In a big push to core sector projects that are yet to register a revival in investments, the finance ministry is finalising the contours of the proposed National Investment Infrastructure Fund.
Additionally, the ministry could also allow public sector firms to float tax free bonds of Rs 30,000 crore to Rs 40,000 crore for infrastructure financing.
The two initiatives are expected to help boost investments in the lagging infrastructure sector, that will also get public investments worth Rs 70,000 crore this fiscal through the government.
Announced as part of the Union Budget 2015-16, the NIIF will have an allocation of Rs 20,000 crore, half of which is expected to come from blue chip public sector units.
The finance ministry is understood to have discussed the plan with cash rich PSUs, which would chip in with about
Rs 10,000 crore for the fund from their dividend income. Sources said that the balance would come from budgetary allocation by the government.
“Many PSUs are sitting on large amount of funds, some of which can be allocated for the NIIF, which would help provide long term funding for infrastructure projects, some of which are also floated by these very firms,” said an official close to the development.
Discussions are still on over the structure of the proposed fund, which could be set up as a special purpose vehicle, said the official. The proposed fund could also be structured as a special purpose vehicle, said the official, adding that a decision is likely to be taken by early next month by the Union Cabinet.
As a means to get long term funding for core sector projects, finance minister Arun Jaitley had said that the NIIF would raise debt, and in turn, invest as equity, in infrastructure finance companies such as the Indian Railway Finance Corporation (IRFC) and National Housing Board (NHB).
“The infrastructure finance companies can then leverage this extra equity, many fold,” he had announced.