Planning Commission Deputy Chairman Montek Singh Ahluwalia has recommended extension of tenure of SS Kohli, who heads India Infrastructure Finance Company Ltd (IIFCL), as the state-owned entity will play a major role in financing Rs 1,00,000 crore worth of infrastructure projects to boost economic demand.
IIFCL, in the midst of raising Rs 40,000 crore through tax-free bonds to finance the infrastructure sector as part of an economic stimulus package, raised Rs 7,200 crore through private placement of tax-free bonds in the first tranche.
Since public investment is focus area for the revival of the economy, Ahluwalia wants to ensure there is continuity in implementing the plan.
In a note, titled “IIFCL financing for PPP projects,” sent to Prime Minister Manmohan Singh, Ahluwalia wrote, “It was pointed out in the meeting that the term of the current CMD (chairman and managing director) of IIFCL ends on 10th March. The FS (finance secretary) had indicated that the term can be extended. Action on this front should be expedited to avoid loss of momentum.” Kohli declined to comment.
Under the two fiscal stimulus packages announced by the Centre, IIFCL was to raise a total of Rs 40,000 crore through tax-free bonds. In turn, the company would help finance projects worth 1,00,000 crore through debt and quasi-equity.
IIFCL is also exploring the option of rolling over debt raised from the market at the end of every five years, according to Kohli. This is being evaluated to plug the duration mismatch — infrastructure project developers take long-term loans (20 years) but funds raised by financial institutions are for shorter period (five years).
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“IIFCL must be assured that it will be given the necessary government guarantee, and possibly tax benefits, for rollover financing,” Ahluwalia wrote, adding it would ensure that banks lend long-term without worrying about the asset-liability mismatch.
Among other proposals, Ahluwalia said the proposed financing through IIFCL should be available only for new road and port projects. However, Kohli said this criterion would be applied for the first Rs 10,000 crore of lending through IIFCL.
Any decision on the second round of Rs 30,000 crore was yet to be taken, he said.