The government will rope in foreign funds and multilateral agencies to create the proposed Rs 50,000 crore core sector fund. | |
| At the implementation stage, the government plans to keep an arms length and float a special purpose vehicle (SPV) to manage the infrastructure projects. |
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| State Bank of India (SBI), ICICI Bank, Industrial Development Bank of India (IDBI), Life Insurance Corporation (LIC) and Infrastructure Development Finance Corporation (IDFC) will supervise the creation of the fund. |
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| However, foreign funds and multilateral agencies may also join the SPV, sources familiar with the development said. Although no final shape has yet been given to the structure of the Rs 50,000 crore fund, sources said the pool will be created with resources from banks, institutions like LIC, foreign funds and even multilateral agencies. |
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| Besides, the government is expected to make some budgetary provision to chip in the "viability gap" in various projects. |
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| Even though the fund will predominantly take debt exposure, it is possible that it may also pick up equities in various projects in very small doses. |
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| Apart from taking direct exposure, the proposed fund may also extend guarantee to projects. On the strength of the guarantee, the projects can raise money at a lower cost. |
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| "It is not yet clear whether the fund will support only new projects. It is possible that some of the existing projects which are suffering from time and cost over run can also be supported by the fund," sources said. |
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| The government has already started discussions with the five players at an informal level on setting up of the fund. |
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| "The two key issues are availablibly of long-term funds and low interest rate. To meet both the requirements, we may see structured instruments making appearance in Indian financial sector. Commercial banks may fund projects for the first five years and the likes of IDBI and ICICI Bank appear at the second stage with medium term funds. The last lap "" between 10 and 15 years "" may be covered by LIC which has long-term pension funds," said a banking source. Essentially, it will follow the take-out financing model. |
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| The government is heavily banking on power sector which is likely to attract huge investment as the 2003 Electricity Bill has paved the path for open access system. |
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| The N K Singh panel is now working on the norms and policy for removing cross-subsidisation and bringing down the cost of power. |
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| Telecom, roads, ports and airports are the other "happening" segments in the core sector. However, virtually no project has taken off at urban infrastructure sector. |
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