The Indian government is planning to create an $11 billion debt fund to help finance projects in the power sector, a high-ranking public sector source told Infrastructure Investor.
While still in its planning stages, the proposal will be discussed by a committee comprising officials from the Planning Commission of India, the Central Power Ministry, the state-owned power sector, and lending institutions such as Power Finance, Rural Electrification and Central Electricity Authority.
The proposed fund is one of the latest measures by the Indian government to provide long-term funding for its infrastructure projects, which otherwise rely largely on commercial bank financing. In May this year, the government proposed setting up a separate $11 billion debt fund to fund infrastructure, which is expected to be implemented soon.
Media reports suggest the sponsors of the power sector fund may be a combination of organisations such as Life Insurance Corporation, State Bank of India, Infrastructure Development Finance Company (IDFC) and IIFCL among others. Sponsors may also include investment banks and non-banking financial companies alongside multilateral funding agencies such as the International Financial Corporation (IFC), part of the World Bank group, and the Asian Development Bank (ADB) in a bid to attract foreign investors.
According to the Planning Commission of India, capacity shortages in the power sector can be a hindrance in achieving the sort of double-digit growth India is aiming for. India is expected to grow by 8.5 percent this year.
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