The government is likely to infuse Rs 5,000 crore into India Infrastructure Finance Company Ltd in the upcoming Budget to boost investment in the infrastructure sector and accelerate revival of the COVID-19 hit economy, according to sources.
As per the Budget document, the government had earmarked Rs 10,000 crore as capital support to IIFCL for 2020-21. In the previous financial year, the company received capital infusion of Rs 5,300 crore through recapitalisation bonds.
Subsequently, the government approved increasing the authorised capital of IIFCL from Rs 6,000 crore to Rs 25,000 crore to create requisite headroom for borrowing thus enabling the company to finance big-ticket infrastructure projects in line with the government's target.
The government has infused capital in the company in the past and it is expected that the infusion will be more than Rs 5,000 crore for the next financial year as there is a huge requirement for infrastructure funding, the sources said.
The sources, however, said the exact quantum will be decided based on various considerations, including setting up of Development Finance Institution.
India Infrastructure Finance Company Ltd (IIFCL) was set up in 2006 for providing long-term finance to viable infrastructure projects across sectors.
To augment infrastructure and create jobs in the country, a government task force in April 2020 had projected total investment of Rs 111 lakh crore in infra projects. The National Infrastructure Pipeline (NIP) for 2019-2025 is considered crucial for the target of becoming a USD 5 trillion economy by FY 2025.
In the Budget 2019-2020 speech, Finance Minister Nirmala Sitharaman had announced an outlay of Rs 100 lakh crore for infrastructure projects over the next 5 years.
To promote investment in the infrastructure sector, the Union Cabinet has approved the proposal for an equity infusion of Rs 6,000 crore by the government in NIIF Debt Platform sponsored by the National Investment and Infrastructure Fund (NIIF), comprising of Aseem Infrastructure Finance Limited (AIFL) and NIIF Infrastructure Finance Limited (NIIF-IFL) in November 2020.
Of the total amount, only Rs 2,000 crore will be allocated during the current year 2020-21, while the remaining amount in the next fiscal.
However, in view of the unprecedented financial situation and availability of limited fiscal space due to the prevailing COVID-19 pandemic, the proposed amount may be disbursed only if there are readiness and demand for debt raising, an official statement had said earlier.
NIIF will take all necessary steps to use the equity investments from domestic and global pension funds and sovereign wealth funds expeditiously.
The proposal to invest Rs 6,000 crore as equity into NIIF was part of the Aatmanirbhar Bharat 3.0 package announced by the Finance Minister on November 12, 2020.
NIIF Strategic Opportunities Fund has set up a debt platform comprising an NBFC Infra Debt Fund and NBFC Infra Finance Company. NIIF through its Strategic Opportunities Fund (NIIF SOF) owns a majority position in both the companies and has already invested Rs 1,899 crore across the platform.
Strategic Opportunities Fund (SOF fund) through which NIIF investment has been made will continue to support the two companies apart from investing in other suitable investment opportunities, it had said.
The current proposal seeks the government's investment directly to further scale the potential and impact of the two entities in the infrastructure debt financing space.