The Narendra Modi- government is said to be putting final touches on a number of measures aimed at kickstarting its push to increase public sector investment in infrastructure projects.
The various measures include funding for the Rs 20,000 crore National Investment and Infrastructure Fund (NIIF), which the Finance Minister announced in his 2015-16 budget, and drawing a roadmap for the financing of Smart Cities’ project, most of which is expected to come from the central and state coffers, Business Standard has learnt.
For the NIIF, the Finance Ministry is likely to dip into the dividends expected to be paid by state-owned companies to their largest stakeholder, the government. While Rs 5,000 crore will be infused by the Centre, Rs 15,000 crore will come from dividend paid by cash-rich PSUs like ONGC and Coal India, amongst others.
“We are looking at getting Rs 15,000 crore from the dividends paid by cash-rich PSUs. This may be through regular dividend, or they may even be asked to pay special dividend just for NIIF,” said a senior government official. Receipts from PSU dividends are budgeted at Rs 36,174 crore this fiscal.
The amounts will likely be infused into NIIF in the latter half of the year, the person added. The proceeds from the NIIF will be used to raise debt, and in turn, invest as equity, in infrastructure finance companies such as Indian Railways Finance Corp and National Housing Bank.
Additionally, officials say that the major bulk of spending on 100 planned smart cities and urban renewal will come from the Centre, states, and PSUs.
“Over the coming years, few projects will be through PPP or completely led by private entities. Most of the spending will either be through the centre’s budgetary allocations for smart cities or by issuing of municipal bonds by the urban bodies, or states on behalf of the urban bodies,” said a second official.
Just past week, the cabinet approved for funds of Rs 1 lakh crore over the next five years for a 100 Smart Cities, and a new Urban Renewal Mission. Officials say that this amount could increase over the coming years. They admitted that the centre and states will have to take the lead on these projects since private infrastructure companies have a lot of stressed assets on their books.
The push for public investment in infrastructure to boost growth was first mooted by Chief Economic Advisor Arvind Subramanian in his mid-year economic analysis in December last fiscal. “It seems imperative to consider the case for reviving public investment as one of the key engines of growth going forward, not to replace private investment but to revive and complement it,” he had stated in the report. The idea was taken forward in the 2014-15 Economic Survey and 2015-16 Union Budget.
By delaying the fiscal consolidation roadmap by a fiscal year, and by targeting a fiscal deficit of 3.9 per cent for 2015-16, instead of 3.6 per cent as per the previous roadmap, Finance Minister Arun Jaitley freed up about Rs 70,000 crore for additional investment into key infrastructure sectors, primarily Railways.
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