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Monday, November 24, 2008

Govt plans Rs 50,000 cr infra spend

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NEW DELHI: The government is planning to raise funds locally and domestically to kick start a spending plan aimed at the infrastructure sector to protect demand and push growth momentum. It plans to identify around 10 big projects in the road, port, power and airport sectors to spend close to Rs 50,000 crore or $10 billion.

Ever since the global crisis spilled over and froze credit markets locally in September and October, demand has slumped. The government now plans to spend this money even if it means increased deficit.

The government is looking at a mix of options to raise the money. It doesn't run a surplus so it will have to borrow for sure.

It plans to borrow domestically some part of the $10 billion as raising the entire chunk would mean pushing up interest rates and leaving little for private firms tapping the local markets. It has also asked the World Bank to double its funding to $6 billion annually. Finally, it could ask infrastructure funds like IIFCL and IDFC to tapl global markets and raise funds backed by sovereign guarantees.

But for the moment, the government hasn't zeroed in on any single option or any particular combination.

The government is looking at highways program, some mega power and port projects for the spending. All of it would be in the current financial year and will help capital goods firms like Larsen & Toubro and BHEL.

The National Highways Authority of India (NHAI) currently has 53 projects worth Rs 60,000 crore.

Half the funds have been deployed and work is progressing on these projects, which is essentially aimed at four-laning nearly 4,300 km of national highway across the country.

Most of these projects are in the Public-Private Partnership (PPP) mode, where there have been some problems for project promoters as far as raising funds are concerned.

There are 5-6 mega power projects where the government is closely monitoring progress. The government has also sought funding to ensure that the port and airport projects move as per the original plan.

The idea is to step up equipment procurement on at least 10 projects.

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