FinMin readies land transfer policy for large infra projects

Finalises model tripartite agreement for infrastructure debt funds

The finance ministry has set the ball rolling for expediting clearances for large infrastructure projects and operationalising infrastructure debt funds (IDFs). It has also finalised a land policy to address the infrastructure sector’s land acquisition concerns.

It is likely the Union Cabinet’s approval for these steps would be sought this month. This would ensure work on existing and new infrastructure projects is hastened. The ministry has also asked the institutions allowed to float tax-free bonds of Rs 60,000 crore — National Highway Authority of India, Indian Railways Finance Corporation, India Infrastructure Finance Company, Housing and Urban Development Corporation and Small Industries Development Bank of India — to indicate a timeline for raising the money. This would ensure the market isn’t crowded with the papers towards the end of the year.

The ministry would also ask the Cabinet Committee on Economic Affairs to expedite clearances for projects of over Rs 1,000 crore that face regulatory hurdles.

JUMBO PUSH

• FinMin to approach the Cabinet Committee on Economic Affairs for speeding up the clearance of large projects of over Rs 1,000 cr facing regulatory hurdles
• Delay in clearing infrastructure projectshave resulted in huge debts being piled up on many of the players, particularly those involved in PPP model
• Last year, a ban was imposed on all transfer of government owned lands to any other entity
• Infrastructure needs were pegged at $500 billion in the 11th five-year Plan with actual spending falling short by 10% of the target

Economic Affairs Secretary Arvind Mayaram has already held meetings with officials from the ministries of roads transport & highways, petroleum & natural gas, mines and shipping to identify the hurdles. Owing to delay in clearing infrastructure projects, many companies, particularly those involved in public-private partnerships, have piled huge debts.

Land acquisition remains a major concern. Last year, a ban was imposed on the transfer of government land to other entities. If any department had to implement a project that required alienation of land (through lease, licence or rent), it had to seek the approval of the Cabinet. To remove this bottleneck, the finance ministry has prepared a land alienation policy.

Besides, the ministry has finalised a model tripartite agreement to be entered into by IDFs through the non-banking financial company (NBFC) route. It is now seeking the law ministry’s feedback on the matter.

The IDFs, to be set up as NBFCs, would have to enter into tripartite agreements to which the concessionaire, the project authority and the IDF-NBFC would be parties. Two consortiums — one led by ICICI Bank and the other by IDBI — have secured approvals for setting up IDFs through the NBFC route.

“Two or three IDFs can start on the NBFC route this year. This would be in the nature of takeout financing and would provide long-term financing to existing infrastructure projects and ease the pressure on the books of banks,” a finance ministry official told Business Standard.

For the 11th five-year Plan (2007-08 to 2011-12), infrastructure needs were pegged at $500 billion. However, actual spending was about 10 per cent lower than that. For the ongoing 12th Plan (2012-13 to 2016-17), the requirement was pegged at $1 trillion. But this estimate is likely to be scaled down.