To address funding challenges of the telecom sector, the government will set-up the Telecom Finance Corporation (TFC) and infuse Rs 1,000 crore of the proposed authorised capital of Rs 10,000 crore in it. Further, the TFC is proposed to be set-up on the lines of sectoral finance bodies such as the Tourism Finance Corporation of India and Power Finance Corporation and will be registered as non-banking financial corporation and non deposit infrastructure finance company. The Cabinet has already approved for the creation of TFC under the National Telecom Policy 2012.
Initially, the government of India will have 100 percent shareholding in TFC and initial equity capital is proposed to be sought through budgetary support. Banks and other financial institutions could be offered equity participation later in order to spread the financial burden and encourage broader participation of the financial community. The fund infusion for telecom finance body is proposed to be done through taxable as well as tax-free bonds, term loans from banks and other financial instruments, off-shore borrowings from multilateral agencies such as International Monetary Fund, World Bank and Asian Development Bank.
As per the government estimate, telecom sector debt market under the 12th Five Year Plan (2012-17) should be around Rs 7.55 lakh crore and TFC, which will initially target 5 percent of this debt market, will translate into a loan portfolio of Rs 38,000 crore in 5 years, approximately Rs 7,000 crore annually. Further, TFC will target to maintain debt equity ratio of 5 for first five year of its establishment and will operate in the interest margin of 200 to 250 basis points.
