Experts suggest government to come out with innovative financing model for infrastructure sector during the 2012-13 union budget.
Two years ago, the government introduced infrastructure debt fund (IDF) for channelising long term fund into the sector. IDF may be set up as mutual fund under the trust model or as NBFC.
Another option that was introduced some years ago was the tax-free infrastructure bonds. But Since infrastructure development require long-term funding, the last Budget had doubled the amount of tax-free bonds the government undertakings could raise to Rs 60,000 crore.
But low subscription of Power Finance Corporation bonds, which garnered only Rs 700 crore as against target of Rs 1,000 crore in December, shows dwindling investor appetite for such funding.
With banks offering more on fixed deposits, investors are clearly not enthused with tax-free bonds. So, even if government raise the amount of tax-free bonds in the Budget, the absorption will depend on the prevailing interest rates as well as equity market movement.
Experts say new initiatives and innovative models of funding for infra projects in the new Budget may spring positive surprises for infra companies that are facing various hurdles.