"There are a lot of mega highway and port sector projects that are coming up for bidding, which require huge investments. The proposed measures will definitely help the developers in achieving financial closures, attracting both overseas as well as domestic investors, said Samir Kanabar, directorinfrastructure, Ernst & Young. He added that since the proposed measures are in the nature of debt, the infrastructure developers will also be able to get funding at a relatively competitive rate as compared to bank financing.
Mukherjee said the Indian Railways Finance Corporation (IRFC) and the National Highways Authority of India Limited (NHAI) will issue tax-free bonds of Rs 10,000 crore each, while tax-free bonds worth Rs 5,000 crore each will be issued by Hudco and the port sector, respectively.
Already listed companies like IDFC, REC, PFC, L&T and IIFCL have planned to mobilise close to Rs 12,000 crore through issue of infrastructure bonds. Out of them, IDFC has already raised Rs 1,228 crore in two tranches and expects to collect another Rs 2,172 crore. Normally such bonds receive a good amount of interest from investors because of the tax advantage, said Jagannadham Thunuguntla, strategist & head of research, SMC Global Securities.
Given the dearth of funds for the sector, Ranen Banerjee, executive director infrastructure development, PwC, said the proposed issue of tax-free bonds would help meet the sector's requirement for a year. Project delays and cost escalation had in the past led to lower capacity addition than targeted in power, roads highways and railways.
The finance minister also said the government has kept a target for spending Rs 2.14 lakh crore in the infrastructure sector, accounting to about 48.5% of the gross budgetary support for the total Plan expenditure. To attract foreign funds for infrastructure financing, I propose to create special vehicles in the form of notified infrastructure debt funds, he said. Since most infrastructure companies are organised in the form of SPVs, Mukherjee has permitted FIIs to invest in unlisted bonds with a minimum lock-in period of three years.