Nineteen months after the announcement was made in FY16 Budget, the National Investment and Infrastructure Fund (NIIF) will commence operations next month with a $1-billion corpus for the highway sector and another fund of the same size for the renewable energy industry, according to official sources. Sujoy Bose, currently a senior executive at the International Finance Corporation, is expected to assume office as the NIIF’s first CEO shortly.
In line with the NIIF’s investment structure, the Centre would infuse nearly 49% of the corpus, or a total of $1 billion in the two sectoral funds, while the balance amount will come from long-term investors such as sovereign wealth funds. The potential investors in these funds include Abu Dhabi Investment Authority (ADIA), Qatar Investment Authority (QIA) and RUSNANO of Russia, the sources added. The NIIF would set up more sectoral funds going forward, they added.
To fulfil the energy requirements to support economic growth, India has set an ambitious target of installing 175 GW of solar and wind energy capacity by 2022 with an investment of Rs 8 lakh crore. Similarly, it is aiming to increase the highway network from about 97,000 km now to 2 lakh km by 2022, a task that would require Rs 10 lakh crore in investment. With private investors jittery about the highway sector (build-operate-transfer projects have been floundering) and lenders being chary, the government is hard-pressed to find alternative resources for funding projects.
The NIIF, to be set up with an initial corpus of Rs 40,000 crore, is expected to act as a catalyst for financing of infrastructure projects in India by leveraging the funds multiple times. The NIIF is envisaged as a mother fund, within which there will be specific sectoral funds to cater to the investors demand. It is expected to play a key role in reducing the potential financial burden on the exchequer for building infrastructure, which requires investment of over $1 trillion in next five years.
“We have signed MoUs with ADIA, QIA and RUSNANO and we have understanding with the UK treasury and the US treasury,” economic affairs secretary Shaktikanta Das said on Thursday on potential investors in India’s quasi-sovereign wealth fund. More such agreements will be signed with investors including multilateral agencies in the coming months, he said.
Bose, who is coming from his latest job as the global co-head for infrastructure and natural resources at IFC, will hit the ground running next month.
He has worked for over 23 years at IFC including as chief investment officer and head of the IFC African Latin American and Caribbean Fund at IFC Asset Management Company. His wide experience in emerging markets private equity and debt investments, will come in handy while at the helm of NIIF.
The paucity of equity capital is felt strongly in many key infrastructure sectors like roads, ports and railways where the government is actively promoting the public-private partnership model with apparently attractive concession provisions.