Nabard, IL&FS in pact for rural infra

Written by Sanjay Jog | Mumbai | Updated: Dec 19 2008, 07:01am hrs
Infrastructure Leasing & Financial Services (IL&FS) and National Bank for Agriculture & Rural Development (Nabard) have, in a significant move, joined hands for making available sustainable infrastructure funding and delivery for rural India.

The memorandum of agreement (MoA) between the two will enable Nabard and IL&FS to jointly identify specific programmes/project areas in various states to take forward programme-based and project-based infrastructure projects for the benefit of rural areas; these will include projects based on the public-private-partnership (PPP) model.

The alliance between the two is crucial, given that investment needs for rural infrastructure during the 11th Plan period is of the order of Rs 4,00,000 crore. There is a shortfall of Rs 1,75,000 crore against this requirement, even after funds allocated under Bharat Nirman and Rural Infrastructure Development Fund (RIDF) for the plan period are put together. This translates into a net gap of Rs 35,000 crore per year during the 11th Plan period.

Nabard sources told FE on Thursday that under the agreement, various projects, such as roads, irrigation, power generation, agri and food processing, agricultural marketing and mandis,and go-downs, can be taken up in rural India.

"Nabard has expertise in funding while IL& FS is in project preparation. In the proposed model, Nabard, IL&FS, the private sector and people will be involved. Maharashtra, Rajasthan and Punjab are in the initial shortlist. Specific projects and associated details, however, will be worked out in the near future," sources told FE. This line of business for Nabard is proposed to be in addition, but outside the already available window under the RIDF, to different state Governments, sources added.

Nabard sources said its move to ally with IL&FS is part of the strategy to reposition Nabard. The aim is to introduce innovative products and services to finance sustainable infrastructure delivery frameworks for the benefit of rural India.

The Nabard Board had advised that in order to design systems like special purpose vehicles (SPVs), annuity-based funding and customised products suitable for specific state governments, collaboration with infrastructure organisations and professionals may be considered and discussions with a few state governments be held.

According to sources, following the agreement with IL&FS, the cumulative sanction of assistance to various state governments by Nabard under RIDF I to XIV has reached Rs 85,663 crore involving 3.6 lakh projects. Various state governments together have so far utilised Rs 50,031 crore. These projects, on completion, will additionally create and stabilise irrigation potential in 141 lakh hectares and improve 2.6 lakh km roads.