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Three Needs of Indian Infrastructure: Revenues, Revenues & Revenues

Therefore, though much has been written and said about the opportunity and the challenges that Indian infrastructure involves, the next step should be a renewed focus on "revenues" that assets can generate

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By Taponeel Mukherjee

The current discourse on infrastructure focuses on the amount of funding needed for its creation. While the talk about the need for funding is essential, to indeed create more funding for infrastructure, the infrastructure ecosystem itself needs to start focusing more on “revenues”.

“Revenues” here mean the returns the infrastructure assets will generate to compensate the investors for the risk undertaken. Essentially, revenue generating mechanisms and greater clarity amongst investors on the revenue generating mechanisms that will create the cashflows to deliver investment returns are the keys to unlocking funding. In finance parlance, the discussion needs to focus both on the quality and the quantity of the cash flows from the infrastructure assets.

To move towards greater clarity on revenue generation, a clear catalogue needs to be created where all infrastructure assets required are broadly classified under three categories.

The first comprises assets that have a revenue-generating capacity to adequately compensate investors for the risk, e.g., a high-quality airport. Second, assets that have the revenue generating capacity, but need subsidies to provide an adequate return to the investors for the risks involved, e.g., a Metro railway project. The third are assets that have economic benefits but do not themselves generate revenues at all, e.g., a non-toll road asset.

For assets that generate revenues, the emphasis must be on clear contract design that elucidates the revenue waterfall for the asset and on the predictability of the cash flows. It is important to realise that the investors who are looking to invest in Indian infrastructure are mostly managing global portfolios across asset classes. Therefore, Indian assets need to compete with other asset classes from both India and abroad to attract capital. The greater the clarity around revenues and the associated risks, the easier will it be to draw a more substantial quantum of money for infrastructure, and that too at lower costs.

Infrastructure financing through improving “revenue visibility” and “revenue predictability” leads to a virtuous circle whereby greater clarity around revenues leads to both greater quantity and lower cost funding, which in turn helps more viable projects to take off. The “asset monetisation” scheme that has been in talks in recent times will get a significant boost if the focus on “revenues” is built up further.

Mumbai Metro One announced on Monday that it has achieved the 400 million passenger mark on its 1,423rd day, which is almost within four years of its operations.
Mumbai metro station (Representational image). Wikimedia Commons

For assets that require part or full subsidies, the government will need to get greater clarity on what component of the budget will finance the much-needed infrastructure. Across infrastructure sectors such as water, power evacuation and highways, clear demarcation of fund allocation, usage and results will be crucial in delivering the much-needed assets.

It is also important to note that there is significant dispersion in the revenue generating capacity of assets within the same asset class. For instance, certain commercially busy stretches of roadways may lead to lucrative toll-road contracts whereas roads elsewhere might have significant economic benefits such as border roads but might need subsidies from the government for their financial viability.

The ability to implement flexible policies that consider the variability of financial returns from various assets within an asset class will help improve “revenue” generating capacity for infrastructure overall. For instance, given the variability in the wind energy capacity of various sites, India’s wind energy policy needs to account for the fact that highly competitive auctions that may work on the best wind sites may not be conducive to rapid infrastructure creation once the best sites are exhausted.

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Additionally, besides the revenue sources, ensuring investors that contracts will be enforced without demur or recourse is essential. In a world with increasing macroeconomic volatility, pricing of revenue streams from infrastructure assets will vary as the various determinants such as the cost of funding, initial capital expenditures and foreign exchange rates vary. Therefore, the better the contract enforcement mechanism, the higher the risk-adjusted revenues from infrastructure projects, thereby greater the investor interest in Indian infrastructure.

Therefore, though much has been written and said about the opportunity and the challenges that Indian infrastructure involves, the next step should be a renewed focus on “revenues” that assets can generate. We must ensure that measures are taken to improve “revenue” visibility, and to provide alternative financing solutions when asset revenues are not sufficient. (IANS)

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Sambhar Lake Becomes Death Bed for Large Number of Birds

The excessive salt in the water led to the poisoning, causing hypernectremia, which is water deprivation due to sodium intoxication

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Sambhar Lake
After witnessing drought for many years, this year the Sambhar Lake, however, brimmed with water due to heavy rains. The inflow made the water toxic due to the change in its alkalinity. Pixabay

A deadly game of survival is on in the Sambhar lake of Rajasthan for decades — salt versus birds. The result came a few days back: thousands of birds were seen floating dead in the lake and their carcasses scattered on the edge of the 12 km catchment area.

The dead birds seen floating in this largest inland salt lake in the country, include plovers, common coot, black winged stilt, northern shovelers, ruddy shelduck, and pied avocet among many other migratory birds.

Harsh Vardhan, a renowned environmentalist, told IANS that no forest department official has ever been appointed to look after the lake. The lake comes under the Hindustan Salt Limited, a public limited enterprise formed in the post independence era to manufacture salt. Its job is to manufacture salt. So who should look after the lake; this has never been decided, he said.

The lake has not been handed to the forest department, and the area, where birds come, is no one’s land. Sambhar lake may be a part of the Hindustan Salt Ltd, but the company has nothing to do with the birds, he says.

The chief wildlife warden Arindam Tomar has maintained silence over the issue.

Even, Principal secretary, forest and environment Shreya Guha has washed her hands off the issue. All that she did was to a give statement that the Jaipur and Nagaur District Collectors have been asked to remove the bodies. She added that 4,800 birds have been dead till date, which is disputed by experts like Harsh Vardhan, who say that counting is not easy in the vast area.

Chief minister Ashok Gehlot on Thursday held a meeting on the issue.

Sambhar Lake
A deadly game of survival is on in the Sambhar Lake of Rajasthan for decades — salt versus birds. Pixabay

Meanwhile, Harsh Vardhan questioned the presence of several private salt miners and entrepreneurs, who have set shops in and around the lake. “They dig tube wells which suck water from the land making it parched. The remaining water gets evaporated leaving crystal of salts which are packed and sold in gunny bags,” he said.

Lack of water and drought has haunted Sambhar lake for years. State government has been spending huge money to woo tourists through activities like mobiking, balloning, race, Bollywood shoots, etc. A resort on the rim of the lake showcases salt manufacturing for the tourists. Crores of Rupees have been spent on the upkeep of the narrow gauge train and watch stations, but birds and conversation issues were always overlooked.

As Sambhar lake went dry, concentration of salt deposits came up within it. The water from surrounding rivers, meant to flow into the lake, was diverted by the miners.

After witnessing drought for many years, this year the lake, however, brimmed with water due to heavy rains. The inflow made the water toxic due to the change in its alkalinity.

The excessive salt in the water led to the poisoning, causing hypernectremia, which is water deprivation due to sodium intoxication, Vardhan said.

It seems birds which came in high numbers due to high water quantity this season died due to hypernectermia after consuming their feed which is the planktons, the microrganisms found in water.

Sambhar Lake
The dead birds seen floating in this largest inland salt lake i.e Sambhar Lake in the country, include plovers, common coot, black winged stilt, northern shovelers, ruddy shelduck, and pied avocet among many other migratory birds. Wikimedia Commons

The only step that has ever been taken by any government in the state was in 1981 when it was decided to designate the site as wetland and was renamed as the Ramsar site.

According to an estimate, around 60,000 birds visited the lake in a year which has come down to less than 20,000.

Vardhan says that if the lake remains with the Hindustan Salt Limited, which has been a loss making unit since years or if it is handed over to the private operators, who do excessive mining of water, then the lake and the birds are sure to die.

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Experts like him want the lake to be handed over to the forest department which can develop it as a wetland. (IANS)