TAKEOUT FINANCING IS IMAGINATIVE MOVE
The F.M. is imaginative in proposing 'takeout financing' as an instrument to organise finance for infrastructure. Mr. Pranab Mukherji should be remembering how the consortium arrangement for long-term financing for industries through the erstwhile I.D.B.I., ICICI and IFCI had made substantial contribution for Indian industrialisation'
Takeout financing should take its place well. It is an accepted financial practice under which long-term funds would be released for slow-yielding and low-yielding but crucial projects for economic development without which the developmental process will linger on, if not totally suffer. Once having established the India Infrastructure Finance Company Ltd. (IIFCL) as the vehicle for providing long-term financial assistance to infrastructure projects, it should be strengthened with long-term funds and also help it to building an expert organisation in the field. Its ability to appraise and monitor infra projects should be strengthened.
The deposits mobilised by the commercial banks are of short-term nature though a substantial part of it could be made available for long-term investments provided the possibility of mismatch is taken care. To effectvely address such asset-liability mismatch of commercial banks arising out of financing infrastructure projects and to set aside funds for financing new projects, the takeout financing scheme will be introduced by IIFCL in consultation with banks to take care of incremental lending for the infrastructure projects. The Budget envisages that the IIFCL and banks would support projects involving a total investment of Rs.100 thousand crore in infrastructure. This will be in addition to public investment in infrastructure.
With this imaginative move in the Budget, IIFCL should, in due course, emerge as the apex financial institution for infrastructure projects and make a signal contribution.
DR. K. U. MADA
Economist & Company Director
Mumbai : 9 July 2007
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