Surface transport, civil aviation ministries woo FIs

Ministry of Civil Aviation and Ministry of Surface Transport (MoST) are in talks with financial institutions (FIs) to fund projects in their respect areas.

This assumes significance in light of the government initiative to set up Rs 50,000 crore infrastructure fund to finance core sector projects at concessional rates of interest.

The Life Insurance Corporation (LIC), State Bank of India (SBI), ICICI Bank, Industrial Development Bank of India (IDBI), and Infrastructure Development Finance Corporation (IDFC) will form the consortium of lenders.

Presentations have been made to all FIs by the respective ministries for the development of the Mumbai and Delhi airports, as well as improvisation of various ports including Jahawala Nehru Port Trust and Cochin Port Trust.

The initiative taken by the government brings back the concept of consortium lending.

Of late FIs were going for direct lending and self appraising all projects unlike earlier times when projects were jointly appraised by institutions.

LIC chairman S B Mathur told Business Standard that while the core sector fund would restrict direct lending by institutions, "it will reduce project risks as these will be spread across 10 players. This means we can then reduce our exposure to single projects and are thus able to invest smaller sums in a number of projects."

Primarily funding of the projects will be through debt, with some investment in equity of various companies.