Parekh to head panel on core sector funds

In a significant step towards greater availability of long-term finance for the infrastructure sector, Finance Minister P Chidambaram today announced the setting up of a committee headed by HDFC Chairman Deepak Parekh to look into the gamut of issues.

The committee has been asked to submit a quick report within six weeks "" possibly by the end of January 2007 "" and a detailed report subsequently.

"You will see action on this front in the next few weeks, in the run-up to the Budget," Chidambaram said at the National Conference on Private Investment in Infrastructure organised by the Confederation of Indian Industry here.

"We need to identify what kind of finances can be raised. We also need to decide what changes "" policy as well as legislative "" are required to obtain that long-term financing," he said, adding, "The IDFC was formed in 1999, the IIFCL, recently. We need a more comprehensive idea."

Building of infrastructure in the country is expected to require nearly $320 billion by 2012. Of this, private sector investments are pegged at close to $75 billion.

The mid-year review of the economy has also sought deepening of the debt market, so that investment risks (in infrastructure) can be diversified and more capital accessed.

Alongside, Chidambaram said he had asked Finance Secretary Ashok Jha to prepare a note on how the country's foreign exchange reserves of $170 billion could be used to bankroll infrastructure projects. The idea was first mooted by the Planning Commission.

Deputy Chairman Montek Singh Ahluwalia had said the reserves could be used to tackle the huge infrastructure deficit in the country. The idea did not gain immediate approval of the finance ministry and the Reserve Bank of India.

At the same meeting, Finance Secretary Jha also made it clear that the infrastructure sector should not expect more tax breaks.

In response to a question, he said, "I do not think that more tax breaks are needed. The sector already gets so many tax breaks." A key point raised on the infrastructure front was the lack of enough bankable projects to fund.