Union Finance Minister Pranab Mukherjee today said that
setting up of Infrastructure Debt Funds (IDF) through public-private
partnership (PPP) would meet the long-term need of infrastructure funding in
the country.
Speaking after a memorandum of understanding (MoU) was
signed here in his presence for setting up India's first IDF, Mukherjee said he
was confident that the stablishment of such funds in the PPP mode would be a
guiding principle for future activities in this area.
According to him, funds to the tune of $ 1 trillion would be
required for infrastructure sector funding in India in the next five years, out
of which 50 per cent would come from the private sector through the PPP mode.
The MoU for the new IDF, structured as a non-banking finance
company (IDF-NBFC), was signed by Chanda Kochar, Managing Director, ICICI Bank,
Pramit Jhaveri, CEO, Citibank, M.D. Mallaya, CMD, Bank of Baroda and Sushobhan
Sarkar, MD, Life Insurance Corporation (LIC).
Others present on the occasion included Planning Commission
Deputy Chairman Montek Singh Ahluwalia, Planning Commission Member Gajendra
Haldia, Finance Secretary R.S. Gujral, Economic Affairs Secretary R. Gopalan,
Expenditure Secretary Sumit Bose, Disinvestment Secretary Haleem M. Khan,
Secretary, Disinvestment and Bimal Julka, Additional Secretary cum Director
General, (Currency), Ministry of Finance.
The Finance Minister in his Budget Speech for 2011-12 had
announced setting-up of IDFs in order to accelerate and enhance the flow of
long-term debt in infrastructure projects for funding the government’s
ambitious programme of infrastructure development. To attract off-shore funds
into IDFs, he had also announced that withholding tax on interest payments on
the borrowings by the IDFs would be reduced from 20% to 5%. Income of the IDFs
has also been exempt from income tax.
The framework for establishment of IDFs was announced by the
Ministry of Finance in June, 2011 wherein IDFs were allowed to be set up either
structured as an NBFC or as a mutual fund. Reserve Bank of India (RBI) issued
the regulations for IDFs to be set up as a NBFC in November, 2011 and
Securities Exchange Board of India (SEBI) issued the regulations governing an
IDF structured as a mutual fund in August, 2011.
ICICI Bank (together with a wholly-owned subsidiary), Bank
of Baroda, Citi and LIC will hold 31%, 30%, 29% and 10% shareholding,
respectively, in the IDF-NBFC. The IDF would seek to raise debt capital from
domestic as well as foreign resources and would invest in infrastructure
projects under the PPP model that have completed one year of operations. The
IDF will expand and diversify the domestic and international sources of debt
funding to meet the large financing needs of the infrastructure sector, thereby
giving an impetus to the creation of the infrastructure necessary to drive
India’s growth, an official press release added.
Source: http://netindian.in/news/2012/03/05/00019123/icici-bank-citi-bob-lic-sign-mou-set-indias-first-infrastructure-debt-fund
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