The government is set to ask cash-rich state-run enterprises to fork out Rs 10,000-15,000 crore in special dividends this year to implement the budget’s proposal of setting up a Rs 20,000-crore National Investment and Infrastructure Fund (NIIF), whose aim will be to catalyse infrastructure development in the country, sources said.
“One of the options is to provide budgetary support of at least Rs 5,000-10,000 crore and mobilise the rest by way of special dividends from PSUs this year,” a senior finance ministry official said.
Announcing the setting up of NIIF during the budget in February, finance minister Arun Jaitley had said he would find resources to ensure an annual flow of Rs 20,000 crore to it. This would enable the trust to raise long-term debt to invest in equity of infrastructure finance companies, such as the Indian Railway Finance Corporation and the National Housing Bank.
The fund would also invest directly in infrastructure projects, such as ultra mega power projects, smart cities, roads, ports, rail lines and airports, the official said.
Leveraging the Rs 20,000 crore, the fund could raise debt up to 10 times, or Rs 2 lakh crore, over a period of time to ensure long-term fund flows to the sector at a time when banks’ balance sheets are laden with NPAs.
The finance ministry has already floated a draft cabinet paper for consultation on the formation of NIIF, which is likely to be approved in a month’s time.
The finance ministry would keep fresh fund infusions into NIIF flexible and look for sources other than special dividends from PSUs in subsequent years. The government could provide up to Rs 10,000 crore budgetary support next year as well, the sources said.
Through NIIF, the government is keen on permanently resolving the nagging problem of infrastructure funding in the country, a prerequisite for the government’s ‘Make in India’ drive to succeed.
The government has announced several ambitious infrastructure projects, from building 100 smart cities to improving infrastructure in 500 existing cities for Rs 1 lakh crore over five years. Similarly, it plans to build five new UMPPs, besides other mega projects such as high-speed trains and industrial corridors.
In terms of dividends and profits from state-owned entities, the government netted around Rs 90,000 crore in FY15. For FY16, the budget estimate is Rs 1 lakh crore, which could rise further if special dividends are doled out, as proposed, to fund NIIF. The top-dividend paying PSus include Coal India, NMDC, NTPC, PFC, REC and Nalco.
PSUs have proven to be cash cows whenever the government faces a financial crunch, and they play a major role in containing the fiscal deficit. Apart from disinvesting shares and drawing dividends, the government often coaxes them to pay special dividends if they fail to meet their capital expenditure (Capex) plans.
The FY16 capex of PSUs is expected to be Rs 3,17,889 crore, an increase of Rs 80,844 crore from the revised estimate of FY15.
Recognising that major slippages in the last decade were on the infrastructure front, the government has budgeted an additional Rs 70,000 crore in public expenditure for infrastructure development.
The Indian economy, which grew 7.3% in FY15, is pegged to grow 8-8.5% in FY16, relying heavily on an increase in
public investment and consumption.
* Announcing the setting up of National Investment and Infrastructure Fund (NIIF) during the budget, FM Jaitley had said he would find resources to ensure an annual flow of R20,000 crore
* That would enable the trust to raise long-term debt to invest in infra finance companies like IRFC and NHB
* The fund would invest directly in UMPPs, smart cities, roads, ports, rail lines and airports
* The finance ministry has already floated a draft cabinet note on formation of NIIF, likely to be approved in a month