Govt considering infrastructure debt fund options: Pranab

Govt considering infrastructure debt fund options: Pranab

New Delhi: Government is considering various options to create an infrastructure debt fund, finance minister Pranab Mukherjee said on Wednesday, as part of government’s efforts to create long-term funds for the infrastructure sector.

Government is planning to spend $1.5 trillion in the 10 years to 2017 to revamp its creaky infrastructure, which is seen as a brake on Asia’s third-largest economy’s growth.

Around $500 billion of the targeted investment is expected to be financed privately, Mukherjee said during his meeting with British Business Secretary Vince Cable, who finishes his three-day visit to India on Wednesday.

Last June,Planning Commission - an advisory body of the government - had proposed to set up a $11-billion infrastructure debt fund that could tap sovereign and insurance funds to finance building roads and utilities.

“Once the fund is established, it would help the country to meet its long-term fund requirements for a number of infrastructure projects, as getting good projects is not a problem," said N.R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a New Delhi-based think tank.

He said the government could consider options including tapping funds from insurance and mutual funds for the infrastructure debt fund.

Overseas funding

Mukherjee also said overseas funds raised by non-banking financial companies for infrastructure lending would now be considered under the automatic approval route, subject to full hedging of currency risk and other prescribed norms.

Capacity bottlenecks in the Indian economy, including poor infrastructure, are partly responsible for driving up food inflation to nearly 17% in early January.

The Congress-led government had set a target of building 20 kilometres of roads per day and increased the capital spending for the sector in the 2010/11 budget by 22% to about Rs222 billion.

The Planning Commission had also asked the Reserve Bank of India to create a special window for foreign debt with a tenure of 10 years or more to let foreign insurance and pension funds invest in the fund.