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Land bank corp to aid infra projects

business Updated: Feb 18, 2010 22:41 IST
HT Correspondent
HT Correspondent
Hindustan Times
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A law to speed up environmental approvals and land acquisition for highway projects and a push to aid a market for long-term bonds to fund large infrastructure projects are among key measures expected to be announced in the budget.

The government plans to create a National Land Bank Corporation through a law so that banks will find it easier to lend for long-gestation infrastructure projects, officials said.

Tax breaks may aid a deeper bond market because long-term loans sold as bonds are considered ideal to build projects that take long.

An estimated investment of $500 billion (Rs 23 lakh crore) is required to upgrade India’s roads, highways, ports and airports in the next five years. This is more than 10 times the current level of investment in infrastructure projects.

The objective is to ensure that total investment in infrastructure projects reach a level of 9 per cent of the country’s gross domestic product by 2014 from the current 4 per cent.

Banks now charge more than 12 per cent on infrastructure loans. Bonds could help cut that.

“The present cost of borrowing for infrastructure projects is around 12 per cent per annum is very high, the all inclusive cost of debt funds should ideally be at rates not exceeding 10 per cent,” V.D. Mhaiskar, chairman and managing director of IRB Infrastructure, told Hindustan Times.

Highways and surface transport minister Kamal Nath has also asked the states to speed up land acquisition or face withdrawal of projects.

“The government should expedite the setting up a NLBC with an with an initial capital of Rs 50,000 crore,” said Vinayak Chatterjee, chairman, Feedback Ventures, an infrastructure consulting firm.