To meet the financial needs of the infrastructure sector, the government is considering floating ?specific infrastructure debt funds? to attract foreign funding at competitive rates.
These funds would be floated overseas by the India Infrastructure Finance Company Limited (IIFCL) to tap small investors, according to a proposal mooted by the finance ministry.
IIFCL would then invest in or lend these funds to infrastructure companies and projects in India. The Centre would also provide guarantees for such borrowings to make these funds attractive.
The government plans to offer some mega projects to investors with long terms debt options at competitive rates. The Deepak Parekh Committee on infrastructure financing had revised its spending target for infrastructure sector to $475 billion (at current prices) from the estimate of $320 billion (at 2005-06 prices).
According to the committee, this entails a financing gap of $ 129 billion going by the current level of infrastructure spending as a percentage of national income. The government believes that floating debt funds overseas could partly help in bridging that gap.
?The debt option will be favourable among investors who do not want to take an equity exposure in infrastructure projects, which usually have a long gestation period. It will also provide them safe return since these will be backed by sovereign guarantee,? a government source said.