Kerala to tap financial mkts for infra funding

The Kerala government is considering tapping financial markets with a first-of-its kind scheme to fund major infrastructure projects in the state, including the development of national highways.

The state government has approved various proposals suggested by an expert committee in this regard and also issued an official order formalising it.

The state needs roughly Rs 35,000 crore for land acquisition pertaining to the development of national highways alone, according to an official estimate.

The government had already formed a high-power committee of ministers for the implementation of the new scheme. It has categorised the fund raising scheme into immediate, medium-term and long-term requirements. Special purpose vehicles (SPVs) will be formed in soon.
 

It has decided to issue General Obligation and Revenue Bonds (GORB) for medium-term funding requirements for major infrastructure projects.

The decision is based on the recommendations of an expert committee under KM Chandrasekhar, former cabinet secretary and currently vice chairman of the state planning board, to explore measures to assess financial markets for raising funds for financing such projects.

Based on the recommendations, the state government has decided to introduce the bills discounting system for meeting the pending bills of contractors.

Under it, it is launching the 'I Owe You' (IOU) scheme with a tenure of one-year and has decided to initiate all procedures for its introduction.

For the GORBs, the Kerala Infrastructure Investment Fund Board (KIIFB) and the Kerala Road Fund Board (KRFB) will act as sponsors. According to a latest government order, amendments would be made to the guidelines of these institutions to become sponsors.

As a strategic measure to tide over the present financial crisis, the committee has suggested the state to introduce the IOU financial instrument backed by unconditional and irrevocable guarantee from the government to the contractors, which will facilitate the latter to avail bill discounting facility from the banks.

Lack of public funds with the government has resulted in the non-clearance of pending dues to the contractors, leading to stalling of works related to roads and bridges.

The government is also finding it hard to raise funds for major infrastructure projects like Kochi metro, national  highway development and the city rail project in Thiruvananthapuram.

The finance department is now keen on raising funds for various infrastructure projects, said KM Abraham, additional chief secretary in the department of finance.

The government also has decided to initiate action to form institutional framework to raise funds for long term investments through Alternate Investment Fund (AIF) and Infrastructure Investment Trust or Infrastructure Development Fund.

It had already decided to provide seed capital to set up such an institution. An empowered committee of ministers has also been formed to take decisions about the proposed fund raising programme.

The committee will include ministers for public works, planning, industries, power and ports, with the state finance minister as its chairman. An implementation group would also be formed, which will be headed by the chief secretary. A consultancy agency would be appointed for its successful implementation.

A special unit would be formed in the KIIFB with an officer in the rank of joint secretary, a section officer and two assistants to provide administrative support to the initiatives.