IIFCL Current Affairs
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Union Government has inked $300 million Loan Agreement with Asian Development Bank (ADB) to support lending by India Infrastructure Finance Company Limited (IIFCL). The loan will enhance availability of long-term finance for PPP projects, improve operational capacity of IIFCL. It will expand portfolio of infrastructure financing instruments available to IIFCL. It is expected to compliment Government’s infrastructure building efforts.
ADB funding is expected to fund at least 13 sub-projects through IIFCL, involving roads and renewable power generation, under the last tranche. It expected to help catalyze the financial closing of $2.4 billion in investments. In addition, attached technical assistance will support IIFCL capacity development and will focus on IIFCL’s financial management and social and environmental safeguards. It will support renewed effort of Central Government in accelerating infrastructure growth through increased Private Sector investment. The Project undertaken it will be relevant and responsive to constraints to bank based infrastructure financing, fiscal space creation, and repercussions on GDP growth.
India Infrastructure Finance Company Limited (IIFCL)
It was set up in 2006 to provide long term debt for infrastructure projects. It provides financial assistance to commercially viable projects, which includes projects implemented by public sector company, private sector company; or private sector company selected under Public Private Partnership (PPP) initiative. IIFCL raises funds from domestic as well as external markets on strength of government guarantees.
Following sectors projects are eligible for financing from IIFCL:
- Gas pipelines;
- Cold storage chains;
- Fertilizer Manufacturing Industry
- Infrastructure projects in Special Economic Zones;
- International convention centres and other tourism infrastructure projects;
- Road and bridges, seaports, railways, airports, inland waterways and other transportation projects.
- Urban transport, water supply, sewage, solid waste management and other physical infrastructure in urban areas.
Union Government is going to launch Rs.500 crore Credit Enhancement Fund (CEF) in July 2018 to facilitate infrastructure investments by insurance and pension funds.
The CEF provides additional source of assaurance or gaurantee that borrower will service their loan. It also helps borrower to raise loans at lower interest rates. The fund was first announced in Union Budget for fiscal year 2016-17.
Credit Enhancement Fund (CEF)
CEF will provide credit enhancement for infrastructure projects which will help in upgrading credit ratings of bonds issued by infrastructure companies and facilitate investment from investors like pension and insurance funds.
The initial corpus of the fund will be Rs 500 crore and will be sponsored by IIFCL (India Infrastructure Finance Company). It will operate as a non-banking finance company (NBFC). IIFCL will hold 22.5% stake in the NBFC, while Asian Infrastructure Investment Bank (AIIB) has been offered by the Government to pick up 10% stake.
At present, only $110 billion is being invested in infrastructure in India, against requirement of $200 billion, leading many analysts to classify India as infrastructure deficit country. Most of the present infrastructure project financing is done by banking system. But all these lenders are saddled with problem of non-performing assets (NPAs). So there is need for the private sector to be more active on the infrastructure investment front. CEF will serve as alternative for rising of money for infrastructure projects through corporate bonds.