PPIAF

Infrastructure investment in India has come a long way in the decade since Nasser Munjee was hired as CEO of India’s Infrastructure Development Finance Corporation. Before that time, the vast majority of public infrastructure, from airports to electric grids, was government-owned.

As the government looked to broaden the base of infrastructure investment, the finance minister tapped Munjee to head the effort. Munjee was well-known as successful businessman with a deep interest in development from his years as head of the Housing Development Finance Corporation. As executive director since starting 1977 he grew the HDFC -- India's first savings-and-loan-type institution offering home mortgages -- from no revenue and one employee into a multi-billion dollar business. Moving to the IDFC in 1997, he grew the enterprise into one of the most successful and profitable of its kind.  

To help bridge India's massive infrastructure gap quickly, Munjee recognized that development finance institutions were "the last thing we needed," he said. Private capital was the answer, but for Munjee the question became "how do we lead capital to infrastructure projects without providing it?" The answer became the IDFC's mission statement: "to lead private capital to commercially viable infrastructure projects." The corporation is best known for its investment portfolio. The project finance group, structured like an equity fund, attracted the 60 percent of its initial capital from foreign investors like AIG and the International Finance Corporation. But it also harbored an equally important policy group to think through what policy frameworks were needed to make private infrastructure investment a reality. The policy group was behind many of the important sector reforms to take place in India over the last decade, such as the regulatory frameworks for private investment in ports and airports. 

Munjee describes recent changes to India's infrastructure market as a "real opening up," as the right regulatory frameworks stimulate investment in infrastructure to meet a massive untapped demand. He sees the growth in air traffic as a textbook example of what private investment can do. "When we first started with reforms to the air sector, people were predicting growth of six percent a year," he said. Instead, once reforms were introduced, growth in air traffic shot up to 46 percent a year, with new investment in airports and a plethora of discount carriers making air travel accessible. Munjee's IDFC fostered a similar boom in the mobile telephone market, which few private operators could enter because of high licensing fees. He helped the government cut the licensing fees and move to a revenue-sharing model.

Despite the seeming growth in private infrastructure investment, Munjee throws cold water on the myth that there was no private infrastructure before regulatory reforms. Rather, "public infrastructure was so bad, every firm built its own infrastructure," he said, recalling a concrete company that spent much of its resources constructing its own ports and power plants. Because of policy reforms, new private investment in infrastructure is going into publicly-available assets. But even with these investments, India has a long way to come.

"There is a huge demand for ports and connecting roads, freight corridors and urban infrastructure. There is not a single sanitary-engineered landfill in India, and not a single Indian city has 24 hour-a-day water service." Such deficits end up costing the poor the most, he points out, as they end up resorting to expensive substitutes like bottled water. Munjee says he's found people accepting of private participation in infrastructure as long as you make the process "open and transparent, which means you take public participation."When people are consulted, they often don't mind paying higher tariffs "if you demonstrate that they will get bar better, more predictable service," he says. “Resistance usually figures in when prices go up but the public continues to see waste and inefficiency.”

Munjee left the IDFC in 2004 over a controversy involving the proposed nationalization of the company. In addition to sitting on PPIAF's technical advisory panel, he serves on 15 corporate boards.