‘Need a PPP model for blended finance in sunrise sectors’

The Centre must go in for a public private partnership (PPP) route to implement this year’s budget announcement on creation of thematic funds for blended finance in sunrise sectors such as deep tech, agri tech and climate action, Pratibha Jain, Executive Committee Member, IVCA said.

To have a maximum impact, the government must consider creating a new organisation within the Finance Ministry and look providing concessional capital to various funds in the sunrise sector system, Jain told BusinessLine here.

The Indian Venture and Alternate Capital Association (IVCA) is the apex body for alternative investments in India. This not-for-profit organisation acts as a go-to body between the government, policymakers and regulators representing the private equity/venture capital Industry.

Rather than creating the thematic funds themselves, the Government must allow the private sector to create them, Jain said. Private sector should be allowed to come and pitch to the government through an auction or bidding process and create various funds that at least had an anchor capital investor in the form of ministry of finance and on the back of that raise global capital, she added.

“Once you get somebody like Ministry of Finance as an anchor investor, it will be easier to get global capital to sit behind it”, Jain said.

Put simply, blended finance mixes public capital with market-based funds to essentially mobilise additional commercial funding towards sustainable development. In blended finance, development finance is used for the mobilisation of additional funds. 

Blended finance can take various forms— it can be concessional capital and first loss guarantee. There is no one definition of sunrise sector— it could mean different things at different points of time for countries. 

Jain also felt that time may be ripe for the government to look at creation of Sovereign Wealth Fund. “ We need a permanent structure (whatever they may call it —SWF or otherwise) to  provide Blended finance for sunrise sectors. Because sectors will keep changing and growing with its success. In that permanent structure, we need to have private participation”, she added.

Government’s consultations

Post the budget announcement on blended finance, the government is now undertaking inter-departmental consultation as well as consultation with all stakeholders, including the Indian Venture and Alternate Capital Association (IVCA) on the issue in sunrise sectors.

Jain highlighted that structuring of it in the PPP mode is the key, as the Government does not have time to go into investment decisions.

She highlighted the success of National Investment and Infrastructure Fund (NIIF) and the SWAMIH fund (Category II Alternative Investment Fund) and stressed the need to take this forward in blended finance for sunrise sector as well. 

“All funding structures so far have been successful even though they have not been concessional. Just the fact that government was providing funding gave a major boost to specific investment opportunities”, she said.

Finance Minister Nirmala Sitharaman had in this year’s budget speech announced the setting up of thematic funds for blended finance in the ‘sunrise’ sectors of deeptech, agritech and climate action.

“For encouraging important sunrise sectors such as climate action, deep-tech, digital economy, pharma and agri-tech, the government will promote thematic funds for blended finance,” Sitharaman had said.

The Government’s share in the funding will be limited to just 20 per cent and these funds will be managed by private fund managers, Sitharaman had then said.

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