Pension funds for infra sector |
The government of India made a strong bid before 20-odd sovereign wealth funds and pension funds to finance large infrastructure projects, given that they are looking to deploy large amounts of long-term capital and seek high returns in emerging market economies like India. A team of ministers and officials led by finance minister Arun Jaitley made the pitch during a closed-door meeting, India Investor Summit, organized by Blackrock and the finance ministry. They added railway minister Suresh Prabhu, for instance, listed out possible investments in nearly half-a-dozen railway PSUs and suggested that they were attractive propositions as they have capacity to raise more resources in terms of debt. Similarly, the petroleum ministry listed out the steps it had taken in recent months to clear the policy logjam in the crucial sector. The road and transport ministry listed out the investment plan involving EPC projects and also said that the Employees Provident Fund Organization too is looking to diversify its asset mix and invest more in infrastructure. The response is reported to be very positive. With banks unable to meet the funding requirements for the infrastructure sector — estimated at $1 trillion over five years — the government is keen to tap other sources of finance. While high levels of non-performing assets, especially in the public sector, have made banks wary of lending, the asset liability mismatch (given that a majority of deposits are for one-two years and infrastructure projects need capital for 20-25 years) is the main reason behind the reluctance. Several of the large infrastructure groups also have high levels of debt, prompting the government to step in to build highways. Road minister Nitin Gadkari and officials in Indian Railways are arguing that it`s a win-win solution given that the funds are sitting on piles of cash, which is not fetching high returns. Investments in India are not just an attractive proposition due to high returns but also because several emerging markets are facing turbulent times.. Sources said some Australian funds have a corpus of around $2 trillion, while the Japanese financial sector has around $5 trillion surplus, some of which could flow into India. Similarly, the Chinese sovereign wealth fund has around $4 billion at its disposal.
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