Infrastructure Debt Fund (IDF), India

Infrastructure Debt Fund (IDF), India


The government has finalized the contours of a $10-billion (over Rs 50,000 crore) infrastructure debt fund (IDF) with 50% participation from a foreign bank and a multilateral agency, while the rest of the corpus will be contributed by state-owned financial institutions.


Government officials and bankers said India Infrastructure Finance Company (IIFCL), Life Insurance Corporation and IDBI Bank along with Asian Development Bank and HSBC are joining hands to set up a non-banking finance company (NBFC) that will manage the fund.


The initial corpus of the fund will be $1 billion (over Rs 5,000 crore) with 50% coming from the three state-run agencies and HSBC and ADB contributing the rest. A request to get ADB to pitch in has been sent to the finance ministry. Sources indicated that the day-to-day operations of NBFC will be with HSBC as there was a view that private players were better equipped to handle the fund.


While companies have the option to set up a fund in the form of a mutual fund, the government has opted for the NBFC route. IDBI Bank was keen to go for the MF option as IIFCL has the mandate to provide funds for projects set up under the public-private partnership (PPP) route.


A formal announcement is expected to be made in the Budget as the government is keen to announce a series of measures to spur infrastructure development - seen to be the biggest roadblock in recent times. Although the IDF structure was announced in the last Budget, only smaller players have come forward to set up the fund.


Bankers as well as companies in the infrastructure space are, however, critical of the fact that more than funds it is the absence of projects and supply of inputs that is holding up development.


In an interview, IDFC managing director told that the infrastructure finance firm had stopped lending to thermal power projects due to uncertainty in the sector.


Several coal-based power projects have been held up the failure of the government to ensure adequate supply of fuel. There are others that have suffered delays on account of land acquisition or environmental clearances. These factors have also prompted the government, which is battling a series of corruption scandals, to go slow on award of new contracts. Contracts have been scarce in other infrastructure sectors like ports. Roads was the only shining light in terms of contracts awarded.


TNN | Jan 3, 2012


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