Rs 50k cr infra fund by early next fiscal: Montek

The Planning Commission today said that Rs 50,000-crore Infra Debt Fund for financing infrastructure projects will become operational by beginning of next fiscal.

A panel constituted by the Commission to look into the changes required in the regulatory framework for facilitating the setting of the Infra Debt Fund (IDF) is expected to give its report by next week.

"If everything goes well, the Infra Debt Fund would be reality by the beginning of the next fiscal," Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters here.

He said, "The committee headed by SBI Chairman O P Bhatt which is looking into the changes required in the regulatory framework for creating IDF would submit its report by next week."

Earlier in June this year, an expert panel headed by HDFC chief Deepak Parekh had recommended setting up of the IDF of Rs 50,000 crore for financing projects in this crucial sector.

In its recommendations submitted to the Plan panel, the committee had asked the government to change rules to allow funding by pension and insurance companies.

It had urged the sectoral regulators— Reserve Bank, market regulator Sebi, insurance watchdog Irda, and pension fund regulator PFRDA— to tweak their existing laws to enable market players to use the large amount of untapped insurance and pension funds.

 In its report submitted to the Commission, the Parekh committee had also suggested that the proposed infrastructure fund with an initial corpus of Rs 50,000 crore be set up as venture capital fund (VCFs) to be managed and regulated by Sebi.

For this purpose, Sebi should be asked to amend its guidelines for VCFs to enable investment in the debt market. Currently, only a part of VCF is allowed to be invested in debt, the panel had said.

The report suggested that insurance regulator IRDA and interim pension watchdog PFRDA be approached to modify the rules to enable these funds to invest in the infra fund.

Besides, the report recommended that foreign insurance, pension and sovereign funds be asked to invest in the proposed infra fund. For this, RBI will have to be approached to create a special window for these kinds of foreign debt with a tenure of 10 years or more.

Also, the multilateral agencies like the World Bank and the Asian Development Bank would also be asked to invest in the fund.

At present, there is a debt funding gap of over Rs 1.62 lakh crore in infrastructure financing for the current 11th Five Year Plan (2007-12).