Investments in key infra sectors to hit Rs 15 trillion in 202426

According to Krishnan Sitaraman, senior director and chief ratings officer, CRISIL Ratings, the underlying demand drivers in these three sectors remain strong, with regular policy interventions fuelling investor interest.

This has also supported healthy credit risk profiles of private players and strengthened their execution and funding capabilities.

In renewables, timely commissioning of storage and storage-linked capacities remains a key risk given their higher tariffs compared with the usual renewable capacities.

These storage-linked capacities have so far had low traction on the ground in finding off-takers, with nearly 7 Gw of the Rs 9 Gw projects yet to find buyers.

Similarly, in the roads sector, as government budgetary allocation is moderating, amendments in the build-operate-transfer (BOT) toll model concession agreement have been made to increase private participation.

However, improvement in traffic estimation accuracy and higher willingness of lenders to fund BOT toll projects will bear watching, the agency said.

Earlier this year, the government had launched a pipeline of 53 projects worth Rs 2.2 trillion to be bid out under the BOT model. This, along with private participation, is also a means for the government to meet its highway awarding target.

The ministry had failed to meet its target last financial year due to its Bharatmala programme being stuck in bureaucratic red tape.

However, the BOT model has been unpopular over the past few years owing to a non-performing asset (NPA) crisis from previously-awarded projects.

The Centre has changed a number of clauses in its model concession agreement to ease the market’s woes, but it remains to be seen whether these will be appreciated by the sector.

“In case the lenders or developers are cautious about the new BOT projects and the response from the sector is tepid, it may stagnate highway awarding. And, we may see a two-three per cent growth in highway capital expenditure. The impact on order books of developers may be there in case the new BOT projects don’t work. But even if the new projects are half-successful, the balance sheets of developers are heavy enough to withstand it,” said Mohit Makhija, senior director at CRISIL.