Govt's investment push for infrastucture projects starts taking shape

PSU dividends to be tapped for funding NIIF; Bulk of Smart Cities' financing to come from Centre, States

The government is said to be readying a number of measures aimed at increasing public sector investment in infrastructure projects.

These include funding for the Rs 20,000-crore National Investment and Infrastructure Fund (NIIF), announced in the 2015-16 Budget, and drawing a road map to the fund of the smart cities project, most of which is expected to come from the Centre and states, Business Standard has learnt.

For the NIIF, the finance ministry is likely to tap the dividend expected from state-owned companies to the Centre. While Rs 15,000 crore will come from dividend paid by cash-rich public sector undertakings (PSUs) such as ONGC and Coal India, Rs 5,000 crore will be infused by the Centre.

WEAK CONFIDENCE ON PRIVATE SECTOR

• Centre to dip into PSU dividends for Rs 20,000-cr National Investment and Infrastructure Fund (NIIF)
   
• Rs 15,000 cr to come from dividends paid by cash-rich PSUs such as CIL, ONGC
   
• Centre to put Rs 5,000 cr into NIIF
   
• Centre not to depend on PPP or private investment for smart cities
   
• Public investment to drive smart cities and urban renewal initiative
   
• Rs 1 lakh cr already announced for five years; amount likely to increase
   
• Decision shows govt’s low confidence in private sector capability to take on bigger projects

“We are looking at getting Rs 15,000 crore from the dividend paid by cash-rich PSUs. This might be through regular dividend, or they might even be asked to pay special dividend, just for NIIF,” said a senior government official. Receipts from PSU dividends are budgeted at Rs 36,174 crore this financial year.

The amounts will likely be infused into NIIF in the latter half of the year, the official added. The NIIF funds will be used to raise debt and, in turn, be invested as equity in infrastructure finance companies such as Indian Railway Finance Corporation and National Housing Bank.

Officials also say the bulk of spending on the 100 planned smart cities and a new urban renewal scheme will come from the Centre, states and PSUs. “Through the coming years, few projects will be through PPP (public-private partnership) or completely led by private entities. Most of the spending will either be through the Centre’s budgetary allocations to smart cities or by issuing municipal bonds by urban bodies or states on behalf of urban bodies,” said a second official.

Just past week, the cabinet approved for funds of Rs 1 lakh crore over the next five years for a 100 Smart Cities, and a new Urban Renewal Mission. Officials say that this amount could increase over the coming years. They admitted that the centre and states will have to take the lead on these projects since private infrastructure companies have a lot of stressed assets on their books.

The push for public investment in infrastructure to boost growth was first mooted by Chief Economic Advisor Arvind Subramanian in his mid-year economic analysis in December last fiscal. "It seems imperative to consider the case for reviving public investment as one of the key engines of growth going forward, not to replace private investment but to revive and complement it," he had stated in the report. The idea was taken forward in the 2014-15 Economic Survey and 2015-16 Union Budget.

By delaying the fiscal consolidation roadmap by a fiscal year, and by targeting a fiscal deficit of 3.9 per cent for 2015-16, instead of 3.6 per cent as per the previous roadmap, Finance Minister Arun Jaitley freed up about Rs 70,000 crore for additional investment into key infrastructure sectors, primarily Railways.