Government eyes long-term debt to fund infra projects

By IANS
Tuesday, October 12, 2010

NEW DELHI - The government is trying to raise over $300 billion through long-term debt to fill the gap in funding for infrastructure projects in the 12th plan period (fiscal 2012-17), Finance Minister Pranab Mukherjee said Tuesday.

The government recognises that the debt of longer maturity is usually not available because of the various constraints such as absence of benchmark rates for raising long term debt from the market, asset-liability mismatch of the tenor of debt in case of most financial institutions and high cost of long term debt, said Mukherjee.

The government is trying to tap bond markets to finance the infrastructure projects, he said at an event marking the signing of an agreement between India Infrastructure Finance Company Ltd (IIFCL) and Union Bank of India.

IIFCL has been set up as a wholly-owned government firm to facilitate raising of debt of longer maturity for infrastructure projects.

Mukherjee said during the 12th plan period over $1 trillion investment would be required in infrastructure sector. According to preliminary estimates, there will be a 30 percent finance gap. This means, the government would be required to raise over $300 billion through debt to fund infrastructure projects.

He said total investment in infrastructure projects in the current plan period (fiscal 2007-12) was estimated at $514 billion.

The finance minister said development of adequate and quality infrastructure was a top priority of the government.

“Development of adequate and quality infrastructure is a major priority for Government to help enable India to achieve sustainable and inclusive economic growth and make India a globally competitive economy,” he added.

IIFCL’s mandate is to supplement the available debt resources, provide long term financial assistance to commercially viable infrastructure projects and give overriding priority to Public Private Partnership (PPP) projects.

Since its inception in April 2006, IIFCL has emerged as a key player in infrastructure financing space and it has made gross sanction of Rs.27,778 crore in 156 projects involving a project cost of Rs.2,33,399 crore.

These projects are spread across 23 states in the country. The financial closure has been achieved in 137 projects (88 percent of total sanctioned number of projects). The company has disbursed Rs.11,159 crore to 111 projects, said Mukherjee.

Filed under: Economy

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