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Rs 10,000 cr SPV for core sector likely

October 27, 2005 11:13 IST

The Cabinet Committee on Economic Affairs, slated to meet on Thursday, is likely to consider setting up of Rs 10,000 crore (Rs 100 billion) special purpose vehicle to finance infrastructure projects.

It is also expected to discuss the establishment of Rs 2,000 crore (Rs 20 billion) national export insurance account and the jute technology mission for 2006-2009.

The government proposes to allocate Rs 600 crore (Rs 6 billion) for the account during the current Plan period that ends next fiscal, while an additional Rs 1,400 crore (Rs 14 billion) is proposed during the next Plan period.

The corpus will be used to partly increase the equity of the Export Credit Guarantee Corporation.

The CCEA will also take up the agriculture ministry's proposal to repeal the Agricultural Produce Cess Act as part of its larger programme of freeing export of agricultural produce. It is being seen as a routine measure to update statute books.

A modified public-private partnership policy for infrastructure projects is also likely to be discussed at the meeting. As per the proposal, the SPV for infrastructure financing India Infrastructure Finance Company Ltd will be set up under the Companies Act as a non-banking finance company.

The company's borrowings, with an authorised capital of Rs 1,000 crore (Rs 10 billion), will be guaranteed by the government, but there will be no counter-guarantee for the projects funded by the SPVs.

The borrowing limits will be decided at the beginning of the year. The government has decided to leave it to the SPV to decide on the mix of domestic and overseas borrowings and interest rates.

The finance ministry has, however, decided to reduce the guarantee fee from the usual 1 per cent to 0.25 per cent for the SPV, which was announced in the last Budget. IIFCL can lend directly to public-sector projects and to those taken up through the public-private partnership route.

In case of private projects, the Planning Commission has said the SPV should only undertake refinancing. The finance ministry, however, wants the company to simplify it further by saying funding to private projects would be 'largely refinance'.

 

BS Bureaus in New Delhi
Source: