Investment Trusts For Infrastructure

The Economic Times     13th June 2020     Save    
QEP Pocket Notes

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 prescribed cap of 5% limit: for insurance companies’ investment in single InvIT.
  • Rating threshold: to be limited to InvITs only as they are independent of sponsors.
QEP Pocket Notes