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Finance ministry to come up with Infra Debt Funds guidelines by June

17 May 2011 Evaluate

The Ministry of Finance is planning to set guidelines on the Infrastructure Debt Fund by end of this June. This Infra Debt fund will help to finance the core sector to sustain high economic growth. The Infra Debt Funds are planned to be structured either as a trust or a company, depending upon the nature they would be regulated either by RBI or SEBI.

Department of Economic Affairs’ secretary is scheduled to meet all the stakeholders including the central bank RBI, market regulator SEBI and insurance sector watchdog IDRA to discuss the guidelines and the Capital Adequacy Ratio for the companies to be helped also the exposure limits. Matters connecting to regulators, possible debt seekers, and credit rating may also come up in the meeting.

The ministry of finance is of the view that instead of an owned funds for the infra investment, it should be pooled funds, as discussed in internal meeting. Since both companies and trust might be allowed in this space, they would issue bonds and units accordingly & SEBI can regulate companies and RBI can regulate trust.

In this year’s union budget, Finance Minister P Mukherjee had announced setting up the funds through special purpose vehicles for attracting foreign investment in the infrastructure sector. In his Budget speech FM said “To attract foreign funds for financing of infrastructure, I propose to create special vehicles in the form of notified infrastructure debt funds,”

Recently, planning commission deputy chief, Montek Singh Ahluwalia had said, “India needs $1 trillion investment in infrastructure creation to continue to grow at 9% over the next five year”.

The Finance Ministry and Planning Commission is planning to invest $1trillion in creation of ports, highways, power utilities and telecom infrastructure in next Five Year Plan starting from 2013. An inclusive policy framework for PPP in building Physical infra and social sectors such as health and education is on the list. It will place guidelines for the entry of private players and implementation of infrastructure projects.

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