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India’s government has approved setting up a government firm to finance infrastructure projects, including private ones. It has also approved plans to divest stakes in public sector utilities (PSUs) and use 75% of the resources for social sector projects and approved a new steel policy to push 8% GDP growth in the country.
The cabinet approved setting up India Infrastructure Finance Company Ltd (IIFCL), a special purpose vehicle (SPV) to fund mega projects. The government will provide guarantees of up to Rs10,000 crore to IIFCL in 2005-06, for borrowing long-term funds (10 years and above) from domestic and overseas markets.
It can also borrow funds from multilateral lending agencies like the World Bank and the Asian Development Bank.
The government guarantee limit for the SPV would be set at the beginning of each fiscal year. The SPV would fund viable projects in sectors like roads, bridges, railways, seaports, airports, inland waterways, power, urban transport, water supply, gas pipeline, special economic zones, international convention centres and tourism projects.
The SPV would fund viable projects of private and public sectors as well as those taken up on a private-public partnership basis.
The cabinet also approved the National Steel Policy, which aims at hiking production to over 100mn tonnes and making Indian steel industry globally competitive in terms of cost, quality and product mix.
To render the domestic steel industry globally competitive, it was deemed imperative to augment indigenous production to more than 100mn tonnes per year by 2019-20 from the 2004-05 level of 38mn tonnes per year, which implied a compounded annual growth of 7.3% per year.
Furthermore, India has decided to join the 1998 agreement on Global Technical Regulations (GTR) for automobiles with the cabinet giving a go-ahead to the proposal.
The signing of the agreement would see Indian automakers benefit as design specifications of vehicles would not have to be changed to meet country-specific regulations, which would reduce the cost of development/production and retail prices of vehicles.
It would also make approval procedures easier, expand the scope of the market and provide the consumers with a wider range of choice.