The government proposes to set up a state-owned company on the lines of India Infrastructure Finance Company (IIFCL) to ensure low-cost long-term finance for urban transportation projects.
The company, to be christened National Urban Transport Finance Corporation (NUTFC), would facilitate both equity and debt financing. It will raise funds by various means ? long-term debt from the domestic market, loans from bilateral and multilateral institutions and external commercial borrowings (ECBs).
According to the proposal by the ministry of urban development, the proposed company’s borrowings would be protected with sovereign guarantee to enable it to mobilise cheap funds.
?The proposal is getting vetted by a team of experts. After getting necessary approvals from other ministries, the proposal is set to come before the Cabinet for approval,? said a government source privy to the development.
The proposal has been put on fast track due to paucity of funds being faced by the central and state agencies to fund urban infrastructure projects. Given the size of projects and amount of investments needed, many private sector companies are also wary to invest here. A dedicated funding agency is expected to overcome this obstacle by providing financing at competitive rates keeping the tenure of the projects in mind.
?There is little doubt about the magnitude of India’s funding challenge. Accelerating the flow of resources into urban transport is therefore critical to India’s agenda of economic growth, poverty reduction and urban renewal. Budgetary funds would only cover about a third of the massive investment needed. rest has to flow from the private sector,? a senior urban development ministry official said.
As per the proposal, NUTFC is envisaged to be an organisation created under the Companies Act 1956 as a wholly owned government company. The NUTFC would be a dedicated institution purported to assume an apex role for financing of urban transportation projects in the country by providing long term financial assistance to metro rail projects, bus rapid transit systems and urban transport projects being developed by PSUs, or through public-private-partnership (PPP) or through the private sector that has entered into a MoU with the central or state government or other PSUs. Apart from extending long-term debt, the proposed institution would also refinance to banks and financial institutions for long term loans.
The secretary, ministry of urban development, is proposed to be the chairman of the corporation with a full time managing director or chief operating officer. The organisation would also have representation from Planning Commission, ministry of finance, ministry of housing & urban poverty alleviation and other banking and non-banking financial institutions.
The urban development ministry has noted that the growth of urban population in India has been extremely rapid during the course of last century. In terms of percentage of total population, the urban population in India has increased significantly from 62 million in 1951 to 377 million in 2011 while the share of urban population has gone up from 17% in 1951 to 31% in 2011 and is expected to increase up to around 37% by 2021.