RBI opposes $20 bn wealth fund from forex reserves

The Reserve Bank of India (RBI) has opposed the creation of a $20 billion sovereign wealth fund, for acquisition of energy assets overseas, out of foreign exchange reserves and wants the government to create the corpus for it from the Budget.

A Group of Ministers headed by Finance Minister Pranab Mukherjee today deliberated on the possible ways of creating a fund on the lines of ones that exit in countries like China.

"Various things were discussed but no view has emerged," Oil Minister S Jaipal Reddy said after the 75 minute meeting.

Sources privy to the deliberations said RBI was against using nation's forex reserves for setting up the fund. So, the Planning Commission has been asked to work out surplus that may be generated after accounting for all Plan and non-Plan expenditure.

"What they are talking is $1-2 billion corpus which is hardly the size...For acquisitions of oil and gas fields or coal and other mineral mines," a source said.

"We decided we will take a look at it after the [12th Five Year] Plan approach paper is approved," Planning Commission Deputy Chairman Montek Singh Ahluwalia.

Asked if RBI agreed for sharing a part of the over $300 billion forex reserves, he said: "Those are some of the issues. I mean one view is that it could be done through use of forex reserve. There are some operational problems there. The other view is that if you do it out of budgetary resources."

He added, "...Obviously if you use budgetary resources then you are taking from other use of plan fund. That's what we have to look at."