After months of deliberation, Mamata Banerjee-led Trinamool Congress government in West Bengal has selected Abhirup Sarkar, economist and professor at Indian Statistical Institute as the chairman of the West Bengal Infrastructure Development Finance Corporation.
The much-contested post had been a point of dispute since the new government took over in West Bengal and appointed Abhijit Mukherjee, son of Union finance minister Pranab Mukherjee and MLA from Nalhati constituency, Birbhum, as the chairman of the company. However, Abhijit Mukherjee tendered his resignation within one month of his appointment on political pressure from his own party members who disapproved of the appointment.
Sarkar, who has been a staunch critic of the economic policies of the Left Front government, was also tipped to be the finance minister of West Bengal, before Amit Mitra, former secretary-general of industry body Federation of Indian Chambers of Commerce and Industry (FICCI) joined Trinamool government ahead of Assembly elections.
WBIDFC, is a non-banking financial Company (NBFC), registered with the Reserve Bank of India RBI. It was established in the year 1997 by the government of West Bengal to provide funds for the infrastructure facilities in the state. However, over the last few years, the company was reduced as a vehicle for raising bonds for deficit financing on behalf of the state government. The bonds, which carried unconditional and irrevocable guarantee of the government of West Bengal, were backed by WBDIFC recurring deposits and term deposits in banks in such a way that the maturity value of such deposits equals the principal value of the outstanding bonds at the time of redemption. The West Bengal government used to provide for the deposits through its revenue receipts on the first day of every month.
Dismantling the mechanism, the new government has decided not to borrow funds through WBDIFC, and instead it is relying on cheaper loans like the state development loan (SDL).
Recently, the state prepaid over Rs 1,350 crore high-cost loans raised through WBDIFC, mostly carrying a coupon rate above 10 per cent. On the other hand, the SDL loans which the government borrowed through the RBI window carried a coupon rate between 9-10 per cent.
Under Sarkar, the WBIDFC is likely to go through a restructuring exercise, as it is no longer the principal vehicle of government borrowing.
“We will draw a business plan to increase non-government loan book. We will lend to infrastructure projects in the private sector and also public private partnership,” said Sarkar.
So far, WBIDFC has extended negotiated loans for the state government to the tune of Rs11,000 crore by issuance of bonds. Present value of outstanding WBIDFC Bonds is Rs 5,400 crore, according to information available on the website.
