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Wednesday, Feb 06, 2002

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Insurance funds for core sector urged

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TO GIVE a fillip to funding of infrastructure projects, the Associated Chambers of Commerce and Industry of India has mooted a proposal for investing 20 per cent of superannuation funds and earmarking insurance funds for investment in specified infrastructure projects.

In a note to the Finance Ministry on accelerating investments in the infrastructure sector, the chamber has pointed out that apart from investment in specified banks and Government securities, the Provident Fund, gratuity and pension funds should be allowed investments in private infrastructure projects. Simultaneously, insurance funds must find their way into projects promoted by the private sector.

Further, the chamber has proposed that the agency responsible for finalising the bid and implementing the project should get non-commercial risks arising from the project assessed from a responsible agency before the tender is issued. This, the chamber feels, would go a long way in ensuring a competitive response to the bids and lower the ultimate cost of the services.

Advocating on the need for income tax relief in the forthcoming Budget for infrastructure investments, the chamber has said that there is need for exemption of the 7.5 per cent MAT for eligible projects under Section 80 1A. This will improve the cash flow for the project, particularly during the 10 years where the provision is applicable.

At present, interest income, exempt under section 10(23G0 is available on a `net' basis. The chamber has proposed `gross exemption of interest income for funds lent to eligible projects be considered during the 10-year period. This will improve the bankability of projects and lower project costs.

The chamber has pointed out that dividends under Section 115 (O) declared by eligible projects from the special purpose vehicle (SPV) get taxed twice — once in the hands of the SPV and again in the hands of the parent company.

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