havent taken off because of
unfavourable economic conditions and lack of funding
Projects have seen an escalation of 30 per cent on account of costlier land and
raw materials
Private developers were seeking lenient rescheduling norms to factor in the
rising costs of construction on the back of an economic slowdown
If projects go for re-bids, they would not see aggressive bidding or might have
to seek the government to fund the projects
According to the Rangarajan committee report given to the government last week, projects facing
economic stress are allowed to avail relief under a revenue shortfall loan clause given in the
model concession agreement. The amount of shortfall between the toll revenue collected by the
highway developer and expenses incurred, including operation and maintenance costs and debt
servicing and premium payments, will be extended as a loan to companies which have been
seeking a rescheduling of premium.
Premium is the amount road developers have to pay the government for build-operate-transfer
projects on the assumption that the returns from the project would be quite high. The amount is
decided at the time of bidding on the basis of projected future traffic flow.
Contd.

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According to an industry source, NHAI has already worked out deals with 10 road developers
and the projects could be re-bid soon. "Some have been terminated and in some cases, the road
developers have backed out. There are 10 such projects and we are likely to see another five or
10 being added to that list. This could include the GMR projects worth Rs 5,500 crore."

In an interview to Business Standard last week, Planning Commission member, B K Chaturvedi
had said the road projects should be scrapped and re-bid because work had not started on any of
the projects. "We need to draw a line somewhere and in some of these projects not a brick has
been laid out... My view is we scrap them and go for re-bids. I think the committee has proposed
a reasonable package and all they are saying is, build up the roads and service the debt,"
Chaturvedi had said.
Industry experts believe scrapping some projects would bring some stability in the road sector.
"There has been aggressive bidding in the past. Now when the projects go for re-bid, we will see
a moderate, cautious bidding. In the long-run, the committee's recommendations will be good for
the road developers," said the CEO of a leading infrastructure company.
The roads ministry has been looking at ways to improve investments into the sector. It recently
notified a revamped exit policy to allow companies to exit road projects. "The recommendations
will help developers who are involved in the two-lane to four-lane construction. There are so
many riders in the report and one of them is on the loan. India Infrastructure Finance Company
currently lends at 11.35 per cent and the committee recommendations also work out to the same.
Then there is the penalty. In that sense, it will become difficult for highway developers," said M
Murali, director-general, National Highway Builders Federation.

THE TIMES OF INDIA
My way on the highway
Dipak Kumar Dash,New Delhi:The new roads are smooth-sailing , but recovering investments is
going to be a long journey for private developers as commuters across India, backed by political
parties, refuse to pay toll
Just days before Maharashtra Nav Nirman Sena (MNS) leader Raj Thackeray reportedly incited
party members to vandalize toll booths across highways in Maharashtra , residents from Rohtak,
Haryana, were organizing a more peaceful protest of their own. United as the Toll Bachao
Sangharsh Samiti, they negotiated to lower toll tax on the Rohtak-Panipat highway.
The timing of both incidents is no coincidence with elections around the corner, there is a
likelyhood of similar protests nationwide. Political outfits like the Shiv Sena-BJP combine and
Aam Aadmi Party have already put forth their intent to make roads across Maharashtra and
Haryana tollfree , if they come to power. And while the National Highways Authority of India

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(NHAI) have resolved the problem at the Delhi border toll plaza on Gurgaon Expressway
reportedly, it may become toll-free soon NHAI officials say it will be tougher to find solutions
on other stretches where similar demands have been raised.
Central and state governments maintain that private investment is essential to meet India's
growing demand for better roads. Private investment has increased significantly from Rs
9.323 crore during 2002-2007 to around Rs 60,000 crore during 2007-2012 . Developers recover
money by collecting toll in their contract period, a uniform rate based on type of vehicle and
grade of road set by government.
But questions are being raised about whether commuter concerns are being ignored. All India
Confederation of Goods Vehicle Owners' Associations president Chittranjan Dass says, "Road
development should be oriented towards need of road users' and not for pampering the
concessionaires."
According to highway ministry officials, commuters are against paying toll for different reasons.
"Some believe the government already collects taxes and cess for road development. Others
accuse developers of failing to provide facilities managing traffic congestion , the upkeep of
roads," says an NHAI official. A senior official adds that most complaints are related to bad
roads even after developers collect toll or on stretches where toll is collected while construction
is underway, like the Gurgaon-Jaipur highway. "Developers must provide the best services . For
example, if the Gurgaon Expressway operator had managed to improve traffic flow at the border
there would not have been objection to toll," says highways secretary Vijay Chhibber.
CPM leader Sitaram Yechury, has questioned why people are made to pay a fee when there are
no public conveniences for commuters along highway corridors.
SP Gupta of People's Voice, which had filed a case against toll on Gurgaon Expressway in
Supreme Court, says that in several locations, the NHAI and state public works departments have
closed service roads to ensure everyone pays toll. "The state must ensure people get a free road.
Those opting for a signal free road can pay for better facility," he says. Often protestors are local
commuters and farmers, who pay toll even for using a small stretch of the highway . This was
what fuelled protests by Bhartiya Kisan Union in Western UP in 2012, who were objecting to
farmers carrying fodder in tractors having to pay toll.
Organizations highlighting commuter woes say the simmering discontent is erupting in violent
protests across the country. "Positioning the plazas at city entry/ exit points results in long
queues. Also, several plazas are perceived to be overcharging and not providing committed
services ," says SP Singh of Indian Foundation of Transport Research and Training, a think tank
on transport issues.
Dass, however, believes protests and vandalizing toll plazas are not the solution. Protests against
toll have already derailed road development projects in Kerala and West Bengal. Now there are
fears whether violent protests in Maharashtra and UP will also drive investors away. As M
Murali, director-general of National Highway Builders Federation (NHBF), points out,
developers will claim damages from the government. "There are clauses in every contract

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agreement for such compensation and the contracting party from government side has to make
that payment. This will be followed in Maharashtra . Soon we are also going to approach NHAI
and the road transport ministry on cases of similar protests on NH stretches," he says.

THE TIMES OF INDIA
Half-built flyover spells trouble for motorists
Debabrata Mohapatra,BHUBANESWAR: Safety measures are allegedly amiss at an under-
construction flyover near Vani Vihar, which witnessed two accidents this month. A biker had a
bad fall on Saturday night after he took the incomplete flyover by mistake. A similar mishap had
taken place on January 16.
Police and NHAI officials expressed ignorance about the latest mishap. "It is the responsibility of
the NHAI and the infrastructure company to adopt precautions at the under-construction
overbridges. We will ask them to install barricades and signages at the construction sites," DCP
(traffic) S Shyni told TOI. She is scheduled to convene a meeting with the officials of NHAI and
the infrastructure company on Monday.
While traffic police are trying to locate the accident victim, construction workers said he
survived after falling on a heap of sand. On January 16, businessman Srinivas Barik too took the
flyover in front of Satsang Vihar and tumbled over at Vani Vihar up to which it has been
completed. "There was no stop board or warning while I was coming from Rasulgarh. Besides,
there are no lights to guide motorists. Luckily, I escaped with minor injuries," Barik said.

Inspector-in-charge of Saheed Nagar police station confirmed the January 16 accident.
Commuters accused traffic police of being lenient to the company, constructing flyovers on NH-
5. "The company should be taken to task for not ensuring safety measures at the construction
sites. It is difficult to cross the stretch due to poor illumination," said Bijay Mishra, a Nayapalli
resident.

The NHAI and construction company authorities rubbished the allegations. "We have taken
adequate safety measures and put up signages," said an NHAI officer.

THE HINDU
Tiruchi-Karaikudi bypass project on fast track
S. GANESAN: TRICHY: The by-pass road, linking the Tiruchi-Thanjavur and Tiruchi-
Pudukottai highways, coming up near Tiruchi.
It would help BHEL and surrounding ancillary units

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Work on the development of 107-km Tiruchi-Karaikudi highway, including the laying of a
bypass between Asoor on the Tiruchi-Thanjavur Highway and Mathur on the Tiruchi-Pudukottai
highway, is expected to be completed in six months as the Madras High Court had recently given
the go-ahead for the project.
The Madras High Court, in a recent order, upheld the petitions of the National Highways
Authority of India (NHAI) quashing the Public Works Departments orders stopping work on the
project on grounds that the alignment of the road impacts water bodies. The stop-work notices
initially stalled the Rs. 374-crore project. However, the NHAI had obtained an interim injunction
early last year to continue with the project, which involves laying of new bypass in Tiruchi,
Keeranur, Pudukottai, Thirumayam, and Karaikudi. The High Court has directed the NHAI to
preserve the water bodies and carry out dredging or restoration, if required.
The PWDs stop-work had mainly impeded the laying of the bypass from Asoor to Mathur.
Although the NHAI went ahead with the project after obtaining an interim injunction, work on a
couple of stretches along the bypass had remained suspended after farmers objected to laying the
road across irrigation tanks near K. Sathanur.
According to sources in the NHAI, a major portion of the 26-km bypass has been completed.
Already, about 15 km of the bypass had been laid and the work on the remaining portion will be
completed soon. An overpass has to be built at Kumaramangalam. On the Tiruchi-Karaikudi
section, work on nearly 75 km has been completed out of about 84 km. Being executed on the
build-operate-transfer basis, the project would be completed in the next six months, the sources
said.
Once completed, the bypass forming part of a semi ring road around the city would help quick
and hassle-free transportation of material from the power sector major BHEL and ancillary units
located around Thuvakudi.

THE TIMES OF INDIA
Flyover, underpass at Hero Honda Chowk gets NHAI, govt nod
Dipak Kumar Dash, NEW DELHI: The expressway's second big traffic hurdle has fallen in as
many weeks.
The Haryana government and the National Highways Authority of India on Friday approved a
three-level crossing at Hero Honda Chowk, paving the way for the corridor's other big bottleneck
to be resolved after bankers last week agreed to remove the toll plaza at Sirhaul.
The three-level crossing, which will see a flyover being constructed over the existing road and an
underpass below the intersecting road, got in-principle approval from both sides and will be built
with an approximate investment of Rs 150 crore.

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After proposing and junking several plans to solve the perpetual logjam at this crossing in the
past six-seven years, the highways ministry recently decided to build a flyover on the existing
highway for smooth flow of traffic. "We have gone a step ahead to find a complete solution to
the traffic problem. Once the three-level crossing is constructed, traffic can move seamlessly in
all directions," said NHAI chief general manager Dr B S Singla.
The project includes an eight-lane flyover on the main Delhi-Jaipur Road (NH-8) for traffic
coming from both Delhi and Jaipur. Cars moving across the expressway, between Subhash
Chowk and Old Gurgaon, can take the four-lane divided underpass. Traffic taking a right turn at
the crossing will use the existing road.
Both the highways ministry and the Haryana government have agreed to implement the project
with complete government funding. The final project cost is yet to be worked out. While the
NHAI will foot 75% of the bill, the remaining 25% will come from Haryana. The state
government will also provide the required land for construction.
It was also decided on Friday that Haryana government will clear all encroachments so that work
can start without any hassle. The meeting was attended by top officials from NHAI, Haryana
Urban Development Authority, Public Works Department and authorities from Gurgaon besides
the city police commissioner.
"Once the estimate is worked out we will get the approval from highways ministry and tendering
will start," said a source.
In October, highways minister Oscar Fernandes had said that the flyover will be operational in
the next 18-20 months.

THE TIMES OF INDIA
How to gain from the fall in inflation
Narendra Nathan | New Delhi:At long last, there is some -respite on the inflation fronttheretail
inflation based on the consumer price index (CPI) returned to single digits in December 2013,
hitting 9.87% from 11.24% a month earlier. The wholesale inflation also came down to 6.16% in
December (see Falling inflation). More importantly, the fall in both these numbers was well
above the market expectations.
The big question now is: which way is inflation headed from now onwards? Says Indranil Sen
Gupta, India economist, Bank of America Merrill Lynch: "Inflation is expected to fall for a few
more months." The recent fall in wholesale and retail inflation is primarily due to the easing of
vegetable prices. Since the latter is continuing to drop, so should inflation.


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However, don't rush to celebrate yet because the fall may be a short-term phenomenon. The
current dip in vegetable prices is due to the winter and may climb back at the onset of summer.
The low base effect of April/May last year, when the wholesale inflation was below the 5%
mark, is another reason inflation may rise. The wholesale debt market has already started
celebrating the fall in inflation. For instance, the yield of the 10-year government of India papers
has fallen to 8.64%, a two-and-a-half month low (see 10-year yield). "We see the 10-year yield
coming down further to 8% in the next three to six months," says Gupta.

Here's a look at some investment products that can help you benefit.

Long-term income and gilt funds
Since the price of debt papers and yield are inversely correlated, the recent yield fall has resulted
in a rally of corporate debt/gilt papers. This is clearly visible in the NAVs of long-dated income
and gilt funds. Most of them had given a 2-3% absolute return in the past month (see Top 5
tables). Since the yield is expected to fall further, shifting assets from short-term debt and liquid
funds to long-term debt funds is a good strategy. If inflation rate, as well as interest rates, drop in
the coming months as expected, investors in these long-term income and gilt funds stand to enjoy
further gains.
However, financial planners advise not to go overboard with this strategy. To begin with, this is a
high-risk, high-return strategy. Each of the one-month best performers have given paltry or even
negative absolute returns in the past year when the interest rate rose.
If you choose to take this route, shift only a part of your portfolio. "Long duration funds should
only form a small part of your portfolio," cautions Raghvendra Nath, managing director,
Ladderup Wealth Management. This is because inflation is not the sole factor that decides
interest rates. So, any untoward incident at a global level, say, a re-emergence of the debt crisis in
Europe, can unsettle the applecart once again. Secondly, you need to stagger your investments.
"The best strategy to invest in long duration funds at present is to do it in a phased manner till
end-March," says Anil Rego, CEO, Right Horizons. Given that March is typically a month of
tight liquidity due to the advance tax outflow and other year-end considerations, the yield may
firm up once again during that period. Lastly, don't get carried away by short-term return
possibilities and stick with the long-term view while investing in such high-risk products.
"Though you can book profit if the interest rates fall significantly in the middle, the original
investment horizon should be at least two years," adds Rego.
Tax-free bonds
The high-interest tax-free bond issues from government-sponsored entities are the best option at
the moment. Since an 8.75% post-tax interest works out to 12.66% pre-tax interest for investors
in the 30.9% bracket, this is a no-brainer. "This is also the best option for retired people since

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they can lock in at high tax-free rates for a very long time," says Rego. This explains why the Rs
2,100 crore NHB tax-free bond offering, which provided retail investors 9.01% on its 20-year
paper, got oversubscribed on the first day itself. Though the rates have come down since then,
both the issues that are currently available in the marketIRFC and NHAI-offer good returns
for 10-year and 15-year papers (neither player offers 20-year -papers). Though these are long-
term investments, there is no lock-in period and are listed in the market. This means that it will
also generate a short-term trading opportunity if the expected fall in interest rate continues. In
fact, many of the recent issues are already quoting at a premium.

Should you pick the IRFC or NHAI? If you are a retail investor and want to put in only a small
amount, go for NHAI because it is -offering better coupon rates. If you are a high net worth
individual (HNI) and want to invest, say, Rs 20 lakh, invest equally in both offerings rather than
going for NHAI alone because the rate on offer for HNIs is less by 25 basis points.

Bank FDs and fixed maturity plans

Fixed deposits are offering decent returns at present, but there is no reason to rush and park your
funds here. The credit-to-deposit ratio is high for banks and they may try to corner more deposits
by keeping the rates high. Taxation is another problem with FDs, especially for HNIs.

It is better to go for the tax-efficient fixed maturity plans (FMP) from mutual funds. The yield on
one-year FMPs is around 9%, which is good to lock in at. However, FMPs are closed-ended
products and only investors with holding power should get in.

Equity

This asset class also benefits from falling -interest rates. Firstly, it helps companies report a better
profit since their interest burden reduces. The sale of several rate-sensitive sectors also picks up.
Several stocks, such as banking, real estate, auto and capital goods, are picking up momentum
after the drastic fall in inflation numbers. However, the Indian economy is going through a slow
growth phase and, hence, getting into equity market only to benefit from the falling inflation and
interest rates may be risky.

Financial Chronicle
NCDs rise in popularity as a debt instrument
By Ravi Ranjan Prasad/, Mumbai:

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Last year witnessed the maximum number of debt issuances, mostly via NCD issues, with 32
offers mopping up Rs 34,392 cr
Amount rose through debt offers like non-convertible debentures (NCDs) and tax-free bonds in
the primary market have been on the rise since 2009 as companies are finding it increasingly
difficult to raise funds through the initial public offering (IPO) route. Last year witnessed the
maximum number of debt issuances; 32 debt issuances mopped up Rs 34,392.50 crore, mostly
through public issue of NCDs, according to data analysis and research agency Primedatabase.

Popularity of NCDs as a debt instrument is particularly rising. Issuers of NCDs as well as the
regulators, Reserve Bank of India (RBI) and Securities and Exchange Board of India (Sebi), are
accordingly introducing new features to make NCDs a safe and investor-friendly product.

When one buys an NCD, one lends money to the issuer, the company that issues the bond. In
exchange, the company promises to return the money, also known as principal, on a specified
maturity date. Until that date, the company usually pays a stated rate of interest, generally semi-
annually, also known as coupon rate.

Experts say the rising popularity of debt offerings over equity offerings is due to investors
moving their savings to safer asset classes. NCDs provide attractive rate of returns to investors.

Observing frequent private placement of NCDs, RBI in a July 2013 circular has put some
restrictions. Such issuances can now be organised only after a six month gap and can be issued to
a maximum of 49 institutional investors. NBFCs have lately been raising resources from the
retail public on a large scale, through private placement, especially by issue of debentures,
Reserve Bank of India (RBI) said.
Companies issue bonds to raise money for a variety of purposes, such as building a new plant,
purchasing equipment, or expanding business.
These bonds do not have an ownership interest in the issuing company, unlike the companys
equity stock.
Companies also offer NCDs on private placement basis to select institutional investors at fixed
coupon rate, which sets the benchmark for the coupon rate to be offered to the subscribers in a
NCD public issue later.
Since the first tax-free bond issue in 2010-11 by National Highway Authority of India (NHAI),
there has been substantial fund raising through tax-free bonds by government-owned companies
over the past three years.
Such tax-free bond issuances are also in the nature of secured, redeemable, NCDs, with tax-free
interest payment being the additional feature.
Corporate bonds are debt securities that are generally considered as long-term investment option.
The maturity period of these securities ranges from one to 20 years. These bonds are mostly

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listed with major stock exchanges, such as the Bombay Stock Exchange (BSE) and National
Stock EXhange (NSE).
As per the provisions of companies act, appointment of debenture trustee to manage the servicing
of debentures and redemption liabilities is mandatory. However, issue of debentures/bonds with
maturity of 18 months or less is exempt from the requirement of appointment of trustee.

In case of debenture/ bonds with maturity beyond 18 months, a trustee or an agent is appointed to
take care of the interest of debenture/bond holders.

The exit options before the maturity period for NCDs and other type of bonds still remain rather
narrow due to the lack of depth in the bond market.
Corporate bonds tend to rise in value when interest rates fall, and they fall in value when interest
rates rise. Usually, the longer the maturity, the greater is the degree of price volatility, which
leads to price arbitrage opportunity, provided there is enough liquidity in the exchange market.

Also when interest rates rise, new issues come to market with higher yields than older securities,
making those older ones worthless. Hence, their prices go down.
When interest rates decline, new bond issues come to market with lower yields than older
securities, making those older, higher-yielding ones worth more. Hence, their prices go up. As a
result, if one sells a bond before maturity, it may be worth more or less than it was paid for.

By holding a bond until maturity, one may be less concerned about these price fluctuations
(which are known as interest-rate risk, or market risk), because one will receive the par, or face,
value of the bond at maturity.
Bonds and interest rates share an inverse relationship with each other, that is, bonds are worth
less when interest rates rise and vice versa.
Premature redemption of bonds on stock exchanges is still in its early year with volumes rising
slowly but steadily. Thus, exit options before maturity still remain limited.
Online order matching system for corporate bond trading was introduced on the recommendation
of RH Patil Committee that was formed to look into the factors inhibiting the development of an
active debt market.
Now stock exchange volumes of traded bonds are on a rise. On the National Stock Exchange
(NSE), corporate bonds traded daily on an average in January this year was Rs 1,076 crore as
against Rs 722 crore in January 2010.
The lower liquidity here is also being addressed by some bond issuers who have started their own
NCD buyback programme.

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The L&T Finance NCD issue was launched in September 2009 and the buyback option was
launched in May 2012, an L&T Finance spokesperson said.
L&T Finance has announced an NCD buyback programme for dated NCDs maturing in
September 2014 with coupon rates of 9.51 per cent and 9.62 per cent, maturing in September
2017 with a coupon rate of 9.95 per cent and maturing in September 2019 with a coupon rate of
10.24 per cent. The L&T Finance buyback programme is open for a limited period and the NCDs
have a buyback price. The buyback programme provides to investors an exit opportunity over
and above the available exchange trading platform. But there is a limit up to which investors can
tender.

Investors can tender up to 100 debentures in a quarter, that is, debentures worth Rs 1 lakh face
value.

In the buyback programme, the company accepts overall 5 lakh debentures per quarter from all
debenture holders.
The buyback price for each month is made available on L&T Finance website.
The pricing in the buyback is different from traded prices on exchanges.
L&T Finance fixes pricing in the buyback scheme on a methodical calculation, whereby,
benchmark G-sec yields and benchmark spreads as per the PDAI-FIMMDA curve are
considered.

The traded prices on the stock exchanges do not follow any particular yield pattern and are quite
erratic, mainly on account of the low volumes of trading. Hence, the pricing in the buyback could
be higher than, or lower than, or equal to the traded prices on the exchanges, L&T Finance said.

Experts say because there is no active market for non-convertible debentures in the capital
market segment of the stock exchanges, the liquidity and market prices of NCDs may fail to
develop and may accordingly be adversely affected.
L&T Finance says it will pay investors participating in the buyback programme the accrued
interest for the period from the previous interest payment date up to one day before the settlement
date, which is also is the date of dispatch of the money. So the investor doesnt lose even one day
interest till the last day of redemption.

Deccan Herald
Critical need to improve infrastructure sector to boost growth

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Sharada Prahladrao:Globally, adequate and efficient infrastructure is critical for industrial growth
and economic prosperity. Developed economies, such as the US and countries in Europe are now
grappling with how to repair/replace worn-out infrastructure with limited funding.
Governments the world over are focusing on the public/private partnership model to finance and
build infrastructure initiatives. Institutional investors are looking at this sector in terms of future
returns and inflation-hedging potential.
In developing countries, strategically planned and executed investments in the infrastructure
sector can help improve logistics and connectivity, equalise opportunities and provide the
wherewithal to compete in a global marketplace. But economic and political conditions have a
strong bearing on effective infrastructure investments. In an increasingly connected world, India's
infrastructure sector is impacted by downswings in other countries as it reins in international
funding.
India's economic growth is bogged down by multiple issues, but the infrastructure logjam is
perhaps the key constraint. Recent debates and conferences highlight that the infrastructure
sector, which encompasses the gamut from transport, buildings, water and wastewater, energy etc
is getting choked due to absence of integrated planning and logistical bottlenecks.

Rapid urbanisation for employment and better standard of living puts tremendous strain on the
infrastructure. These challenges include: providing basic facilities such as potable water, power,
etc; building mass transport systems; overhauling existing infrastructure; and perhaps most
important - timely completion of projects. According to estimates, by 2030 about 40 per cent
(600 million) of the country's population will be in urban areas. Evidently, infrastructure delivery
in India is hugely affected by fuel supply to the power sector.

Panelists at the National Infrastructure Summit 2013 concurred that while alternative sources of
energy are being considered and recommended, coal would remain the mainstay of India's energy
source. In this sector, environmental clearances were the common grouse but infrastructural
constraints and logistical bottlenecks emerged as the primary challenge in developing
incremental capacity. The total output of coal in 2012-13 is 557 million tonne and coal imports
135 mt.
In the 11th Five-Year Plan (2007- 2012), capacity was ramped up to 56,000 mw, of which 76 per
cent was thermal capacity. Since then capacity addition on an annual basis was more than during
previous Five-Year Plan tenures. Coal transportation is another challenge as the evacuation
logistics are inadequate. With the right logistics, production in each coal block can reach 100 mt
incremental capacity within three years. Substantiating this point is the fact that 300 mt of
additional supply potential is stuck due to the lack of three rail corridors in Jharkhand, Odisha,
and Chhattisgarh.

Improving connectivity

India is about sheer volumes - both in terms of population and aspirational demands. Every year,

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14 million vehicles get added. Although India has one of the world's densest road networks - 1.42
km per sq.km of land compared to 0.66 km for the US and 0.43 km for China - the number of
multi-lane highways is rather low. The decade-old underground metro system in New Delhi is
also approaching overcapacity. For smooth transition of goods and services it is vital to have
efficient road and rail networks.

The key challenges of the railway sector are: Inability to add to the existing railways network.
Since 1947 merely 10,464 km has been added whereas, China added 20,000 km in the last five
years. High freight rates are forcing commodities to shift to road transport. Share in freight
movement is only 30 per cent today (post-Independence it was 90 per cent). Reluctance to raise
passenger fares has resulted in operational losses. Losses in 2013-14 from passenger operations
amounted close to $4 billion.

The cost to build roads and transit systems to manage a huge population is significant, but it has
to be done in a comprehensive manner through long-term vision and planning. The Government
has allocated $1 trillion in the 12th Five-Year Plan (2012-2017) for infrastructure development -
focus will be on more private participation to build new roads. Statistics reveal that out of 564
infrastructure projects, over 40 per cent have been delayed.

According to the Department of Industrial Policy and Promotion (DIPP), the air transport
(including air freight) in India has attracted FDI worth $456.84 million from April 2000 to July
2013. In 2012-2013 total domestic passengers were above 65 million.

Although statistics show a marginal improvement, this sector is grounded by higher fuel prices;
the depreciating value of the rupee is also affecting airlines as 70-80 percent of costs (aircraft
leases, fuel) are dollar determined. High airport rates in Mumbai and Delhi have led economy
airlines such as Air Asia to withdraw flights from these airports. In the first quarter of 2013-14,
Indias 12 big ports, which account for about 58 per cent of the total cargo, shipped through the
countrys ports handled 137 mt of goods. Present port capacity stands at 750 mt and traffic
around 550 mt, which shows sub-optimal efficiency.

These are what need to be done to improve the port sector: connectivity with better road and
railway systems; expediting of environmental and security clearances; encourage investments;
improve efficiencies and reduce the turnaround (about 4.2 days) and pre-berthing detention time
(about 12 hours); mechanisation for faster cargo handling and reduction of labor costs; and
provide a level field for private operators with regularised tariffs.

Business Standard
India-Japan summit: Infra clearly a growing story
New Delhi: Much before Japanese premier Shinzo Abe's visit to India, Japanese investment into
India was on a steady rise, especially in the infrastructure sector. The growing India-Japan

17
economic cooperation, in fact, is increasingly been seen as a strategic alternative to Chinese
influence in the South Asian region.
Of the 51-paragraph joint statement issued on the first day of Abes three-day visit, some half a
dozen were devoted to cooperation in energy and infrastructure. These and defence cooperation
were the most important plank of bilateral talks.
"If one takes a close look at the statement, this one is much more explicit with several hints at the
China factor, compared to what it was in 2007 (when Abe earlier came to India). The very fact
that the statement emphasized on taking into consideration the strategic environment is proof
that the China factor loomed large on the visit, said Srikanth Kondapalli, chairperson, Centre for
East Asian Studies (School of International Studies) in Jawaharlal Nehru University.
On economic relations, though the highlight was expansion of bilateral currency swap
arrangement from $15 billion to $50 bn that came into effect from this month, Japanese official
development assistance (ODA) of a little over 200 billion was also negotiated. The two sides
agreed all instruments of funding of the Japan Bank for International Cooperation (JBIC) and the
Japan International Cooperation Agency (JICA), including the Special Term for Economic
Partnership, should be explored.
According to JICA, the Japanese cumulative commitment of ODA loans to India stood at 3,781
bn (Rs 229,100 crore) as of March 2013. JICA has signed around 230 ODA loan agreements with
India in various fields -- roads, metro projects, water supply and sanitation, environment
conservation, power and several other infrastructure sectors.
Kondapalli said in infrastructure development, while the Japanese have been making bold
announcements, actual work and progress on the ground has to be seen. While the intention is
there, India has to put its own house into order -- we have to tackle our environment laws, labour
laws, etc. We are very slow. Also, their assistance for developing the northeast region cannot be
delinked from the strategic moves they are taking. Abe came here just before the Diet (Japanese
legislature) session. This is enough proof for anyone to understand that Japan is serious about
India."
After the Delhi Metro rail, the Western Dedicated Freight Corridor is an important part of the
cooperation. The start of Phase-1 construction of the corridor in August 2013, which utilises
Japanese technologies, was reviewed during the talks. Nine projects financed by the DMIC trust
have already been approved.
Progress on the western corridor, however, has been slow to start with, compared to the World
Bank-funded eastern corridor. But JICA does not agree. We dont think Japanese-funded
projects are slower in implementation. Many of the projects being implemented with JICAs
assistance have also been completed ahead of the time schedule, said Shinya Ejima, JICA chief
in India. He cited the first phase of the Delhi Metro, covering 65 km, completed in 2005, two
years and nine months ahead of schedule. The second phase, too, was completed within the
estimated cost and well within the scheduled time, adding another 125 km, in 2011. This has
been viewed as a miraculous milestone achievement, he said.

18
In the railway sector, another major achievement is the commencement of a joint feasibility study
and issuance of the inception report for a high speed railway system on the Mumbai-Ahmedabad
route. They agreed the joint study should be completed by July 2015.
In energy, government-controlled NTPC, the countrys largest power generator, signed an
agreement for two loans totalling $430 million (Rs 2,650 crore) for its Kudgi and Auraiya
projects. Besides, the Japanese are financing a scheme for two smart community projects, a
model project for a micro-grid system using large scale photo-voltaic power generation at
Neemrana and a seawate desalination project at Dahej.
India is the biggest receiver of Japanese ODA and Indian companies the second biggest receiver
of assistance from JBIC after Chinas. Overall Indo-Jap cooperation is heavily directed towards
long-term participation in infrastructure, much of which comes from the enormous demand.
Japanese investment is geared to tap this.

THE ECONOMIC TIMES
Japan to provide Rs 1,267 cr loan for road project in Bihar
NEW DELHI: Japan International Cooperation Agency will provide Rs 1,267 crore loan
for Bihar's National Highway Improvement Project.
Under the agreement signed between JICA and the Centre today, the loan is being
provided for upgradation of National Highway 82 connecting Gaya and Bihar sharif in
Bihar covering 92.93 km, a release said.

NDTV PROFIT
Afghan builders interested to form JVs with Indian firms: Ficci
New Delhi: Builders from Afghanistan have evinced interest in collaborating and forging
joint ventures with Indian companies for executing projects in the war-torn country in
housing, road construction, schools and hospitals.
The businessmen from Afghanistan "have also shown interest to source all kinds of
building materials and building equipments/machinery," industry body Ficci said in a
statement issued after its interaction with members of Afghanistan Builders Association
(ABA).

A 35-member Afghan delegation, led by ABA, is here on a visit.

19
It said India is in the final stages of preparing a draft memorandum of understanding
under which India will help Afghanistan in developing roads. Highways and share its
knowledge in transportation technologies.
India has carried out several construction and infrastructure projects in Afghanistan,
including building of Afghanistan's Parliament.
ABA President Naeem Yassin said that the delegation's aim was to connect construction
firms of both the sides, facilitate joint venture opportunities in Afghanistan and explore
investment opportunities in construction sector.
"ABA facilitates international investors and companies to work in Afghanistan in
construction field," it said quoting Yassin. The bilateral trade between the countries
stood at $632.18 million in 2012-13.

MONEYCONTROL

Ashoka Buildcon selected bidder for KSHIP WAP-2 project

Ashoka Buildcon Ltd has informed BSE that Company along with GVR Infra Projects
Limited, as a Consortium (51%:49%) had submitted its bid to The Chief Project Officer,
Karnataka State Highways Improvement Project ("KSHIP") engaged by Government of
Karnataka (Public works Department) for the Project viz. PROJECT NO. WAP - 2: -
Design, Build, Finance, Operate, Maintain and Transfer (DBFOMT) the Existing State
Highway (SH18) from Mudhol to Maharashtra Border (Approx length 107.937 Kms) in
the State of Karnataka on DBFOMT Annuity Basis" ("Project").The project is on Annuity
Basis with a Concession Period of 10 years and KSHIP cost of the Project is Rs. 317.60
Crores.The Chief Project Officer, Karnataka State Highways Improvement Project, has
declared the Consortium as a "Selected Bidder" for the aforesaid Project vide Letter of
Award dated February 01, 2014.Source

Project monitoring group clears hurdles in 84 mega projects
Entail investments worth 3.71 lakh crore in the past seven months
Kolkata:

20
The Project Monitoring Group (PMG), attached to the Cabinet Secretariat, could sort out
problems for some 84 mega projects totalling 3.71 lakh crore investments in the past
seven months since the inception of the group.
Anil Swaroop, Chairman of the PMG, told here that actually problems for more projects
about 137 have been resolved. But, we have received clear information about 84
projects. Other project implementation agencies, mostly private sector ones, have been
slow in filing updated inputs about progress of their projects, he added.
PMG identified some 419 stalled projects worth almost 20 lakh crore that had been
pending for years.
He said projects related to coal mining and evacuation formed the biggest chunk of the
stalled projects followed by ones that were stuck because of non-availability of forest or
environmental clearances. Some 70,000 MW worth coal related projects have been
cleared, the PMG Chairman added.
Swarup said that the Todi-Shibpur-Hazaribagh rail project work for coal evacuation
would start this month after decades of delay.
PMG has only been taking up projects worth 1,000 crore or more. He said that nine
States, including Andhra Pradesh, Maharashtra, Gujarat, Madhya Pradesh, Rajasthan
and Jharkhand, have decided to set up their own monitoring groups for projects worth
less than 1,000 crore.
West Bengal has also decided to set up such a group. The PMG Chairman on Friday
discussed the pipeline project linking Paradip, Haldia and Durgapur as also railway,
highway and power transmission projects. He said in West Bengal problems for the
mega infrastructure projects stemmed mainly from the issues related to land
acquisition.

THE ECONOMIC TIMES
Work on Rs 800-crore terminal at Cochin Airport to begin tomorrow
MUMBAI: Work on a new Rs 800-crore terminal at Cochin International Airport Ltd
would begin tomorrow in the biggest expansion since it started operations in 1999.
Kerala Chief Minister will lay the foundation stone for the world-class terminal tomorrow.
The development comes a day ahead of the work on the fourth international airport in
the state at Kannur kicking off on February 2.
"Chief Minister Oommen Chandy will lay the foundation stone for the new international
terminal tomorrow and the work construction will begin on the same day.

21
"The new terminal is likely to be opened to the public in two-and-a-half years. We are
investing over Rs 800 crore for the terminal," Cochin International Airport Ltd (CIAL)
Managing Director V J Kurien told PTI from Cochin today.
The other projects, involving over Rs 200 crore investments, are the second phase of
the CIAL would include a golf course, a solar power unit, a duty-free warehousing
complex, a golf academy, an aviation safety training institute, and an integrated airport
management system, he said.
For the Cochin airport, this Rs 1,000-crore ambitious plan marks its biggest expansion
since it began operations in 1999 as the first greenfield airport in the public-private
partnership model.
The new terminal will have three-times more built-up area of 15 lakh sq ft with 15
aerobridges that can handle a peak hour capacity of up to 4,000 passengers or 10
million passengers annually, Kurien said.
Meanwhile, Defence Minister A K Antony will lay the foundation stone for Kerala's fourth
international airport at Kannur, a multi-party joint venture on Sunday. The first phase of
the project involves and investment of Rs 1,590 crore.
The government will hold 35 per cent in the airport, Airports Authority 26 per cent, oil
major BPCL will have 23 per cent and the rest will be held by private sector,
including Federal Bank and NRI businessman M A Yusuf Ali, would hold 5 per cent
stateke each and the remaining 5 per cent would be given to NRK groups.
The new international airport is expected to be ready in 2015. Kerala already has three
airports in Thiruvananthapuram, Kozhikode and Kochi a fifth one is planned to come up
at Aranmulla in Pathanamthitta district in central Kerala.
The new Kochi airport terminal will help the airport, set up way back in 1999 under a
PPP model with investments individual public, mostly from non-resident Keralites, to
keep pace with its increasing passenger traffic that is growing by 12-13 per cent, Kurien
added.
MONEYCONTROL

Panel on coal linkages to meet on February 19

An inter-ministerial panel will meet on February 19 to review the status of existing coal
supply arrangements to the power and other sectors.
"The meeting of the Standing Linkage Committee (Long-Term) for
power/sponge/cement to review the status of existing coal linkages/letters of assurance

22
and other related matters will be held on February 19," according to a Coal Ministry
memorandum.
Amid continuous delays, the Cabinet Committee on Investment had earlier said
timelines for signing fuel supply pacts for power projects of 78,000 MW capacity should
be met.
State-owned Coal India has signed 157 fuel supply agreements with power producers
for a capacity of 71,145 MW, missing two deadlines.
Coal Minister Sriprakash Jaiswal had said that the remaining supply agreements would
be signed once technical glitches are addressed.
Coal India will supply as much as 80 per cent of a power producer's requirements, of
which 65 per cent will be sourced locally and 15 per cent will be met through imports.
The mining company last month invited fresh applications for supply of coal from
overseas to meet its obligations to power producers under the fuel supply agreements. It
plans to import 5 million tonnes of coal.

Abu Dhabi's TAQA to acquire two hydropower assets from Jaypee Group for Rs 12,000-
13,000 crore
By Arijit Barman,
The deal signals growing appetite among foreign investors for infrastructure assets. TAQA is
forming a consortium of sponsors to conclude this transaction
MUMBAI: Abu Dhabi's flagship energy and utilities company TAQA (energy in Arabic) is set to
acquire two hydropower projects in Himachal Pradesh from Delhi-based Jaypee Group at an
enterprise valuation of Rs 12,000-13,000 crore ($1.9-2.07 billion) signaling growing appetite
among foreign investors for infrastructure assets. TAQA is forming a consortium of financial
sponsors to conclude this transaction, said multiple sources involved in the process.

After months of negotiations, last week, TAQA's top brass met their counterparts in Jaypee in
New Delhi to finalise plans to buy the 300 mw Baspa II and the 1000 mw Karcham Wangtoo
projects on the Sutlej river.
TAQA has roped in Canadian pension fund PSP Investments and home-grown infrastructure-
focused PE player IDFC Alternatives - part of infrastructure finance company IDFC - to form a
consortium.

23

TAQA TO HOLD MAJORITY STAKE
The Abu Dhabi company will have operational control with a majority stake of at least 51%
while PSP will be a significant minority partner. IDFC is likely to have a 10% shareholding after
the deal is concluded. More financial investors may come in later.
The foreign direct investment could range from $875 million (assuming an enterprise valuation
of $1.9 billion) to $1.03 billion (at an enterprise valuation of $2.07 billion). The new investors
will inherit the project debt, which stands at close to Rs 7,000 crore.

The total project cost for the two power plants is about Rs 8,900 crore - including Rs 2,600 crore
of equity, which means TAQA and its partners are paying a substantial premium.

"Last Friday, both sides shook hands and agreed on the broad terms of this landmark deal.
Diligence and pricing discussions are already over. Some commercial conditions are yet to get
finalised, following which the final signatures will be appended and a formal announcement is
expected," said an official aware of the ongoing discussions. He spoke on the condition of
anonymity as the talks are still in private domain.

Since the latter half of last year, Jaypee's listed power arm Jaiprakash Power Ventures Limited -
India's largest private sector hydropower producer with 1.7 gw of operational capacity - has been
negotiating with TAQA to sell two of its three operating hydropower assets, often considered the
jewels in its portfolio.
ET was the first to report the discussions last year in its edition dated September 9, 2013.

24
The deal is expected to be announced by March-end. But with most of the terms being agreed
upon, the matter is likely to be discussed when Jaiprakash Power's board meets on Monday to
announce the third quarter numbers. ET was unable to verify if the proposed deal is part of the
formal agenda.
A Jaypee Group spokesperson refused comment, saying the company did not respond to market
speculation. "What you are saying is speculation and I will not comment on it. I am out of town
and am not aware of any meeting that you are referring to," added Suren Jain, managing director
& CFO of Jaiprakash Power Ventures.
"We are listed on the Abu Dhabi Securities Exchange. Any updates regarding new acquisitions
would only be made through stock exchange notifications. Our policy is not to comment on
rumours," TAQA's Abu Dhabi-based global spokesperson told ET.

Mails sent to PSP Investments did not receive a response till the time of going to press. The
IDFC Alternatives spokesperson was also unavailable for comment.
Last year, Jaypee Group had sold its Gujarat cement plants to Aditya Birla Group's UltraTech
for Rs 3,800 crore as part of an exercise to pare debt. Jaypee runs a diversified portfolio of roads,
cement and power plants as well as construction, real estate and sports companies. The group
owns India's only Formula One (F1) racing track.
PSP Investments is one of Canada's largest pension fund managers with $76.1 billion of assets
under management as of March 2013. The firm invests on behalf of the pension plans of the
Canadian Armed Forces, Royal Canadian Mounted Police and the Reserve Force. The Jaypee
deal will be its first direct investment in India.
IDFC's PE division (under IDFC Alternatives) has recently raised $644 million from investors in
continental Europe and America to be deployed in Indian roads, port and power projects. It aims
to raise up to a billion dollars in what would be the largest PE fund-raising in the past five years
for investments in India's core sector. Incidentally, PSP is also a sponsor (limited partner) to
IDFC's new fund.
Founded in 2005, TAQA - with 2012 revenues of $7.6 billion - is 72.5% owned by the Abu
Dhabi government and its various agencies. TAQA is the listed international business arm of
Abu Dhabi Water & Electric Authority (ADWEA). ADWEA has five subsidiaries that generate,
clean, buy, transmit and distribute water and electricity throughout the emirate. TAQA operates
in 11 countries across four continents, including a small presence in India.

According to company officials, TAQA's interests lie in conventional and alternative power
generation, water desalination, oil & gas exploration and production, pipelines and gas storage.
As of end-2012, its global assets are valued at $33.4 billion while its current global power
generation capacity stands at 16,395 mw.
Consulting firm EY is advising the Jaypee Group.

25
DELEVERAGING JP BALANCE SHEET
Analysts reckon both Baspa and Karcham Wangtoo are attractive assets. The former has been
operational since 2005-06 and has consistently generated close to 25% return on equity. It sells
100% of its output under a power purchase agreement (PPA) with Himachal Pradesh. In
Karcham Wangtoo, Jaiprakash Power Ventures is selling the entire output as a merchant power
producer.

The company had signed a PPA with Power Trading Corporation to sell 70% of the output on a
cost-plus basis. However, a dispute between the two on implementation of the PPA is being
adjudicated by the Central Electricity Regulatory Commission.

"At 1.25-1.5 times price-to-book, this is a great valuation keeping the net worth at around Rs
4,000 crore. Since commissioning, the projects have been accumulating profits of around Rs
1,400 crore. This will help bring down the (debt) stress," said an analyst at a foreign brokerage
who tracks the group and the power sector.
Jaypee, among the top 10 indebted corporate groups in India, had a gross debt of over Rs 63,000
crore ($10 billion) in FY13, as per a Credit Suisse estimate. Of that, Jaypee Power alone had
accumulated Rs 23,000 crore of debt, and by next fiscal this is estimated to reach close to Rs
28,000 crore as new capacities in Uttar Pradesh and Madhya Pradesh commence operations.
Flagship Jaiprakash Associates' shares have dropped 51% in the past one year. Jaiprakash Power
has also plummeted 63% during the same period. The scrip closed at Rs 13 on Friday.

After the disinvestment, the company plans to deploy part of the proceeds of around Rs 3,000
crore as equity for the Prayaraj and Nigrie projects in Uttar Pradesh and Madhya Pradesh,
respectively, said officials briefed on the matter. The group has said it would cut total liabilities
by 25% by selling assets in power, real estate and cement sectors. The sale, once consummated,
would help the conglomerate reach its target of paring debt by Rs 15,000 crore by June 2014. It
has already managed to bring down debt by Rs 6,300 crore by monetising cement plants and land
parcels.

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February 3, 2014 NATIONAL HIGHWAYS BUILDERS FEDERATION

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