Government is looking at creating a fund under India’s first sovereign wealth fund, NIIF, which will address capital requirements of domestic steel companies. The government in December created the Rs 40,000-crore National Investment and Infrastructure Fund (NIIF) as an investment vehicle for funding commercially viable greenfield, brownfield and stalled projects.
“Government is also working on operationalising National Infrastructure Fund, the sovereign fund, and that is envisaged as a mother fund and within that there will be specific sectoral funds. “We are trying to see how we can structure something for the steel industry there, which I think will definitely go a long way in bringing down the capital costs,” Steel Secretary Aruna Sundararajan said at an event here while speaking on the capital requirements of the domestic steel industry.
The Finance Ministry had signed an MoU with Abu Dhabi and Russian nano-technology company and is also having discussions with some funds with the UK for investments in NIIF. While the government will invest Rs 20,000 crore in NIIF, the remaining amount will come from private investors.
NIIF is set up as a Fund of Funds (Category II Alternate Investment Fund) with a proposed series of funds. She further said that high capital cost is one of the major reasons that affects the competitiveness of Indian steel industries and the government is working on a two pronged strategy to deal with that.
“One is that right now as you know government is looking at developing long-term funding for sectors like steel and RBI has brought our the 5/25 format, where there is a recognition that you cannot expect industries like steel to repay their loans in short spans of 5-7 years,” she added. The stressed assets are a major challenge.
The RBI, Department of Financial Services and the banks are working to see how government can help clean up the balance sheets so that banks can get capital at lower costs. Lenders today are unable to get capital at lower costs as their credit ratings are impacted due to the stressed assets, Sundararajan said.
“While trying to do that, we are also trying to see that how we can balance that with the steel industry because we do recognise that some of this stress is not coming because of mismanagement, a lot of stress is due to global factors that are beyond the control of individual firms,” she added.