Funding for infrastructure may ease

Updated on Feb 21, 2008 11:21 PM IST

Govt may relax external borrowing norms to make sector attractive for pvt players, report Samiran Saha & Gaurav Choudhury.

HT Image
HT Image
Hindustan Times | BySamiran Saha & Gaurav Choudhury, New Delhi

The government is trying to work out various innovative funding options, including relaxing commercial borrowing (ECB) norms, to fund infrastructure projects. Sources indicated that with domestic interest rates remaining on the higher side, the government might relax ECB norms to make infrastructure projects more attractive to the private developer.

Funds can be raised through the ECB route from various sources including from overseas commercial banks, multilateral financial institutions as well as export credit agencies.

“Liberalising the end use of ECB will help construction companies raise cheaper finances,” Amitabh Das Mundhra, director, Simplex Infrastructures, said.

India would need an estimated $500 billion over the 5 years for the infrastructure sector.

The government feels that lack of credible and bankable infrastructure projects along with absence of long-term financing instruments as the major weaknesses affecting the growth of the infrastructure sector in the country.

“ECB scores over FDI in the above regard, as Indian companies raise ECB strictly to meet their specific requirement, while flow of FDI is on a selective basis, at the discretion of the foreign investors,” said an official. The government is also examining various options for active management of the country’s burgeoning foreign exchange reserves for infrastructure projects.

A committee, headed by HDFC chairman Deepak Parekh, felt there is a need to find out suitable structures “that can effectively help in channeling these reserves for investment in infrastructure projects without the risk of monetary expansion.”

Analysts feel the sector needs a regulator to make it risk free. “Derisking is one of the critical issue the government should look into in the forthcoming budget. This will make the sector make attractive and allow the entry of many more players to make it attractive,” said DK Joshi, director & principal economist, CRISIL.

In his last budget the finance minister had upped the spend on National Highway Development Programme to Rs 10,667 crore.
However, of the 7,300-km of North-South-East-Corridor connecting Kashmir to Kanya Kumari and Silchar to Porbandar, only 1,635 km was completed till December 31, 2007. Over 4,686 kilometers is under implementation and the government is yet to award contracts for completion of 821 kilometers. The Golden Quadrilateral connecting four metros is nearing completion. Of the planned 5,846 km, about 5,600 km has been completed.

“We recommend unspent budgetary allocations from previous year for infrastructure spending to be carried forward. To sustain the targeted GDP growth, we expect the momentum of spending on infrastructure to be increased to 8 per cent of GDP,” said Mundhra.

Close Story
Story Saved
Saved Articles
My Reads
Sign out
New Delhi 0C
Friday, August 19, 2022
Start 15 Days Free Trial Subscribe Now