Covid-19 Pandemic and Its Impact on Infrastructure and Its Financing

Abstract

Abstract The Covid-19 pandemic is a black swan event and has had a major impact on infrastructure and its financing. The impact on infrastructure has been both from the demand and the supply side. In terms of its treatment, the Covid-19 pandemic is a non-political force majeure event in the Indian road sector’s Model Concession Agreement and the relief provided is an extension of the concession period by the force majeure period. To address the issue of the concessionaire’s liquidity during this period, the country’s central bank (Reserve Bank of India) has put in place a moratorium period for loan repayment up to August 2020. However, bank financing was already grappling with non-performing assets of 8.5 per cent of their portfolio, which was expected to go up because of the Covid-19 pandemic (however, the actual numbers are much lower), with consequent impact on bank financing of infrastructure. Implementation of India’s first National Infrastructure Pipeline (NIP, April 2020) has been impacted adversely at least in the first two years (financial years 2020 and 2021) as public-sector resources were constrained because of the high-priority expenditures associated with the pandemic and private-sector investments suffered from increased risk. However, since the NIP is a six-year infrastructure development plan, the slack in the first two years may be covered in the later years given the infrastructure green shoots that have appeared even in the midst of the pandemic.