• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• BL Club
• Smartbuy

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

– Kamal Narang

Mr Ashok Chawla, Secretary, Department of Economic Affairs, Ministry of Finance, at the launch of the Web site in the Capital on Monday on the online data base of PPP Projects in India. Also seen is Ms Sindhushree Khullar, Special Secretary, DEA.

Our Bureau

New Delhi, Sept. 22 In a move that could help spur investments in sectors such as roads, power and telecom, the Government has further liberalised the external commercial borrowings (ECB) policy. This will allow infrastructure companies to avail themselves of borrowings of up to $500 million a year, as against the existing limit of $100 million, for rupee expenditure under the approval route.

The enhanced limit of up to $500 million comes with a rider that borrowings in excess of $100 million should have a minimum average maturity of seven years. The latest changes will particularly benefit telecom operators who will participate in the 3G auctions slated for October-November this year.

Also, the Government has hiked the interest spread ceiling on ECBs, with minimum average maturity of over seven years, by 100 basis points to 450 basis points over six months London interbank offered rate (LIBOR). The move to modify the all-in-cost ceilings has been prompted by the widening credit spreads in the international financial markets.

“Considering the huge funding requirements, particularly for meeting rupee expenditure, it has been decided to enhance the existing limit of $100 million to $500 million a year for the borrowers in the infrastructure under the Approval route,” the Finance Ministry said in a release issued here on Monday evening.

However, there is no change in the decision of May 2008 as regards companies other than those in infrastructure sector. The Government had in May 2008 allowed such companies to borrow up to $50 million for rupee capital expenditure under the approval route. This decision remains unchanged, the Finance Ministry release added.

All other aspects of ECB policy such as $500 million limit for a company a year under the automatic route, eligible borrower, recognised lender, end use of foreign currency expenditure for import of capital goods and overseas investments, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements also remain unchanged.

The ECB policy change for companies in the infrastructure sector came hours after the Economic Affairs Secretary, Mr Ashok Chawla, told reporters here that the Government was looking to relax the policy. “We will ensure keeping in context of the unfolding scenario that infrastructure projects in particular or even other projects do not face any problems of access to funds or liquidity,” he had said after launching an online database of Public-Private Partnership (PPP) projects.

The ongoing credit crunch and turmoil in the US financial markets arising from collapse of Lehman Brothers and rescue of American International Group (AIG), had widened the credit spreads in the international markets, making it difficult for Indian companies to access funds within the interest ceilings prescribed.

In his first interaction with the media after taking charge as DEA Secretary, Mr Chawla did not endorse the notion in certain quarters that the sources of funds were drying up in the wake of the turmoil in the US financial market.

“We may be jumping to conclusions if we feel that sources of funds are drying up. There is certain amount of turmoil in the market. But the expectation is that these are all going to settle down in the near future. The kind of restructuring that is taking place, the general stability of system hopefully will be restored sooner than later,” Mr Chawla said.

The Finance Ministry official also said that the position of the rupee vis-À-vis the dollar was a separate issue and there were a number of factors that led to where the rupee was today.

The Government had last year imposed curbs on ECBs, limiting remittance of funds up to $20 million and that too with RBI approval. However, in May, the limit was relaxed to $100 million for infrastructure companies and $50 million for others.

More Stories on : Infrastructure | Overseas Borrowings | Policy

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Copyright © 2008, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line