The Centre plans to bring in more safeguards for investment of pension and insurance funds in infrastructure projects to deflect criticism that the funds are not being used in debt papers of the Centre and the states. These additional conditions are necessary to raise the Rs 50,000-crore fund for investing in the core sector, a significant part of which will come from domestic pension and insurance funds.
According to the existing regulatory framework, insurance firms can allocate up to 15% of the sum for investment in infrastructure. The money is meant only for operational infrastructure projects and through AAA-rated securities. A similar dispensation is in place for pension funds.
?We are looking at long-term funds for the infrastructure sectors. Such funds cannot come from the banking sector. It can only come from insurance and pension funds. They are allowed to invest in infrastructure. But we have to ensure that the public money does not get diluted in the process,? Planning Commission member BK Chaturvedi told FE . He said the new fund will invest in all infrastructure sectors but the respective share has to be decided.
Planning Commission has formed a committee under the chairmanship of Housing Development Finance Corporation?s chairman Deepak Parekh to finalise within the next two weeks the modalities of garnering the required amount and investing it. Of the proposed amount, pension and insurance funds?both domestic and foreign?are supposed to contribute nearly Rs 20,000 crore and remaining amount will come from other institutions, including India Infrastructure Finance Company.
Looking at the shortage, the government has increased the infrastructure expenditure in the 12th Five Year Plan (2012-2017) to $1 trillion, compared with $500 billion in the current Plan. The Rs 50,000-crore fund is an attempt to ensure that the target is met. Incidentally, all physical infrastructure sectors barring telecom have had 11%-60% investment shortfall in the last three years.
The government had announced a $5-billion fund in partnership with Citigroup Inc and Blackstone Group, but the same failed to take off and was later shelved. ?It?s a good idea to create a fund, but it should actually be created on the ground and the recommendation for improving infrastructure should be implemented well in time,? PricewaterhouseCoopers executive director Amrit Pandurangi said.
