The government is setting up a dedicated funding agency in the state sector for highways and ports. The move, road transport and highways minister Nitin Gadkari told FE, is in view of the Rs 25-lakh-crore investments envisaged in these two infrastructure sectors in the medium term. The new institution, on the lines of Power Finance Corporation, which is committed to electricity generation and transmission projects, would be set up with an initial equity capital of R500 crore, the minister said.
The new institution, he said, would ensure that road and port projects don’t get crowded out by companies from other sectors
While the initial capital base of Rs 500 crore would largely be contributed by the National Highways Authority of India, all 12 major state-owned ports and Shipping Corporation of India (SCI) will also contribute, Gadkari said, adding that efforts would also be made to bring in foreign funds at cheaper rates.
“The funding agency would be just like PFC, which finances the power sector. Today’s scenario warrants a financial institution for our sectors as we are doing many projects. Sometimes contractors also need finance. The entity will also help sectoral players get funds at 2-2.5% cheaper than the bank rates,” Gadkari said.
Set up in 1986 as a financial institution dedicated to power sector financing, PFC became the largest NBFC operating in the country as of March 2015. As per a government survey, it was the sixth largest profit-making PSU among 290 state-owned firms in 2015.
The proposed entity would be a state-owned one and there would be no private sector participation as promoter. The proposal to set up the entity has been sent to the finance ministry for its approval and Gadkari believes that there would not be any objection from the Arun Jaitley-led ministry. A Cabinet note in this regard is also in circulation.
“Though I am not committing, I wish to at least start work on projects worth Rs 25 lakh crore — Rs 15 lakh crore for the port sector and Rs 10 lakh crore for the highways sector — in the next five years. We have already started work on Rs 2.5 lakh crore projects,” Gadkari said.
The minister said Rs 4 lakh crore could be invested in the Sagarmala ports project. About Rs 8 lakh crore would be required to create 27 industrial clusters and Rs 3 lakh crore for setting up five major ports and inland waterways. In addition, Rs 10 lakh crore would be invested in the highways sector.
R25 lakh crore
investment envisoned in next five years in highways (R10 lakh crore) & ports (R15 lakh crore)
initial equity of the proposed dedicated funding agency; to come from NHAI, port trusts and SCI