The government has tweaked the structure of the National Infrastructure Investment Fund (NIIF), which will now have two dedicated funds — one for roads and another for clean energy — as it looks to get long-term funds into two crucial sectors of the economy.
Originally, the government had planned to have NIIF as the mother fund which was to raise money from sovereign wealth funds (SWFs), pension funds and other long-term investors. But based on discussions with investors, the finance ministry has now changed the strategy.
“Interaction with various SWFs, pension and long-term funds showed that investor interest was not so high in multipurpose or multisectoral infrastructure fund. They wanted more focused investment in sectors or sub-sectors,” economic affairs secretary Shaktikanta Das said, when contacted. He confirmed that the two sectoral funds are planned, which sources said could have initial corpus of around Rs 5,000 crore each.
The government had planned to start NIIF with an initial corpus of Rs 40,000 crore and had budgeted to release Rs 4,000 crore this financial year with funding from other investors such as Abu Dhabi Investment Authority, Russia’s RUSNANO, Qatar Investment Authority and Singapore’s GIC, among others.
The idea is to provide long-term funding and reduce pressure on banks, which are the primary source of finance for long-term infrastructure projects. Bank lending comes with asset-liability mismatches since majority of bank deposits are for one-two year tenure while loans to infra projects are for 15-20 years.
With Sujay Bose taking charge as NIIF chief executive, the government is set to release the budgetary allocation for the current financial year and is in talks to raise funds from multilateral agencies in the mother fund. A part of the allocation will also be transferred to the two sectoral funds with further fund-raising from long-term and private equity investors.
Das said that the government has a long shelf of projects and money would start flowing to the two sectors quickly. Investor interest in the highways and renewables sector has grown in recent years after the NDA government unveiled a series of measures to promote investment in these two segments. Several overseas funds have shown interest in investing in the country’s highways sector after the government moved to uncog the sector and accelerated the award of projects.
The government is banking on rapid infrastructure development through this fund and has identified several projects in which investments could flow into. The NIIF, announced in the budget, is expected to ease pressure on banks, which are facing severe stress from bad loans.
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