In his attempt to bolster the fragile economy, finance minister Pranab Mukherjee has chalked out several programmes, including heigtened focus on infrastructure.
In his Budget speech Nukherjee said India Infrastructure Finance Company Ltd (IIFCL) and banks are equipped to support projects involving investment to the tune of Rs100,000 crore in infrastructure.
"To stimulate public investment in infrastructure, we had set up the IIFCL, a special purpose vehicle for providing long-term financial assistance to infrastructure projects. We will ensure that IIFCL is given greater flexibility to aggressively fulfil its mandate," Mukerjee said.
"To ensure that infrastructure projects do not face financing difficulties arising from the current downturn, the government has decided that IIFCL will refinance 60 per cent of commercial bank loans for PPP projects in critical sectors over the next fifteen to eighteen months," the minister said, adding that the IIFCL and banks are now in a position to support projects involving a total investment of Rs100,000 crore in infrastructure.
'Takeout financing' is an accepted international practice of releasing long term funds for financing infrastructure projects. This will effectively address the asset liability mismatch of commercial banks arising out of financing infrastructure projects and also free up capital for financing new projects.
According to the minister IIFCL would, in consultation with banks, evolve a 'takeout financing' scheme which could facilitate incremental lending to the infrastructure sector.
He claimed that the government was successful in attracting private investment in a wide range of infrastructure sectors such as telecommunications, power generation, airports, ports, roads and even in railways through public private partnerships (PPP).