Govt plans Rs10 tril­lion pub­lic fi­nanc­ing for in­fra projects

The plan aims to raise money in tranches of Rs10,000 crore by sell­ing 10-year bonds at a coupon of 7.25-7.75%

Mint Asia ST - - Inside - B Y J YOTIKA S OOD & U TPAL B HASKAR

With bank credit dry­ing up for large in­fra­struc­ture projects, the Na­tional Demo­cratic Al­liance (NDA) gov­ern­ment is ex­plor­ing a plan to raise Rs10 tril­lion from re­tirees and prov­i­dent fund ben­e­fi­cia­ries, said trans­port min­is­ter Nitin Gad­kari.

The plan aims to raise money in tranches of Rs10,000 crore by sell­ing 10-year bonds at a coupon of 7.25-7.75%.

Each tranche will be meant for a spe­cific project.

India plans to in­vest as much as Rs3.96 tril­lion in the cur­rent fi­nan­cial year to bankroll its new in­te­grated in­fra­struc­ture pro­gramme which in­volves build­ing of roads, rail­ways, wa­ter­ways and air­ports.

Gad­kari, who also holds the charge of the min­istry of wa­ter re­sources, river de­vel­op­ment and Ganga re­ju­ve­na­tion, said that the gov­ern­ment was ex­plor­ing al­ter­na­tive mech­a­nisms for

Fund­ing growth:

fund­ing large in­fra­struc­ture projects.

He de­clined to com­ment fur­ther, stat­ing the scheme was still at a con­cep­tual stage and has not been dis­cussed with the fi­nance min­istry.

State-run com­pa­nies, in­clud­ing Power Fi­nance Corp. Ltd (PFC) and Ru­ral Elec­tri­fi­ca­tion Corp. Ltd, have been sell­ing tax-free bonds to raise low-cost and long-term funds to help fi­nance in­fra­struc­ture projects.

India needs funds for its am­bi­tious plans such as Sa­gar­mala (ports) and Bharat­mala (roads) to im­prove its trans­port in­fra­struc­ture. While the to­tal in­vest­ment for the Bharat­mala plan is es­ti­mated at Rs10 tril­lion—the largest ever out­lay for a gov­ern­ment road con­struc­tion scheme—the coun­try has en­vis­aged Rs8 tril­lion of in­vest­ment un­til 2035 un­der the Sa­gar­mala pro­gramme.

The to­tal road length to be de­vel­oped as ex­press­ways un­der Bharat­mala will be around 51,000km; the Sa­gar­mala pro­gramme en­vis­ages con­struc­tion of new ports to har­ness the coun­try’s 7,517km coast­line and set­ting up as many as 142 cargo ter­mi­nals at ma­jor ports.

The plan to raise money from re­tirees and prov­i­dent fund ben­e­fi­cia­ries comes as In­dian banks, loaded with bad debt, have turned averse to fund­ing in­fra­struc­ture projects. With many large con­glom­er­ates and in­fra­struc­ture com­pa­nies weighed down by debt, the onus of cre­at­ing in­fra­struc­ture has fallen on the gov­ern­ment.

Ex­perts say that there are lim­ited op­tions avail­able to raise funds for in­fra­struc­ture fi­nance.

“You ei­ther opt for pub­lic funds or get in­vest­ments from out­side. The gov­ern­ment’s de­ci­sion is based on lim­ited op­tions it has,” said Jai­jit Bhat­tacharya, part­ner and head, eco­nomics, reg­u­la­tory and pol­icy ad­vi­sory, KPMG in India.

But Gad­kari also sees his plan ben­e­fit­ting in­vestors.

“A lot of peo­ple fall prey to chit fund schemes and lose money. So our aim is to give such com­mon peo­ple an in­vest­ment op­por­tu­nity,” said Gad­kari.

The gov­ern­ment has been try­ing to raise re­sources to boost its am­bi­tious in­fra­struc­ture pro­gramme through mul­ti­ple ways.

Mint re­ported on 11 Au­gust that the gov­ern­ment is con­sid­er­ing set­ting up an in­de­pen­dent fi­nan­cial in­sti­tu­tion to cater ex­clu­sively to the roads and high­ways sec­tor along the lines of PFC.

In 2015, the gov­ern­ment set up the Na­tional In­vest­ment and In­fra­struc­ture Fund to raise funds for the in­fra­struc­ture sec­tor with an ini­tial tar­geted cor­pus of Rs40,000 crore, of which Rs20,000 crore was to be in­vested by the gov­ern­ment. The re­main­ing Rs20,000 crore was to be raised from long-term in­ter­na­tional in­vestors, in­clud­ing sov­er­eign wealth funds, in­surance and pen­sion funds and en­dow­ments.

The gov­ern­ment is also work­ing on rais­ing cap­i­tal by mon­e­tiz­ing the op­er­a­tional road as­sets of Na­tional High­ways Author­ity of India, which has drawn up a list of 105 projects to be mon­e­tized over a pe­riod of time.

Union trans­port min­is­ter Nitin Gad­kari.

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