Investment Trusts For Infrastructure

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.