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Journalism of Courage
Even as the Union Budget 2013-14 may have proposed to permit insurance companies,pension and provident funds to trade directly in debt funds,the interim pension regulator PFRDA has shot down a proposal of a high level panel to invest more retirement funds in infrastructure,which needs over Rs 13,00,000 crore during the 12th Plan period.
A high level committee on financing infrastructure headed by HDFC Bank chairman Deepak Parekh had in its meeting on January 28 observed that given the power sectors need for an estimated investment of Rs 13,72,580 crore,the panel should actively explore various funding options to optimise raising of resources.
Parekh said that despite the robust growth of the insurance companies,the estimated debt availability from them is barely Rs 28,899 crore.
The government has envisaged an investment of 1 trillion in the infrastructure sector during the 12th Plan period.
Parekh suggested that in view of the funding constraints,pension funds should invest larger amounts in case of availability of higher credit rating instruments.
But Pension Fund Regulatory and Development Authority PFRDA chairman Yogesh Agarwal opposed Parekhs suggestion in the meeting saying that world over insurance companies and pension funds have not invested more than 1 per cent in infrastructure. Besides,foreign funds would not be available till the sectoral issues remain unresolved,he argued.
The insurance regulator Irda too has in the recent past opposed investing insurance funds into the infrastructure sector. Power Finance Corp chairman Satnam Singh told the panel that the huge gap in volume of financing power projects either from the Rural Electrification Corp or his organisation arose due to sectoral exposure limit of 15 per cent in case of scheduled commercial banks.
Responding to Singhs point,a senior finance ministry official asked the panel to recommend increasing the exposure limit to 20 per cent.
The committee reasoned that inputs from various sources suggest that the availability of equity and debt were estimated at Rs 2,63,487 crore and Rs 9,21,286 crore respectively.
The finance ministry has been pitching for more insurance and pension funds investing in the infrastructure sector to boost growth. The ministry had entrusted its department of financial services to prepare an action plan in this connection.
According to the Planing Commissions working sub-group for the infrastructure sector,the tenure of investments in infrastructure-related facilities may be revised to at least five years as against 10 years currently to help life insurance companies to invest in brown field infrastructure projects and also to enable them to fund the take-out finance arrangements.
FUND CRUNCH
The Deepak Parekh committee on financing infrastructure had recommended that pension funds invest more in the sector given the funding constraints
The pension regulator says that globally,insurers and retirement funds have not more than 1 exposure to the sector
Insurance regulator Irda too opposed the suggestion earlier
The finance ministry has been pitching for more pension and insurance money entering the sector to boost growth,and is working on an action plan
