New Delhi: With bank credit drying up for large infrastructure projects, the National Democratic Alliance (NDA) government is exploring a plan to raise Rs10 trillion from retirees and provident fund beneficiaries, said transport minister Nitin Gadkari.

The plan aims to raise money in tranches of Rs10,000 crore by selling 10-year bonds at a coupon of 7.25-7.75%.

Each tranche will be meant for a specific project.

India plans to invest as much as Rs3.96 trillion in the current financial year to bankroll its new integrated infrastructure programme which involves building of roads, railways, waterways and airports.

Gadkari, who also holds the charge of the ministry of water resources, river development and Ganga rejuvenation, said that the government was exploring alternative mechanisms for funding large infrastructure projects.

He declined to comment further, stating the scheme was still at a conceptual stage and has not been discussed with the finance ministry.

State-run companies, including Power Finance Corp. Ltd (PFC) and Rural Electrification Corp. Ltd, have been selling tax-free bonds to raise low-cost and long-term funds to help finance infrastructure projects.

India needs funds for its ambitious plans such as Sagarmala (ports) and Bharatmala (roads) to improve its transport infrastructure. While the total investment for the Bharatmala plan is estimated at Rs10 trillion—the largest ever outlay for a government road construction scheme—the country has envisaged Rs8 trillion of investment until 2035 under the Sagarmala programme.

The total road length to be developed as expressways under Bharatmala will be around 51,000km; the Sagarmala programme envisages construction of new ports to harness the country’s 7,517km coastline and setting up as many as 142 cargo terminals at major ports.

The plan to raise money from retirees and provident fund beneficiaries comes as Indian banks, loaded with bad debt, have turned averse to funding infrastructure projects. With many large conglomerates and infrastructure companies weighed down by debt, the onus of creating infrastructure has fallen on the government.

Experts say that there are limited options available to raise funds for infrastructure finance.

“You either opt for public funds or get investments from outside. The government’s decision is based on limited options it has," said Jaijit Bhattacharya, partner and head, economics, regulatory and policy advisory, KPMG in India.

But Gadkari also sees his plan benefitting investors.

“A lot of people fall prey to chit fund schemes and lose money. So our aim is to give such common people an investment opportunity," said Gadkari.

The government has been trying to raise resources to boost its ambitious infrastructure programme through multiple ways.

Mint reported on 11 August that the government is considering setting up an independent financial institution to cater exclusively to the roads and highways sector along the lines of PFC.

In 2015, the government set up the National Investment and Infrastructure Fund to raise funds for the infrastructure sector with an initial targeted corpus of Rs40,000 crore, of which Rs20,000 crore was to be invested by the government. The remaining Rs20,000 crore was to be raised from long-term international investors, including sovereign wealth funds, insurance and pension funds and endowments.

The government is also working on raising capital by monetizing the operational road assets of National Highways Authority of India, which has drawn up a list of 105 projects to be monetized over a period of time.

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