India to court private sector for cities

Friday, 21 January 2011 00:01 - - {{hitsCtrl.values.hits}}

(Reuters) - India will reach out to private and foreign investors to help build its rapidly expanding cities through public-private parternships (PPPs), the newly appointed minister for urban development Kamal Nath said on Thursday.

The move forms part of the government’s aggressive push to sell its infrastructure story as an enormous opportunity for the private sector to help overhaul the country’s crumbling infrastructure, with a planned spend of $1.5 trillion over a decade to 2017.

India’s cities are already among the most populous in the world and expanding at blistering rates. But under-investment and lack of planning have resulted in a legacy of clogged roads, power shortages and irregular water supply that may threaten the growth momentum of Asia’s third-largest economy, analysts say.

The urban development ministry is not seen as a high-profile one, but it may change under minister Kamal Nath, a ruling party heavyweight credited with injecting momentum and much private sector interest in his old job in charge of road building.

“We need to introduce PPP model in urban infrastructure also and create a partnership of people in private finance,” Nath told Reuters.

“With 8-9 percent growth which we have in the country, we have to facilitate the creation of economically vibrant, inclusive, efficient and sustainable urban habitats.”

Nath said government may sell a stake in state-owned National Buildings Construction Corp (NBCC), the country’s largest state-run construction company.

NBCC, which had an annual turnover of about 30 billion rupees ($660 million) in 2009/10, is among those companies in which the government proposes to sell stake in the next financial year.

Separately, Nath told reporters earlier on Thursday that he might introduce an independent regulator for the real estate sector.

India needs to spend $1.2 trillion by 2030 to meet the projected demand of its cities, a McKinsey Global Institute Report showed last year. There will be 590 million Indians living in cities by then, nearly twice the current population of the United States.

Kamal Nath was shifted from the Road Transport ministry as part of Prime Minister Manmohan Singh’s low-key cabinet reshuffle on Wednesday.

Seen as a dynamic minister who went to great lengths to attract private money for road contracts, he also sparked some criticism by failing to build 20 kilometres of roads a day, a target he announced with much bluster at the start of his tenure.

Companies such as the conglomerate GMR Infrastructure, which builds and manages airports, roads and power plants in India, could see enormous benefits if Nath starts a more aggressive push towards private-sector involvement.