New Delhi: Infrastructure refinance company IIFCL will provide Rs1,00,000 crore of low-cost funds for the development of new core sector projects by leveraging money to be raised through tax-free bonds, as announced in the two stimulus packages.
A top Planning Commission official said that the first tranche of the proposed Rs10,000 crore tax-free bonds would be issued this month by IIFCL to channel resources into big public private partnership (PPP) projects.
While Rs10,000 crore bonds would be issued this fiscal, another Rs30,000 crore would be given next fiscal. The entire sum would be leveraged to provide about Rs1,00,000 crore of low-cost resources to projects, mainly in ports and roads.
“Now that we have provided this, this should support Rs1,00,000 crore of project level investment, of which the equity component will be Rs30,000 crore. The rest Rs70,000 crore will be debt,” he added.
He said that he was in favour of coupon rates having a reset clause to make them align with government securities few years down the line.
“We are going to use the India Infrastructure Finance Company Ltd (IIFCL) to raise low cost resources to help the economy hit by a financial tsunami,” the official said.
He said that resources will be low-cost because it will be government guaranteed tax-free bonds resulting in low interest cost to the IIFCL.
So far as lending by banks is concerned, he said that their resource crunch should not prevent them from lending because they will be getting refinance.
“The lender’s risk is not bad in these projects because the fact of the matter is that 90% of the debt is guaranteed in the event there is any kind of default. So it is a situation where you need not worry”, he said.
IIFCL was allowed to raise Rs10,000 crore of tax-free bonds in the first stimulus package announced in December 2008, and Rs30,000 crore in the second one declared on 2 January, 2009.
The Rs30,000 crore bonds would be raised within 18 months of Rs10,000 crore papers.
While announcing the second stimulus package, Planning Commission Deputy Chairman Montek Singh Ahluwalia said: “Expansion of infrastructure investments in PPP area is a very important part of the effort to mark the counter-cyclical thrusts at a point when there is a bit of global slowdown.”
He had said package to IIFCL is something that will not only stimulate demand in the short term, but lay the foundation for broader investment revival and for broader growth.