To go active by Dec, NIIF will work like a sovereign fund

The proposed ₹20,000-crore National Investment and Infrastructure Fund (NIIF) is likely to be set up as a trust in which the government will contribute 49 per cent at most, with the rest of the funds coming in from long-term institutional investors, pension funds and sovereign wealth funds.

There could also be an intermediate company looking at day-to-day operations.

Sharing the details of the NIIF, Minister of State for Finance Jayant Sinha said it will be ‘operational’ by the end of this calendar year.

The NIIF, which may take the role of a sovereign wealth fund, is being set up primarily to address the gap in equity financing of large-gestation, commercially viable infrastructure projects in the country.

Discussions are on to finalise the legal structure under which the NIIF will function, Sinha told reporters at North Block here.

“The government will have an arm’s length relationship with this entity. This will not be a government entity. The NIIF will be an investment manager and put in equity in commercially viable infrastructure projects. It will not be a project management firm,” Sinha said.

Below the NIIF will be a series of alternative investment funds (AIFs), which will provide equity capital support to commercially viable infrastructure projects.

Sinha said that foreign investments could be attracted both at the level of NIIF and AIFs. The Cabinet had approved the flow of foreign investments into AIFs a few days ago.

The Centre is yet to allocate funds in the Budget for pumping in money into the NIIF.

As and when the project pipeline builds up, the initial funds will be allocated through the Budget, said a Finance Ministry official. “It is not that the entire ₹20,000 crore would be needed at one go”.

Sinha highlighted the lack of equity capital to support the country’s infrastructure development. He pointed out that the balance sheets of large business groups are already stretched and they are not being able to take up fresh exposure due to the absence of equity capital.

The Indian stock markets ecosystem has “not done a good job” of providing equity funds for long-gestation projects, he added.

The proposed NIIF entity will be located in Mumbai and it will be run by a governance council with “world class governance standards”, Sinha said.

Besides investing equity funds in entities such as IIFCL, NHB and IRFC, the NIIF could also sponsor funds for investment in infrastructure projects.