core sector communique

• Britain - India Infrastructure Group Launched
• India Invites Large Scale Investment from UK Companies in Infrastructure Development and Infrastructure Financing

Union Finance Minister, Shri Pranab Mukherjee has said that infrastructure financing is one of the key areas of concerns for us. He said that we are hopeful of meeting the 11th Plan target for investment in infrastructure sector but the preliminary estimates for the 12th Plan indicate a substantial 30% gap in the financing of said investment. Shri Mukherjee said nearly half of the one trillion US dollar targeted investment in infrastructure sector for the 12th Plan is envisaged to be financed through private sources. Finance Minister said that Public Private Partnership (PPP) wherein the private sector is participating in the construction and operation of public infrastructure asset is one of the most important development in infrastructure delivery in our country. Finance Minister Shri Mukherjees was giving his opening remarks during his bilateral meeting with Dr. Vince Cable, Secretary of State for Business, Innovations & Skills, UK, here today. He said that both the countries can learn a lot from each other’s experiences and expressed his happiness at the launch of the Britain India Infrastructure Group (BIIG). He said that BIIG is a major step forward to facilitate the development of infrastructure in India with the involvement of senior officials from both sides and the major private sector players in infrastructure development.

Finance Minister Shri Mukherjee said that BIIG has been formed at an opportune moment, when India is taking stock of its infrastructure investments during the Eleventh Plan period and is gearing up to almost double the investment amount during the Twelfth Plan period covering 2012- 2017. Shri Mukherjee said that iinfrastructure is the key to sustaining India’s economic momentum of recent years. He said that the high growth of the Indian economy in the past few years has increasingly stressed physical infrastructure, including electricity, railways, roads, ports, airports, irrigation, and water supply and sanitation, all of which already suffer from a substantial development deficit.

Finance Minister Shri Mukherjee said the implementation of infrastructure projects is also currently facing a huge shortfall of skilled manpower. He said that there is a wide gap between annual addition to the workforce and the annual vocational training capacity. The Finance Minister said that National Skill Development Corporation (NSDC) has been formed to facilitate private initiatives in skill creation. Shri Mukherjee said that he would like NSDC to have tie ups with overseas Companies to enhance their participation in bridging skill gap, particularly in the infrastructure sector.

Finance Minister Shri Mukherjee said that beside creating skilled manpower, we also want to develop and set up a vibrant bond market in the country to facilitate infrastructure financing. He said that as per the existing guidelines, Indian companies can issue bonds in Indian currency, which gets traded on the corporate bond market in India. Shri Mukherjee said that foreign institutional investors can invest in these bonds up to $20 billion collectively, with a ‘carve out’ of US $ 5 billion for infrastructure projects solely. Shri Mukherjee said that in February 2010, a new class of non-banking financial companies called infrastructure finance companies (IFCs) has been announced. He said that External Commercial Borrowing by infrastructure non-banking financial companies for on-lending to infrastructure sector, will now be considered under the automatic route subject to hedging of currency risk in full and other prescribed norms. The Finance Minister said the concept of creating a regulatory framework for credit enhancement is also under active consideration. Shri Mukherjee said that various options with regard to creation of Infrastructure Debt Fund are being examined by the Ministry of Finance.

Speaking on the occasion, Dr. Vince Cable, Secretary of State for Business, Innovations & Skills, UK said that there is a lot of scope for both the countries to work together in the field of infrastructure development. He said that various UK companies are interested to invest in this sector in India. He hoped that BIIG will facilitate the investment by UK companies in the development of infrastructure in India. Dr. Vince said that a joint action plan is the need of hour and invited India’s Finance Minister to UK later in June or July this year to institutionalise the same.

Later official delegations from both the sides discussed the scope for enhanced role of private sector in creation of infrastructure and infrastructure financing among other related matters.