Welcoming the idea of creating a corpus to fund power projects, state-run infra lender IIFCL today said it is open to be part of such an initiative and suggested that a separate company be set up to address such needs.
"This is only a suggestion. We will definitely contribute. Let the idea come, let the structure come...There should be separate company to look at that. If you look at bank's exposure to infrastructure, 60 per cent is for power," said S B Nayar, Chairman & Managing Director, India Infrastructure Finance Company Limited (IIFCL) said on the sidelines of an event today.
"It is basically to support banks. Banks have certain caps, exposure norms. It is to give them additional funding. PFC (Power Finance Corporation) has been asked to look at this," he added.
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As per the idea floated by Power Minister Piyush Goyal, companies such as Power Finance Corp (PFC), Rural Electrification Corp (REC) and IIFCL may be asked to contribute for the corpus fund to finance power projects.
Government should create many more financial institutions to fund infrastructure projects to enable country to move on higher growth trajectory, Nayar said at a PHD Chamber event.
He said banks and financial institutions may withdraw funding to infrastructure projects to meet Basel-III norms. This has already been conveyed this to the Finance Ministry and Reserve Bank, he added.
Nayar said India needs USD 1 trillion investment to create infrastructure to achieve over 9 per cent GDP growth in the 12th (2012-17) plan period. However, the existing financial system may not be well-equipped to cater to this kind of huge funding needs, he added.
"Therefore, the government would have to either create many more financial institutions on lines of IIFCL and even accord a lead banker's role to IIFCL and the likes, to help such institutions support the infrastructure projects that need huge financial funding," he said.
Replying to queries on infra loans, he said demand has not really picked up and it would depend on how the economy grows. There has been good demand in solar and renewable energy segment, Nayar added.
"It (demand in solar and renewable energy) is taking off because there is a repurchase agreement. 12-30 per cent solar energy has to be there. What I am saying is we can even give it a subsidy, much bigger than what it is now," he added.
As per the repurchase agreement, states are mandated to buy/produce a certain amount of energy from renewable energy sources.
