In a bid to provide the much-needed push to the cash-starved infrastructure sector, finance minister Pranab Mukherjee has announced raising Rs 60,000 crore through tax-free bonds in 2012-13, twice the amount announced for 2011-12.
"For 2011-12, tax-free bonds for Rs 30,000 crore were announced for financing infrastructure projects. I propose to double it to raise Rs 60,000 crore in 2012-13," said Mukherjee.
While the National Highways Authority of India (NHAI), Indian Railway Finance Corporation (IRFC) and India Infrastructure Finance Company Ltd (IIFCL) will raise Rs 10,000 crore each through the issuance of tax-free bonds, National Housing Bank (NHB), Small Industries Development Bank of India (SIDBI) and HUDCO will raise Rs 5,000 crore. Besides, Rs 10,000 crore would be raised by the power sector and ports would raise another Rs 5,000 crore.
The move, however, may primarily help the public sector.
The infrastructure sector requires an estimated investment of R45 lakh crore or $1 trillion during the 12th Plan period, of which 50% would have to come from the private sector against 36% anticipated during the 11th Plan period.
“This is a very positive move and it would provide the much needed impetus to the sector but it will principally help the public sector and not much would be directed towards the private sector,” Rajiv Kumar, secretary-general, FICCI, told Hindustan Times. “Greater attention must be paid to the private sector as well.” Mukherjee also said that the first Infrastructure Debt Fund with an initial corpus of R8,000 crore has been set up this month to tap the overseas markets for long tenor pension and insurance funds.
To ease credit availability to infrastructure projects, IIFCL has already put in place a structure for credit enhancement and take-out finance, he said. “A consortium for direct lending and grant of in-principle approval to developers before the submission of bids for PPP projects has also been created.”
With a view to deepening the capital market and encourage investment in the infrastructure sector, the government has taken a series of steps including raising the limit for foreign institutional investors in long-term infrastructure bonds, corporate bonds and government securities. The limit on external commercial borrowings was also raised and qualified foreign investors were allowed to invest in specified Indian mutual funds and directly in equities.