Powerful Clarification

Referring to the term 'financing fatigue' I had used in my article in Nepali Times, 'Power to India' (NT # 517) RatnaGlobal has asked 'Which India are you talking about? The state of India or Indian investors?' He has gone on to say that "there is no such thing as 'financing fatigue'. There is only looking around for the right time and right conditions for investment that give returns."

I had used the term in the context of of the level of 'gross national happiness' achieved by Bhutan under 'inter-government model' under which 60 per cent of the project cost is availed to Bhutan by India as grant and the remaining 40 per cent as soft loan. It wasn't used to indicate financing fatigue with all types of financing configurations. After implementing 1,416MW under this model Indian 'power ministry is getting the jitters' as ToI reported last year. Therefore, Indian Government is endeavoring to drastically reconfigure the model so future projects are built with 70 per cent loan and 30 per cent grant.

This is clear indication of India experiencing financing fatigue with regards to 60:40 model. Conversely, India seems to be prepared to further invest if the model is turned on its head by drastically reducing the portion of grant from 60 percent to 30 and increasing loan to 70 percent from 40. However, this change will substantially increase debt service burden and at the same time pull down gross national happiness index by a magnitude. Moreover, no attempt was made in my article to imply that Indian private sector too has reached financing fatigue which will be evident if the article is read carefully.

Ratna Sansar Shrestha

Published in NT # 518 on September 10, 2010