The Cabinet on Wednesday approved the infusion of ₹6,000 crore as equity into a new debt platform to raise up to ₹1.1 lakh crore for financing infrastructure projects by 2025.
Of the ₹6,000-crore equity to be injected by 2021-22, the Cabinet has approved ₹2,000 crore for disbursal this year subject to the funds being required.
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Finance Minister Nirmala Sitharaman had announced the plan to provide equity capital to the debt platform sponsored by the National Investment and Infrastructure Fund (NIIF), as part of the last round of stimulus measures announced on November 12.
“In view of the unprecedented financial situation and availability of limited fiscal space due to the prevailing COVID-19, the proposed amount may be disbursed only if there is readiness and demand for debt raising,” the government said in an official statement detailing the Cabinet’s decision.
Stressing that the decision would strengthen India’s bond markets, Union Information and Broadcasting Minister Prakash Javadekar said that another ₹7,000 crore would be raised as equity for the debt platform, with the bond markets set to be tapped for ₹1 lakh crore.
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Global capital
The Cabinet had asked the NIIF to take all necessary steps to use equity investments from domestic and global pension funds and sovereign wealth funds expeditiously. Ms Sitharaman had said earlier this week that several sovereign wealth funds had evinced interest in availing the tax concessions offered for them to invest in the country.
“The NIIF’s infrastructure debt financing platform is expected to contribute almost ₹1 lakh crore in debt to the infrastructure sector over the next five years,” the government said.
“This will act as a catalyst in attracting more investments into the infrastructure sector as envisaged in the National Infrastructure Pipeline,” it said, adding that this would help free up space for banks to lend to new greenfield projects.
“It is expected that a well-capitalised, well-funded and well-governed NIIF debt platform can play a major role in infrastructure financing and development of bond market in India by acting as a AAA/AA-rated intermediary between the bond markets and infrastructure projects and companies,” the government observed.