Infrastructure Current Affairs
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.
Kerala Infrastructure Investment Fund Board to issue masala bonds worth Rs 5,000 crore for development works
Kerala Infrastructure Investment Fund Board (KIIFB) is going to issue masala bonds worth Rs. 5,000 crore to mobilise funds for various development works. KIIFB has appointed Standard & Poor’s and Fitch Ratings for rating the masala bonds issue. The bonds will be listed in London and Singapore stock exchanges. The funds will be raised in tranches over period of 10 years.
It is Kerala government owned financial institution. Its mandate is to mobilize funds for infrastructure development from outside state revenue. It is statutory body constituted by Kerala Infrastructure Investment Fund Act, 1999.
Masala bonds are rupee-denominated bonds through which Indian entities can raise money from foreign markets in rupee and not in foreign currency. Basically, it is debt instruments used by corporates to raise money from foreign investors in local currency. The issuance of rupee denominated bonds transfers risk associated with currency fluctuations to investors and not to the issuers. This is especially during depreciation of domestic currency and when borrowing is in foreign currency as company has to pay more while repaying its debt, or while servicing interest on such borrowings if the rupee weakened. From the issuer’s perspective, masala bonds provides cheaper borrowings compared to raising funds in India besides helps in diversifying its sources of fund-raising. Besides, it also helps in internationalization of the rupee and in expansion of Indian bond markets. Its issuance in long term can help to check slide of rupee and also reduce current account deficit over time.