| P. Chidambaram with Montek Singh Ahluwalia, deputy chairman of the Planning Commission, in New Delhi on Saturday. (PTI)
New Delhi, July 21: The government today announced a Rs 100-crore fund for infrastructure projects built on the public-private partnership model.
“The government alone will not be able to meet the growing need for funds in infrastructure and the country will need massive private investment,” finance minister P. Chidambaram said today at a conference of chief secretaries on public private partnerships. The country needs Rs 20,000 crore of foreign exchange reserves annually to meet its infrastructure needs.
The fund, to be called India Infrastructure Project Development Fund, will bear up to 75 per cent of the development costs of projects till the bidding stage. If the bidding is successful, the amount given to states will be treated as interest-free loans and if it fails, the assistance will be converted into a grant.
“It will be a revolving fund that will get replenished from the successful bids. In case it needs to be topped up, it will be done through budgetary support,” Chidambaram said.
In case of a successful bidding, the money will be recovered from those who get the contract.
The pace of infrastructure projects started gathering momentum from 2006-07. India will require an investment of $475 billion in the segment during 2007-12, higher than the previous estimate of $320 billion.
“The need for private investment is at around $18-20 billion a year,” he said, adding global private equity funds were keen to invest in India.
In February, four financial institutions — Citigroup, Blackstone, Infrastructure Development Finance Company Limited and India Infrastructure Finance Company — launched a $5-billion infrastructure fund. In April, private equity firm 3i tied up with India Infrastructure Finance. “Other initiatives are waiting to be launched in India,” said Chidambaram.
The finance ministry is also in talks with the Reserve Bank of India to provide $5 billion from the forex kitty for infrastructure projects.
Though private funds have shown interest, there were not enough projects on the shelf, the minister said. He also expressed concern over the quality of projects and the way they were executed. “These do not measure up to the requirement of the economy,” he said.
India needs to build its infrastructure to sustain an average annual growth of 9 per cent in the next five years from an average 8.6 per cent in the past four years.