The government is planning to dip into your pension, parked in the Employees’ Provident Fund Organisation (EPFO), to finance its ambitious highway development programme.
The finance ministry on January 21 modified pension fund investment norms that will now allow the National Highways Authority of India (NHAI) to borrow from the EPFO, the country’s largest state-run pension fund. Under the changed rules, from April 2015 onwards, the pension corpus can be invested in debt instruments or bonds of ‘authorities’ such as NHAI and not just in public sector undertaking (PSU) bonds, as was the case earlier.
The NDA government’s ambitious plan to build 30km of highway a day over the next four to five years would require Rs 1.8 lakh crore — six times the annual budget of the rural job scheme MNREGA — over and above the budgetary support of Rs 1.25 lakh crore.
With private investment in the sector drying up, the highways ministry started looking at alternate investment avenues. “We approached the finance ministry to modify the investment norms for pension funds to allow us to borrow from EPFO,” said a senior ministry official.
At present, the EPFO — which holds the retirement savings of over 5 crore employees across India — is sitting on a pension corpus in excess of Rs 6 lakh crore.
Highways minister Nitin Gadkari will be meeting top bureaucrats, including the finance, labour and highway secretaries, and central provident fund commissioner KK Jalan among others on Thursday to hammer out the contours of such an investment and the design of the bond instruments — which could typically be of a long-term maturity running up to 30 years.
Finance minister Arun Jaitley is likely to make an announcement to this effect in his budget later this month.
To counter the risk factor, the EPFO wants the government to stand guarantee for any funds it may lend the NHAI.
The highways ministry, on its part, has proposed toll revenue as surety. “While the NHAI builds highways, it is the government that owns these assets. Therefore, it can offer toll revenue as collateral to EPFO in lieu of the pension money the authority borrows,” said a government official.