Niti Aayog has suggested to the government to provide tax incentives for investment in InvITs, and bring them under the IBC to attract retail as well as institutional investors to achieve the goals of the National Monetisation Pipeline scheme.
The Aayog in consultation with infra line ministries has prepared and released a report on National Monetisation Pipeline (NMP) this month.
"More tax-efficient and user-friendly mechanisms like allowing tax benefits in Infrastructure Investment Trust (InvITs) as eligible security to invest under Section 54EC of the Income-Tax Act, 1961, are important starting points for initiating retail participation in the instruments," the Aayog has recommended.
Finance Minister Nirmala Sitharaman on August 23 had announced a Rs 6 lakh crore NMP scheme that will look to unlock value in infrastructure assets across sectors, ranging from power to road and railways.
She had also said the asset monetisation does not involve the selling of land and it is about monetising brownfield assets.
"Since the trusts are not considered as 'legal person' under the extant regulations, the Insolvency and Bankruptcy Code (IBC) regulations are not applicable for InvIT loans. Hence, the lenders do not have an existing process for recourse to project assets," Aayog has noted in the NMP guidebook.
While the lenders are protected under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and the Recovery of Debts and Bankruptcy Act, 1993, the provision of recourse under IBC regulations will bring in an added level of comfort for the investors, it observed.InvITs are pooled investment vehicles that draw institutions and wealthy individual investors with returns from underlying assets such as the toll road.