National Investment & Infrastructure Fund

With a view to maximizing economic impact mainly through infrastructure development in commercially viable projects, both greenfield and brownfield, including stalled projects, the NDA government has approved the creation of National Investment and Infrastructure Fund (NIIF) which aims to attract investment from both domestic and international sources.

Presenting the General Budget 2015-16, Finance Minister Arun Jaitley stated that an annual flow of Rs 20,000 crore will be ensured for the NIIF. This will enable the Trust to raise debt, and in turn, invest as equity, in infrastructure finance companies such as IRFC and NHB. The infrastructure finance companies can then leverage this extra equity, manifold. The NIIF will be established as one or more Alternate Investment Funds (AIF) under the SEBI Regulations. If set up as Category I and II AIFs, then NIIF will be eligible for a pass through status under the Income Tax Act. A 'pass-through' status means that the income generated by the fund would be taxed in the hands of the ultimate investor, and the fund itself would not have to pay tax on the same.

In the case of category III AIF, where pass through status is not available, all income received by NIIF will be taxable at its level and any distribution made to the unit holders (investors) would be tax exempt. NIIF, proposed to be set up as a Trust, would raise debt to invest in the equity of infrastructure finance companies such as Indian Rail Finance Corporation (IRFC) and National Housing Bank (NHB). The idea is that these infrastructure finance companies can then leverage this extra equity, manifold. In that sense, NIIF is a banker of the banker of the banker.

A Search-cum- Selection Committee (SC) has been constituted under the Chairmanship of Shaktikanta Das, Secretary, Department of Economic Affairs, Ministry of Finance, for selecting a CEO for the Investment Management Company, under the NIIF. The Investment Management Company would actually be responsible for taking investment decision of NIIF corpus. The government’s share in the corpus shall not exceed 49%. The company is expected to achieve ambitious performance goals with rigorous management output.

The PPP mode of infrastructure development would be revitalized. It is expected that this would invite investment for the petroleum and natural gas sector. In a bid to woo Gulf-based investors to invest in India's infrastructure, Arun Jaitley will meet top officials of UAE-based sovereign wealth funds ADIA, ADIC and IPIC during his 2-day visit to Dubai during November 16-17.