In a major bid to push growth in infrastructure by way of investment coming in from the private sector, the Centre is considering a proposal to create a ‘risk guarantee fund’ worth ₹20,000 crore.
The fund may be managed by the National Credit Guarantee Trustee Company Limited (NCGTC), say sources, adding that it would be sufficient to underwrite development risk of a new project, thereby reducing the burden on project developers.
However, there should be additional safeguards by way of a minimum stake by the developer and risk-based premiums may also be charged, the sources added.
Additionally, for the fund to be successful, the fund’s guarantee must be bankable and there must be assurance of payment in a timely manner.
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It is estimated that India would need to spend USD 4.51 trillion (about ₹390 lakh crore) on infrastructure by 2030 to realise the vision of a USD 5 trillion economy by 2025, and to continue on an escalated trajectory until 2030, as per the National Infrastructure Pipeline (NIP) report.
The country will be banking on its infrastructure sector to fulfil its vision of sustaining relatively high growth. However, infrastructure in a shambles would be incapable of meeting the needs of a growing economy and an expanding population, the report said.
The task force that prepared the report was headed by the then Economic Affairs Secretary, who pointed out that quality infrastructure is among the biggest hurdles facing the Indian government’s ambitious make-in-India mission, which aims to improve the nation’s manufacturing capabilities and support higher growth for generating employment.
In fact, the government’s failure to close the infrastructure debit gap can result in slower corporate growth and hampered investments, which, some experts estimate, may cost 4-5 per cent of the GDP, the 2020 report suggests.
Creating new and upgrading existing infrastructure will be key to raising India’s competitiveness and achieving this target, it said, adding, it will specially be critical for the success of the make-in-India programme as manufacturing competitiveness critically depends on infrastructure.
The fund, sources say, would cover losses arising from policy uncertainty and other non-commercial risks, thereby encouraging lenders to extend larger loans to big projects.
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