Centre eases overseas infra borrowings

The Centre’s proposal to liberalise external commercial borrowings (ECBs) for power, aviation, low-cost housing and roads will see corporates in key sectors looking for expansion have easier access to capital from overseas markets.

Finance Minister Pranab Mukherjee, presenting the Budget 2012-13, said investment in the infrastructure sector during the 12th Five-Year Plan (2012-17) will go up to Rs 50 lakh crore, about half of which is expected from the private sector.

The move will further deepen the capital market and encourage investment in infrastructure sector.

“To address the immediate financing concerns of the civil aviation sector, I propose to permit ECB for working capital requirements of the airline industry for a period of one year, subject to a total ceiling of USD one billion,” Mukherjee said in his Budget speech. Further, in order to augment funds for low-cost housing projects, Mukherjee allowed developers to access the ECB route. “In view of the shortage of housing for low-income groups in major cities and towns, I propose to allow ECB for low-cost affordable housing projects,” he added.

With regards to the capital needs of the power sector, he said: “I propose to allow ECBs to part finance rupee debt for existing power projects.”

Further to facilitate funds into roads and construction segment, he allowed companies to raise overseas funds to meet their capital expenditure. The move will help in setting up infrastructure in the public-private-partnership (PPP) mode.

“To encourage public private partnerships in road construction projects, I propose to allow ECB for capital expenditure on the maintenance and operations of toll systems for roads and highways so long as they are a part of the original project,” he said.

The government has raised FII investment limit in long-term infrastructure bonds, corporate bonds and government securities. The limit on ECB has also been raised and qualified foreign investors were allowed to invest in specified Indian mutual funds and directly in equities.

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