ECB Curbs To Impact Infrastructure Funding

India needs big money to transform its infrastructure dreams into reality and its the long-tenor loans that is the lifeline to make sure that long gestation projects are on the fast track. But now with the government limiting the external commercial borrowings tap to just $20 million for domestic projects, the infrastructure sector may soon feel the heat as project costs are likely to jump.

I would not call it retrogate, I think they have to balance currency, inflation and money supply, and something like this was expected. The sector, which will get hurt is the infrastructure sector because we need lot of money for funding infrastructure, said YM Deosthalee, CFO, L&T.

Infrastructure investment target has been pegged at $320 billion for the Eleventh Plan, out of which the private sector is slated to pump in $120 billion. Long term funding is critical for infrastructure projects and companies will now turn to domestic financiers for money.

However, some industry watchers say that the cost impact on infrastructure projects may not be that significant as very little money flows into this sector through the ECB route.

Availability of money may not be a problem for infrastructure projects as domestic banks are flush with funds. The bigger challenge of course will be to work out innovative financing instruments. For long gestation projects to make sure that the costs don''t shoot up to make the projects unviable.