NIIF will be a commercially run organisation and operate at arm's-length from the government, Minister of State for Finance Jayant Sinha told reporters here.
Government will provide Rs 20,000 crore from Budget as seed money to the fund, which will provide equity support to infra project as well as funding agencies like IFCI and NHB.
While the government would own 49 per cent of NIIF, which will be based out of Mumbai, equity participation from strategic anchor partners like sovereign wealth funds will be sought, he said.
The fund will have its own governing council and the management will be paid market salaries to attract best talent.
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"We are looking for long-term investors in NIIF," he said, adding that provident funds, endowment and sovereign funds have expressed interest.
"NIIF is like a sovereign wealth fund focused on infrastructure sector," Sinha said.
The Cabinet had earlier this week cleared setting up of NIIF, which was originally announced by Finance Minister Arun Jaitley in his budget for 2015-16.
NIIF's governing council will have government representatives and experts, eminent economists and infrastructure professionals.