Adb, Oecf Promise More Support

The Overseas Economic Cooperation Fund of Japan and Asian Development Bank, through senior representatives voiced existing and future plans for the Indian power sector that involve major credit and equity inflow, as well as strong technical support.

The OECF proposes a new funding option, while the ADB has already committed $300 million fresh investment last week. ADB is preparing a telecom sector report.

At the conference, Investment Information & Credit Rating Agency chairman D N Ghosh said financial institutions like the Life Insurance Corp, General Insurance Corp, Unit Trust of India and the provident funds must be brought into the ambit of infrastructure financing.

 

In a dire warning to all small investors who have invested in recent deep discount bond issues, Ghosh said in the context of unknowability of the future in the capital market that those who are putting their money into the deep disount bonds of Larsen & Toubro (L&T) and Tisco are in for a shock. These investors are in for a tremendous shock as there is a high degree of uncertainity due to the taxation status of these bonds which is still not known, Ghosh said.

He went on to add that the debt market should come out with a lot innovations. There should be liquidity in the market and the investor has to be provided with an exit route in the secondary market so that the household savings in form deposits in bank and non banks can be tapped, Ghosh told the gathered delegates.

According to him along with institutions like LIC, UTI, and GIC are a source of long term capital required for infrastructure investment. Institutional sopurces like them with long term depositors provide the necessary maturity for such projects, he added.

Welcoming the formation of the Infrastructure Developement Finance Co, Ghosh added that creation of such institution does not form a solution to the institutional inefficiency that has plagued the economy.

Chairing the first technical session, Yoshitaro Fuwa, chief representative of the OECF, said that the institution is is keenly interested in co operation with the IDFC.

We lend to projects through two windows. Under the first window finance related to infrastructural developements like transmission and power generation is provided. In the second window finance which forms a smaller part than the first one we lend either directly or through equity participation, Fuwa said.

Later, outlining his plans to Business Standard, Fuwa said that his organisation is interested in financing the telecom projects through the first window. A couple of Japanese companies have approached us and we actively looking at the proposal to provide loans to telcom projects in India, Fuwa said.

The OECF, which has floated the SARA fund in ten states in India along with ILFS, is also offering funds to clean the Yamuna river apart from afforestaion projects in Karnataka.

Speaking on industry & government interaction in infrastructure developement and financing, VV Desai, director and chief economist at the Asian Development Bank, pointed out that private sector participation in infrastructure is very important. However a monopolistic tendency should be avaoided for which a regulatory body needs to be in place

In the second technical session, Fahrettin Yagci, senior economist the World Bank, said that to achieve a 7 per cent growth rate for the economy the investment in ifrastructure should be double. The share of investment in governemnt oriented projects should be incresed by 6-9 per cent, he added.

He cited some conditions for increased private participation in infrastructure projects.

Stable agro economis developements is necessary to gear up private investment along with a transparent and depoiliticised environment for all telecom, power road and civil aviation projects, he said while addressing the present delegates.

An institutional and regulatory framework in risk sharing and risk management for investors is needed, he emphasised. This could be in the form of provisional guarante in power projects. The World Bank is now making greater use of guarantees to private lenders in order to minimise off shore risks, he added.