The government today extended the Concessional Financing Scheme (CFS) for five years till 2023 to support Indian entities bidding for strategically important infrastructure projects abroad.
Also, the scheme will now cover all Indian entities, compared to the earlier stipulation of minimum 75 per cent Indian shareholding.
The decision was taken at a meeting of the Union Cabinet, chaired by Prime Minister Narendra Modi, Finance Minister Piyush Goyal said.
Under the scheme, the government provides counter guarantee and interest equalisation of 2 per cent to EXIM Bank to offer concessional finance to any foreign government or foreign government owned/controlled entity if any Indian entity succeeds in getting a contract for the execution of the project.
Under the CFS, the government has been supporting Indian entities bidding for strategically important infrastructure projects abroad since 2015-16.
Since the objectives of the scheme continue to be relevant, it has been for another five years from 2018 to 2023, an official release said.
Earlier, only those companies which had a minimum of 75 per cent shareholding of Indians were eligible to take benefit of the scheme.
The scheme has now been liberalised and any Indian company, irrespective of the ownership, will be eligible to benefit from the scheme, Goyal said.
Before CFS, Indian companies were not able to bid for large projects abroad since the cost of financing was very high for them and bidders from other countries such as China, Japan, Europe and US were able to provide credit at superior terms (lower interest rate and longer tenures).
“Also, by having projects of strategic interest to India executed by Indian entities, the CFS enables India to generate substantial backward linkage induced jobs, demand for material and machinery in India and also a lot of goodwill for India,” the release said.
Under the scheme, the Ministry of External Affairs (MEA) selects the specific projects keeping in view strategic interest of India and sends the same to the Department of Economic Affairs (DEA).
The CFS is presently being operated through the Export-Import Bank of India, which raises resources from the market to provide concessional finance. Government provides counter guarantee and interest equalisation support of 2 per cent to the EXIM Bank.
Interest Equalisation Support (IES) under the scheme is would be Rs 625.63 crore by 2022-23.
Goyal said liberalisation of the scheme would also benefit job creation and the ‘Make In India’ initiative, besides boosting exports.
Power major NTPC is getting interest subvention under the scheme for a thermal power project in Bangladesh.