Govt finalising modalities for setting up infra trust funds

The finance ministry is in the process of putting in place modalities for setting up infrastructure trust funds (ITFs) that would accelerate flow of long-term funds to various infrastructure projects.

These are expected to be finalised within a month.

ITFs, which are on the lines of real estate investment trusts, would help accelerate the flow of long-term funds into various projects in areas such as power, roads, ports etc.

"We are at the moment working on a new structure called Infrastructure Trust Fund. We will finalise its modalities within one month," said a senior official at the ministry.

"Under the structure, underlying revenue of projects will be transferred to a trust and the trust will then issue units to investors, including foreign investors who then want to buy the units," he added.

REITs are prevalent in many countries like Singapore, Hong Kong and the US.

The creation of IDFs was first proposed in the Union Budget for 2011-12 fiscal, and the government has been looking at various options to help fund the infrastructure sector, which is estimated to require around $1 trillion investment by 2017.

Against this, the India Infrastructure Finance Company Ltd (IIFCL) has targeted a $-billion corpus for its first IDF, which aims at accelerating and enhancing flow of long term debt for funding infrastructure development in the country.

Government expects private sector to meet about half of the total $1 trillion needed for investments in power, roads, ports, civil aviation and other infrastructure projects during the 12th Plan period (2012-17).

During meetings with business leaders in Washington recently, finance minister P Chidambaram had pointed to the huge opportunity for foreign investment in India as the government focuses on rapid infrastructure development in the country.