RBI grants infra status to cold storages

The Reserve Bank of India (RBI) today allowed companies setting up cold storage facilities to raise funds abroad, thereby giving the infrastructure status.

The decision to grant infrastructure status to cold storage and cold room facilities by the RBI follows the Budget announcement to this effect.

"It has been decided to expand the definition of infrastructure sector, for the purpose of availing of external commercial borrowings (ECBs) to include cold storage or cold room facility, including for farm level pre-cooling, for preservation or storage of agricultural and allied produce, marine products and meat," the RBI said in a notification.

As per the definition, the infrastructure sector includes power, telecommunications, railways, roads, including bridges, sea ports and airports, industrial parks, urban infrastructure (water supply, sanitation and sewage projects), mining, exploration and refining.

Finance Minister Pranab Mukherjee in his Budget speech said: "ECBs will be available for cold storage or cold room facility, including for farm level pre-cooling, for preservation or storage of agricultural and allied produce, marine products and meat."

The decision to encourage cold storage sector forms part of the strategy of the government to encourage more food production and prevent wastage.

The RBI also allowed foreign entities to extend guarantee for infrastructure firms raising debt through instruments like debenture and bonds. However, this guarantee could only be provided by multilateral, regional financial institutions and government-owned development financial institutions.

The debt instrument should have a minimum maturity of seven years. In case the guarantee is involved and foreign entity meets the liability in foreign currency, ECB norms related to maximum rate of interest will apply, the Reserve Bank said.

Under the present ECB norms, funds can be raised in overseas market at a maximum rate of global benchmark interest rate-- Libor -- plus 200 basis points if loan is for three years, up to 300 basis points if debt is up to 5 years and 500 basis points if it is above five years.