To encourage private capital investments in education and health, finance minister Pranab Mukherjee on Friday conferred the coveted infrastructure status on these sectors. With this, investors in educational institutions and hospitals can dip into the various infrastructure funds designed to suit long-gestation projects and access low-cost loans.

?There is a need to further accelerate the creation of infrastructure in this (health and education) domain. I am happy to announce that henceforth capital stock in educational institutions and hospitals will be treated as infrastructure sub-sectors,? Mukherjee said while replying to a debate on the general budget for 2011-12 in the Lok Sabha. ?Capital investment for these sub-sectors will be eligible for the viability gap funding scheme,? he said, adding that detailed guidelines would soon be announced.

VGF is a mechanism for providing long-term grants to facilitate public private partnership projects. Granting infrastructure status would increase the availability of banking funds to investors in these sectors. It would also lower their cost of debt by around 200-300 basis points.

?This move comes as a major boost for the private healthcare players who can now expand into tier II, tier III towns and surrounding rural areas without worrying much about long-term funding,? said Pradip Kanakia, leader, healthcare practice, PricewaterhouseCoopers India.

Mukherjee said promoting investment in education and health is high on the government’s agenda.

?Although one has to wait for the guidelines to analyse the impact, on the face of it, it appears to be a good step,? said, Pervez Ahmed, CEO, Max Healthcare.

Hospitals and educational institutions will now be able to access funds from infrastructure-focused funds such as IIFCL, the India Infrastructure and IL&FS Funding. Additionally, healthcare sector can also make claims for focus funds worth over Rs 4,000 crore. This is today available to core sectors with priority status. Long-term funding would become much easier and the private hospitals can now negotiate better to access ECBs, leverage forex reserves as also insurance and pension funds.

The finance minister also said a Women’s Self Help Groups Development Fund with a corpus of Rs 500 crore would be formed. ?The proposed fund will operate through Nabard and will be exclusively utilised for providing refinance on loans given to women’s SHGs on soft terms,? he said.

The government would also extend the existing interest subvention scheme to fish farmers and fishermen for providing short-term loans at 7% interest, with additional subvention for timely repayment. Under the interest subvention scheme, the government steps in by picking up a part of the interest burden.

Under fire for the proposal to tax ‘high-end’ medical services, Mukherjee further said he was examining various suggestions and would respond later. ?Since the presentation of the Budget 2011-12, I have received several suggestions and representations, including valuable feedback from members (MPs) on taxation proposals. These are under examination,? Mukherjee said.

The minister further said that he would respond to the issues in his reply to the discussion on the Finance Bill 2011 later during this session. Mukherjee is expected to reply during the discussion on the Finance Bill in Lok Sabha on March 22. His proposal to impose a 5% service tax on services provided by centrally air-conditioned hospitals of 25 beds or more evoked sharp reaction from the medical community, with doctors describing the levy as a ?misery tax?.

Besides, Mukherjee’s proposal to levy minimum alternate tax on special economic zone units and developers was criticised by the industry.

Further, in a bonanza for lawmakers, Mukherjee announced that MPs’ constituency fund will be more than doubled to Rs 5 crore per year from April 1. As many as 797 Lok Sabha and Rajya Sabha MPs will get Rs 5 crore under the Member of Parliament Local Area Development (MPLAD) scheme against the current allocation of Rs 2 crore. This would result in an additional allocation of Rs 2,370 crore per year, he said.

Allaying apprehensions that global events like high oil prices may impact growth, the finance minister on Friday exuded confidence that the economy would return to 9% growth in 2011-12. However, he added that fighting unacceptably high inflation is the most important issue that the government needs to address.