Our Bureau

New Delhi, March 1

THE Union Government will set up a financial special purpose vehicle (SPV) to finance infrastructure projects in road, airport, port and tourism sectors.

It has also decided to utilise a portion of the large foreign exchange resources to finance necessary import of equipments required for infrastructure projects.

The SPV will lend funds, especially debt of long-term maturity, directly to the eligible projects to supplement other loans from banks and financial institutions, the Finance Minister, Mr P. Chidambaram, announced in his Budget speech.

"The Government will communicate the borrowing limit to the SPV at the beginning of each fiscal year. For 2005-06, the Government proposes to fix the borrowing limit at Rs 10,000 crore," the Minister said.

Conceding that there was a glaring infrastructure deficit in the country, Mr Chidambaram said investment in infrastructure will continue to be funded through the Budget.

"However, there are many infrastructure projects that are financially viable but, in the current situation, face difficulties in raising resources. Such projects may be funded through the financial SPV after an appraisal is made by an inter-institutional group of banks and financial institutions," he said.

The Government has also made a provision of Rs 1,500 crore for "viability gap funding" for infrastructure projects. "This mechanism will be used in conjunction with the funding mechanism through the SPV," the Minister said.

(This article was published in the Business Line print edition dated March 2, 2005)
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