Infrastructure being the key sector in focus, all eyes will be on what the new government can do in the short-term and long-term to give a boost to this sector.
In an interview to CNBC-TV18 RS Ramasubramaniam, Co-Chairman of Feedback Infrastructure shared his expectations from the new government and the outlook for the sector going ahead.
According to him rejuvenating the infra sector with government financing will be important and there are hopes of the government and NHAI reinitiating ordering activity in the engineering, procurement and construction (EPC) projects.
Also read: What can NDA 2 do for the ailing road sector?
Below is the transcript of RS Ramasubramaniam's interview with Reema Tendulkar and Ekta Batra on CNBC-TV18.
Reema: Can you tell us just for the near-term perhaps in the next 100 days, what can be the two-three things that the new government can announce which can improve sentiment as well as more importantly get the companies to talk about investment and perhaps initiate the process?
A: I think on the short-term the highway sector especially engineering, procurement and construction (EPC) funded projects something that National Highway Authorities of India (NHAI) has constantly been talking about at least in the press saying it is not the correct time for build-operate-transfer (BOT) projects in the highway sector but perhaps EPC can be done.
Secondly, considering on the same line, I think some resets and renegotiations of stalled projects in the highway sector in order to set the ball rolling.
Third, electronic tolling and collection (ETC) across the country I think a fairly major initiative, I think these three things as far as the highway sector can be announced fairly immediately.
Bharatiya Janata Party (BJP) in its manifesto (presuming here that the BJP is the party that is going to come into power) has been talking about new cities particularly twin and satellite cities. I think along the Delhi Mumbai Industrial Corridor (DMIC), the industrial corridor, projects are rating and in the next 100 days, this too can be announced. A rejuvenated urban infrastructure scheme with financing by the government is something that they can do.
Also, in the manifesto, the party has talked about an institutional framework for public-private partnership (PPP) projects. In fact they have added the fourth P called People to the traditional PPP. If they can announce that institutional framework and announce that the sovereign will not be without projects, without building up of a pipeline of projects that are ready to go, I think the sheer announcement of an institutional framework can galvanise the market in the short-term.
Ekta: One of the key talking points in the past in this week has been basically one of the big brokerages writing on Bharat Heavy Electricals Ltd ( BHEL ) and saying that even if there is quick and speedy reforms, the order activity as well as the earnings trajectory for a company such as BHEL are most unlikely to revive for several quarters. In that sense, do you expect huge pick up in order activity to come through and your view on the capital goods space or a company such as BHEL and a revival for the same?
A: To the extent that companies like BHEL are dependent on revival of the fortunes of the power sector, I tend to agree with the statement of saying I don't think we should expect any short-term revival in the fortunes of companies that are in the capital good space particularly the BHEL types because if you look at the power and the energy space, on both fronts, on the input front -- in terms of coal, the whole coal linkage issue, the fuel supply agreements (FSA) issue, the volatility in coal prices and what all is not happening in coal auctions -- we need to see some traction which we have not seen in the last couple of months.
Similarly, on the output side, reforms on power distribution particularly the financial restructuring packet, which was announced about a year back, I don't think we have seen the kind of traction that we should be expecting from that. So, given that both on the input and output side for the power sector we have not seen much of traction and these issues are going to take some time to address also by any new government that comes into power. I tend to agree saying I don't think we can expect any short-term uptick or bullishness for companies which are in capital goods space like BHEL.
Reema: Shifting focus to the power sector, domestic coal shortage is one of the key concerns and that problem could exacerbate if there is a revival in the economy. What can the government announce to increase the production of coal?
A: Not Just coal, a debate on the natural resources policy is what the government should start and encourage and come out with that. So, in the short-term once again I don't think it's not too much to expect that the policy will get finalized in the space of a month or two. But, I certainly think that in the next six months if one were to give that much of leeway to a new government, they can announce some natural resources policy which will include coal.
Second, is the whole issue is of coal regulator which is almost ready to take off. They can do that as well but the larger issue of saying what does one do with the coal sector and are we ready for denationaization is a question that is facing the government and if they are ready to bite the bullet on that and announce something which is a radical shift from what we have been seeing in the past, it will do wonders for the coal sector and therefore for the power sector.
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