The government has set up a committee under HDFC Chairman Deepak Parekh to review a proposal for a Rs 50,000-crore infrastructure debt fund.
The Planning commission had floated a concept paper in February to set up the fund that would help meet long-term needs of public private partnership projects (PPP) by tapping foreign and domestic pension and insurance funds, sovereign funds and multilateral institutions.
The proposed fund would be used to finance infrastructure projects that have begun commercial operations and could replace the existing practice of taking loans from commercial banks.
“A concept paper has been circulated to create a Rs 50,000-crore infrastructure fund for low-cost, long-term financing of infrastructure projects. The committee will look into it,” Gajendra Haldea, advisor to planning commission deputy chairman Montek Singh Ahluwalia, told Business Standard.
The fund was conceptualised to address the need of infrastructure companies in India, that do not have access to loans of 10 to 20 years for long-term projects like developing airports and roads. Most commercial banks’ loan tenure is less than 10 years.
The government-promoted India Infrastructure Finance Company (IIFCL), which was set up to facilitate lending for infrastructure projects, lends funds for roughly the same time period, since it works in consortium with banks.
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The proposed fund can be an independent legal entity. IIFCL could contribute Rs 5,000 crore to the account.
The Planning Commission has also proposed raising about Rs 20,000 crore from domestic insurance and pension funds, Rs 10,000 crore from foreign insurance and pension funds, Rs 10,000 crore from foreign sovereign funds and Rs 5,000 crore from multilateral agencies like the World Bank and the Asian Development Bank.
Although the loan tenure could span from 10 to 20 years, the money is likely to be disbursed on condition that the repayment is completed three years before the expiry of respective project contracts or concessions.
Planning Commission might set infra targets for various ministries
The planning commission will announce infrastructure targets for various ministries to gauge the progress of infrastructure development in the country. Planning Commission deputy chairman Montek Singh Ahluwalia is likely to make an announcement regarding the same on Monday.
Currently several ministries, like road and transport, power and energy among others, do not have a mandatory target, although some do have individual internal deadlines.
The eleventh plan had estimated an increase in investments for physical infrastructure from a level of 5 per cent of GDP during the Tenth Plan to about 9 per cent of GDP by the end of the Eleventh Plan.
The estimated investment stood at $ 514 billion during the Eleventh Plan as against $ 217.86 billion during the Tenth Plan.