India to set up infra investment trust by year-end

The Indian government by this year-end will set up an "infrastructure investment trust" to stimulate investments in infrastructure sector, Economic Affairs Secretary Arvind Mayaram said Monday.

He said the proposed trust will help speed up projects and nurture a strong long-term relationship between sponsoring authorities and private partners.

"In the next two-three months there will be greater deepening of the equity and bond markets for financing of the infrastructure sector," Mayaram said at an event organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) here.

The proposed trust will manage the projects over a longer period of time. It will do away with the current practice of private players turning into developers whose interest is limited to merely contracting for construction and are not attuned to a long-term relationship with the government.

The trust will function in similar way as Real Estate Investment Trusts.

Under the new set up, underlying revenue of a project will be transferred to a trust which will issue units to investors, including foreign investors who want to buy the units.

"A major reason why some PPP projects in the infrastructure sector have run into problems is that many private partners did not price the risk in projects over a 25-year time frame," said Mayaram, adding that even officers in the public sector do not have the capacity to carve out a long-term relationship with the private sector.

He said the government was working on various plans to stimulate investments in the infrastructure sector. These include deepening of bond markets and encouraging investments from pension funds and Employees Provident Fund Organisation (EPFO).