Infrastructure Investments Current Affairs - 2019
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Singapore-based global investment firm Temasek has signed agreement to invest up to Rs 2,750 crore ($400 million) in National Investment and Infrastructure Fund’s (NIIF) Master Fund. With this investment, NIIF Master Fund is now one of largest infrastructure funds in India which invests in core infrastructure sectors in India with focus on energy, transportation and urban infrastructure.
As part of this agreement, Temasek will join Government of India (GoI), Abu Dhabi Investment Authority (ADIA), HDFC Group, ICICI Bank, Kotak Mahindra Life Insurance and Axis Bank as investor in NIIF’s Master Fund and as shareholder in National Investment and Infrastructure Limited (NIIFTL), investment management company of NIIF. With this agreement, NIIF now has agreements totalling almost Rs. 10,000 crore, with ADIA having committed to invest up to $1 billion (about Rs 6,500 crore) and domestic financial institutions, about Rs. 500 crore.
National Investment and Infrastructure Fund (NIIF)
NIIF was set up in December 2015 to catalyse funding into the country’s infrastructure sector by serving as quasi sovereign wealth fund (SWF). It has been set up as fund of funds structure with aim to generate risk adjusted returns for its investors alongside promoting infrastructure development. It aims to maximize economic growth of country mainly through infrastructure development in commercially viable projects (both greenfield and brownfield) and also in stalled projects.
NIIF has been registered with Securities and Exchange Board of India as a Category II Alternate Investment Fund. It has targeted corpus of Rs 40,000 crore to be raised over the years — 49% of it will be funded by government and remaining 51% will be raised from domestic and global investors, including international pension funds, sovereign wealth funds, multilateral/bilateral investors.
NIIF’s Governing Council is chaired by Finance Minister and act as an advisory council. Moreover, two companies viz. NIIFTL, a trustee of fund and NIIFL, an investment management company of NIIF were incorporated in 2015. NIIF is also planning third fund to be called strategic investment fund, which could be of similar size to its master fund. This third fund will target investments in greenfield projects and will be long-tenure fund of 15 years.
The Union Cabinet has approved the policy guidelines to permit financially sound State Government entities to borrow directly from bilateral ODA (Official development Assistance) partners for the purpose of implementing vital infrastructure projects. The approval is subject to fulfilment of certain conditions and all repayments of loans and interests to the funding agencies.
As a corollary to the new decision, the Mumbai Metropolitan Region Development Authority (MMRDA) has been permitted to borrow directly from Japan International Cooperation Agency (JICA) Official Development Assistance (ODA) loan for implementation of Mumbai Trans Harbour Link (MTHL) project.
At present, external assistance from bilateral and multilateral sources is received by the union government for:
- projects/programmes in the Central sector;
- projects executed by Central Public Sector Undertakings;
- on behalf of the State Governments for State sector projects/programmes implemented by the State Governments and/or local bodies and public sector undertakings.
The existing guidelines prohibit State Government from borrowing directly from external agencies. In addition, the amount borrowed by the state governments would become a part of their FRBM (Fiscal Responsibility and Budget Management).
Salient highlights of new guidelines
- The State government which gets the loan will furnish guarantee for the loan and the Government of India will provide counter guarantee for the loan.
- The state entities can directly approach bilateral agencies and the funding would not fall under state FRBM target.
- The eligibility criteria for state entities would be a revenue of over Rs 1,000 crore.
- In case of infrastructure projects, the cost criteria will be Rs 5,000 crore.
Major infrastructure projects of several State entities have huge funding requirements, and borrowing of the State Governments for implementing such projects exhausts their respective borrowing limits. Therefore, it was considered necessary to facilitate direct borrowing by the State Government entities from bilateral external agencies. As per the new guidelines, State entities can directly borrow and repay the loan without burdening the State exchequer.