$10 bn infra debt fund in the works

Finance minister Mukherjee,US Treasury Secretary discuss structure of the new fund

In a bid to get long-term capital for its lagging infrastructure sector,India is in talks with the United States to set up a $10 billion infrastructure debt fund that would finance projects routed through the public private partnership model.

We are in advanced talks to set up an Infrastructure Debt Fund. The governments of India and the United States have agreed in-principle to set up the fund as proposed by the CEOs Forum of $10 billion, commerce and industry minister Anand Sharma said on Monday at the sidelines of a conference organised by the CII and the US-India Business Council.

The exact structure of the fund is yet to be finalised,the minister said,adding,Finance minister Pranab Mukherjee and US Treasury Secretary Timothy Geithner are directly discussing the modalities needed to put in place the infrastructure debt fund, he added.

With restrictions on investments by pension and insurance funds as well as a shallow debt market,India is keen to get foreign funds for core sector projects which are fast emerging as a challenge to double digit growth. The proposed fund is expected to would help bridge a significant part of the required $1 trillion investments in infrastructure during the 12th Five Year Plan period,nearly double the target of $514 billion for the 11th Plan.

The fund is also expected to help develop a deeper corporate bond market in the country, Geithner said. Planning Commission deputy chairman Montek Singh Ahluwalia also supported the fund and said the plan panel was in favour of it.

The Plan panel and the finance ministry were earlier working on a similar proposal to set up an India Infrastructure Debt Fund with a corpus of Rs 50,000 crore that would be created using contributions from insurance companies,pensions funds,foreign funds,sovereign wealth funds and big banks. But it did not cut ice with many sectoral regulators who were concerned over the structure of the fund.

But the current proposal is one of the recommendations made at an ongoing Indo-US CEOs forum,which is co-chaired by Tata Group chief Ratan Tata and Head of Honeywell Corp. Dave Cote.