Context: The recent rollout of Infrastructure Investment trust (InvIT) by the National Highways Authority of India (NHAI) is a welcome step and needs to be emulated in other struggling sectors too.
Need of InvITs:
Creates potential to mobilize funds: by attracting patient capital such as strategic investors, sovereign wealth funds and pension funds to build infrastructure.
Struggling sectors: like power and highways, due to pan India populism in power and disregard for the levy of user charges, require an alternative resource generation model.
Per capita power consumption remains low at 1,811kWh per annum as compared to global average of 3,200kWh. So a non-levy of user change is at a huge national cost.
Way forward:
Ensure regular levy of user charges: as the income from InvIT assets is passed on as dividend to investors.
Well budgeted finance devolution: targeted digitally via biometric.
Ease of doing business: through clear cut norms to avoid time and cost overruns.
Revisit the prescribedcap of 5% limit: for insurance companies’ investment in single InvIT.
Rating threshold: to be limited to InvITs only as they are independent of sponsors.