Deepak Parekh-headed expert group has recommended that private companies should manage the proposed infrastructure fund with an initial capital of Rs 50,000 crore for financing projects in the crucial sector. The recommendation are part of the experts group’s report expected to be submitted to Planning Commission Deputy Chairman Montek Singh Ahluwalia on Monday.
The idea of creating an infrastructure fund to facilitate investment in the sector was mooted by the Planning Commission. The expert group was constituted to study the proposal last month.
The group also suggested that there should be at least two companies to manage the fund. Each company would have a stake of at least 10 per cent in the fund. The recommendations suggest that initially the corpus may be kept at a lower level (Rs 50,000 crore) and enhanced as the demand grows.
It is proposed by the group that the fund should be given income tax rebates on the lines of Venture Capital Funds. The group also recommended that flexibility should be given to the fund to tap external commercial borrowings.
For this, certain rules may have to be tweaked in the Income Tax Act and Reserve Bank of India rules. The proposal would need to be processed at all stages, including the Cabinet, before it takes shape, sources said. The expert group said the fund should be set up expeditiously, as activity in the roads and shipping sectors is picking up. Fund constraints can lead to a slow down in the sector, which the Indian government can ill afford. The high growth in infrastructure is considered necessary to target 10 per cent economic growth in the XIIth Plan (2012 -17). Additional fund arrangements in the private sector would also be necessary to fund infrastructure development in the XIIth Plan, as state funds would focus on the social sector.
Ahluwalia had earlier said that 50 per cent of the investment in infrastructure development during the XII Five- Year Plan would have to come from the private sector if the country is to realise the investment target of over USD 1 trillion (over Rs 45 lakh crore) in the next Plan period. During an infrastructure summit here, the Prime Minister had announced a revision of the investment target in infrastructure to USD 1 trillion in the XIIth Plan compared to USD 500 billion in the current Five-Year Plan. Last month, the Planning Commission had unveiled the annual physical target for infrastructure development. The commission has been directed by the government to give a quarterly progress report on the development of roads, railways, power, airports and ports to the Cabinet Committee on Infrastructure.