Govt's core sector funding arm may get more powers

The Cabinet will soon consider giving more powers and operational flexibility to India Infrastructure Finance Company Ltd (IIFCL), the government's special purpose vehicle for financing infrastructure projects.

The Cabinet will also consider allowing IIFCL to finance projects that are not allotted through competitive bidding. Competitive bidding happened only with large projects like ultra mega power projects and there were many viable power projects that IIFCL was unable to finance due to this condition, sources said.

IIFCL may be allowed to lend for tenures of up to 12 years and more, given that infrastructure projects have an average gestation period of 12 years to 15 years. At present, the average tenure IIFCL loans is 10 years.

Under the current scheme, the recovery of loans is the responsibility of the lead bank. This condition might be removed as guarantees get reflected in the lead bank's balance sheet, who in turn demands a guarantee fee from IIFCL, which does not want to bear this additional cost. A lead bank is a financial institution that funds 25 per cent of the total debt of a project.

Under current guidelines, IIFCL exposure is limited to 20 per cent of the total project cost.

"There is a proposal to replace this condition with that 'the exposure of IIFCL' shall not exceed the share of the lead bank in a project," official sources said.

IIFCL, which encourages public-private partnership projects, will only get back its money after 80 per cent debt of the lead bank and other financiers are recovered. This clause, too, will be amended to make repayment terms of IIFCL loans similar to that of lead bank and other financiers.