Govt may relax ECB norms for infrastructure

The government may soon relax the external commercial borrowing norms for investment in the infrastructure sector by Indian companies, given the high level of private investment required for upgrading the country's infrastructure during the 11th Five Year Plan (2007-12).

"The High-Level Committee on ECB, which met on September 19, has agreed 'in principle' to relax ECB norms for infrastructure projects. It has asked the Department of Economic Affairs to suggest ways to go for it," an official source told Business Standard.

The high level of capital inflows has forced the government to put fresh restrictions on ECBs. In August this year, the Reserve Bank of India tightened ECB rules by limiting the use of foreign loans in India at $20 million per company.

The government has also decided to keep the overall ECB ceiling unchanged for the current financial year, at the previous year's level of $22 billion.

"Though liquidity in the economy due to high capital inflows is worrisome, we do not think ECB for the infrastructure sector should be restricted at par with other sectors. In fact, long-term infrastructure financing through the ECB route should be encouraged," the official said.

However, the official pointed out that though monitoring the end-use of ECB has become necessary, it is difficult to implement.

"We are consulting some experts and will submit our views on the matter soon. The high-level committee on ECB will take up the issue in its next meeting," the official said.

The Planning Commission has estimated that an investment of $492 billion is required for the infrastructure sector during the Eleventh Plan.