Missing in action: Domestic infra finance

The resources of state-owned entities are too small for the enormous requirements, especially in renewable energy

- SUBHOMOY BHATTACHARJEE

As India logs into the largest ever infrastructure government-run build-up, the array of financial corporations are conspicuously low-key.

For decades, various government ministries have built up assorted financing companies. The Public Enterprises Survey of the Central government lists 27 of them with a total paid-up capital of ₹11.46 trillion. More than half of the sum is accounted for by Power Finance Corporation (PFC) and REC, of which PFC is a holding company, at ₹6.05 trillion, and another ₹49,256 crore by India Infrastructure Finance Company Ltd. As the table shows, the rest are tiny.

Compared to the demand of over ₹112 trillion that the National Investment Pipeline estimates India will need to raise, the resource bases of these companies are negligible. For instance, of the ₹80,000 crore PFC plans to raise in FY24, about half will be via domestic debt, which includes public issues, debt securities, tax-free bonds, term loan from banks, and other financial institutions. Most of the remaining ₹40,000 crore will be raised abroad as syndicated loans, FCNR (B) loans, term loans, and bonds or notes, among others.

This dearth of domestic infrastructure finance is noticeable particularly in the renewable energy (RE) sector. It has implications. Globally, how money is raised for the energy sector now matters a lot. Insurance companies are looking into every possible detail of how energy companies, not only in the fossil fuel sector but also in RE, have sourced their funds. The International Energy Agency estimates Indian demand will climb 3 per cent annually due to urbanisation and industrialisation.