Pioneer of India's mortgage finance industry and chairman of HDFC, Deepak Parekh, has said that the country should use its forex reserves for funding in infrastructure. He feels the infrastructure debt fund should be put into practice. SLR requirements should be brought down he said, adding, that he hoped to see SBI and IIFCL raise USD 2-3 billion each year for infrastructure. "India needs a minister for infrastructure," Parekh stated.
A committee headed by Parekh had submitted a report in June 2010 which recommended that the infra debt fund be allowed to re-finance upto 85% of outstanding debt of infrastructure projects. The long-term debt fund, according to the committee, was expected to bring down interest costs and user charges associated with infrastructure projects.
To woo foreign investors the Parekh committee had recommended exemption of withholding tax on interest income. As part of his measures for the sector, finance minister Pranab Mukherjee in his budget presentation, has allowed foreign institutional investors to invest in unlisted bonds with a minimum lock-in period of three years in infrastructure companies that are organized in the form of special purpose vehicles. The sector has been allocated Rs 2.14 lakh crore for FY12. The withholding tax that the Parekh committe had recommended to be exempted has been slashed to 5% from the prevailing 20%.
IIFCL also received an additional Rs 5,000 crore for its take-out financing scheme.
Deputy chairman of the planning commission, Montek Singh Ahluwalia however believes that even if the SLR was reduced, banks would still rake up government debt. He said all regulators should be accountable to people. Future metro projects should be done through the public private partnership route, Ahluwalia stated.
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