News: Finance Ministry plans ways to woo pvt funds in core sector

(PTI 26/10/2006) New Delhi - Grappling with the issue of attracting private sector investment in infrastructure, the Finance Ministry is likely to start consultations next month with the RBI, market regulator Sebi, merchant bankers and multi-lateral agencies on innovative financial instruments to woo these funds.

While the Finance Ministry is quite certain about the quantum of funds needed from the private sector in infrastructure projects, it is yet to do an analysis of the kind of policy requirements that are needed to attract this money, said a key ministry official.

"This analysis, we will do now. We are in the process of working out a concept paper and will come out with it in four weeks," he said.

He said the ministry will hold consultations with merchant banks, multilateral agencies, RBI and Sebi on the ways to attract the private capital in infrastructure.

The ways would include new financial instruments and developing the debt market, which is at a very nascent stage right now.

Infrastructure like roads, power, railways, aviation require an enormous amount of $320-350 billion by 2012 to raise rate of investment in key areas at par with economic growth, 20 per cent of which will have to be chipped in by the private sector, the official said.

As such, the total requirement of private sector investment in infrastructure is somewhere near $65-$70, of which $25 billion should come from equity and the rest through debt in public-private partnership (PPP) projects, the official said.

Huge private sector funding is required since public investment in the area is constrained by limitations on the government borrowing programme imposed by the FRBM Act and demand for investment by other growing sectors of the economy.