Pvt players can issue infra bonds, says Pranab

Union Finance Minister Pranab Mukherjee today said the private sector would be allowed to raise resources by issuing long-term infrastructure bonds.

“The proposal to issue long-term infrastructure bonds will, of course, be for private sector as well as public sector,” Mukherjee said at a conference on infrastructure organised by the Planning Commission.

Currently, the domestic private bond market for infrastructure is not very large. The National Highways Authority of India and Rural Electrification Corporation are the two organisations which are allowed to issue tax-free infrastructure bonds.

A recent request by the Airports Authority of India to issue tax-free infrastructure bonds was not approved by the finance ministry.

The Budget 2010-11 has announced an outlay of Rs 1.75 lakh crore on infrastructure and even proposed to exempt income-tax on investments up to Rs 20,000 in long-term infrastructure bonds to promote investment in the sector. The amount is in addition to the existing overall tax exemption limit of Rs 1 lakh per annum for personal income-tax payers.

The long-term infrastructure bonds entitled for the benefit would be notified by the government later. Mukherjee also said that the decision would help in augmenting resources of public as well as private sector for developing the country’s infrastructure.

The investment requirement for the infrastructure sector was pegged at $500 billion during the Eleventh Plan (2007-12) and is expected to double to over $1 trillion in the Twelfth Plan.