New Delhi: The Union Cabinet on Wednesday approved creation of a Rs 20,000-crore National Investment and Infrastructure Fund (NIIF), a sort of sovereign fund, for development of infrastructure projects, including the stalled ones.
The decision to set up the fund was taken at the meeting of the Cabinet headed by Prime Minister Narendra Modi, sources said.
The NIIF, sources said, is being established with an aim to maximise "economic impact" mainly through infrastructure development in commercially viable projects, both green field and brown field, "including stalled projects".
The fund could also consider funding nationally important projects in the manufacturing sector.
The initial authorised capital of NIIF would be Rs 20,000 crore, which will be raised from time to as decided by the Finance Minister.
The government would contribute 49 per cent of the subscribed capital of NIIF.
The fund would also solicit equity participation from strategic anchor partners.
"The contribution of the government to the NIIF would enable it to be seen virtually as a sovereign fund and is expected to attract overseas sovereign/quasi sovereign/multi-lateral/bilateral investors to co-invest in it," sources said.
The fund was proposed by Finance Minister Arun Jaitley in his Budget for 2015-16.
Sources further said domestic pension and provident funds, and the national small saving fund may also provide funds to NIIF.
NIIF may utilize the proceeds of the monetized land and other assets of public sector undertakings (PSUs) for infrastructure developments.
These funds have been consistently gaining traction since coming into play in late 2012 and there were 135 AIFs (alternative investment funds) registered with Sebi as of March 31, 2015.
Collectively, these AIFs had raised investment commitments totalling over Rs 22,600 crore till that date, while over Rs 9,500 crore worth funds have already been raised by them.
Their total investment stood at Rs 7,350 crore.
While market regulator Securities and Exchange Board of India (Sebi) has made provisions in its norms for AIFs to collect funds from the foreign investors, there is no enabling provision under the FDI policy or in the Foreign Exchange Management Act.
Because of this, the Foreign Investment Promotion Board (FIPB) has been considering the foreign investment proposals in AIFs on a case-by-case basis.
Under the RBI's Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000, only Sebi-registered foreign venture capital investors are allowed to invest in a Venture Capital Fund or in a Venture Capital Undertaking.
Besides, the FDI policy does not permit foreign direct investment in any trust other than by the FVCIs (foreign venture capital investors).
The Cabinet's approval on Wednesday would ensure that foreign investment in AIFs is in compliance with the FDI (foreign direct investment) policy and with the Reserve Bank of India norms.
The decision to set up the fund was taken at the meeting of the Cabinet headed by Prime Minister Narendra Modi, sources said.
The NIIF, sources said, is being established with an aim to maximise "economic impact" mainly through infrastructure development in commercially viable projects, both green field and brown field, "including stalled projects".
The fund could also consider funding nationally important projects in the manufacturing sector.
The initial authorised capital of NIIF would be Rs 20,000 crore, which will be raised from time to as decided by the Finance Minister.
The government would contribute 49 per cent of the subscribed capital of NIIF.
The fund would also solicit equity participation from strategic anchor partners.
"The contribution of the government to the NIIF would enable it to be seen virtually as a sovereign fund and is expected to attract overseas sovereign/quasi sovereign/multi-lateral/bilateral investors to co-invest in it," sources said.
The fund was proposed by Finance Minister Arun Jaitley in his Budget for 2015-16.
Sources further said domestic pension and provident funds, and the national small saving fund may also provide funds to NIIF.
NIIF may utilize the proceeds of the monetized land and other assets of public sector undertakings (PSUs) for infrastructure developments.
These funds have been consistently gaining traction since coming into play in late 2012 and there were 135 AIFs (alternative investment funds) registered with Sebi as of March 31, 2015.
Collectively, these AIFs had raised investment commitments totalling over Rs 22,600 crore till that date, while over Rs 9,500 crore worth funds have already been raised by them.
Their total investment stood at Rs 7,350 crore.
While market regulator Securities and Exchange Board of India (Sebi) has made provisions in its norms for AIFs to collect funds from the foreign investors, there is no enabling provision under the FDI policy or in the Foreign Exchange Management Act.
Because of this, the Foreign Investment Promotion Board (FIPB) has been considering the foreign investment proposals in AIFs on a case-by-case basis.
Under the RBI's Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000, only Sebi-registered foreign venture capital investors are allowed to invest in a Venture Capital Fund or in a Venture Capital Undertaking.
Besides, the FDI policy does not permit foreign direct investment in any trust other than by the FVCIs (foreign venture capital investors).
The Cabinet's approval on Wednesday would ensure that foreign investment in AIFs is in compliance with the FDI (foreign direct investment) policy and with the Reserve Bank of India norms.
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