The Centre is examining a proposal of the health ministry to issue tax-free bonds of over Rs 5,000 crore to fund the creation of an health infrastructure spanning the country. The tenure of the bonds would range between 7 and 10 years.
According to government sources, the proposal forwarded by health minister C P Thakur envisages issue of Arogya, Healthcare and Social Welfare bonds and utilise the proceeds to set up healthcare, research and family welfare infrastructure which would be available on a cost-plus basis.
The health ministry has said that a sovereign guarantee, though desirable, is not essential for the bond issue. The bonds are proposed to be rated by credit rating agencies and would be secured by creating a charge on the assets in favour of bondholders.
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The interest on the bonds could be paid on a quarterly, half-yearly or an annual basis, which would be decided at the time of the bond issue. The minister has also sought income tax benefits for the bondholders and has proposed listing of the bonds on stock exchanges to create adequate liquidity.
Sources said the health minister has made the proposal to the Planning Commission deputy chairman in the second week of January and has also initiated talks with the finance minister.
The health infrastructure bonds would be targeted at retail investors as well as institutional investors like mutual funds, banks, provident funds, financial institutions and trusts on a wholesale or bulk basis. The health minister has recommended that banks like the State Bank of India should be used to issue and manage the bonds.
In the current financial year, the Central Plan outlay for the ministry of health and family welfare is Rs 5,780 crore, up 29 per cent compared to Rs 4,478 crore in 2000-01.
The health ministry has said that the repayment would be made out of the cash flows emanating from the infrastructure created. Since this was a pioneering work, it has suggested creation of robust systems of financial planning and management to monitor the cash flow and maintain financial viability.