PFRDA opposed to pension funds in infrastructure sector

Even as the Union Budget 2013-14 may have proposed to permit insurance companies, pension and provident funds to trade directly in debt funds, the interim pension regulator PFRDA has shot down a proposal of a high level panel to invest more retirement funds in infrastructure, which needs over Rs 13,00,000 crore during the 12th Plan period.

A high level committee on financing infrastructure headed by HDFC Bank chairman Deepak Parekh had in its meeting on January 28 observed that given the power sector's need for an estimated investment of Rs 13,72,580 crore, the panel should actively explore various funding options to optimise raising of resources.

Parekh said that despite the robust growth of the insurance companies, the estimated debt availability from them is barely Rs 28,899 crore.

The government has envisaged an investment of $1 trillion in the infrastructure sector during the 12th Plan period.

Parekh suggested that in view of the funding constraints, pension funds should invest larger amounts in case of availability of higher credit rating instruments.

But Pension Fund Regulatory and Development Authority (PFRDA) chairman Yogesh Agarwal opposed Parekh's suggestion in the meeting saying that "world over insurance companies and pension funds have not invested more than 1 per cent in infrastructure." Besides, foreign funds would not be available till the sectoral issues remain unresolved, he argued.

The insurance regulator Irda too has in the recent past opposed investing insurance funds into the infrastructure sector. Power Finance Corp chairman Satnam Singh told the panel that the huge gap in volume of financing power projects either from the Rural Electrification Corp or his organisation arose due to sectoral exposure limit of 15 per cent in case of scheduled commercial banks.

Responding to Singh's point, a senior finance ministry official asked the panel to recommend increasing the exposure limit to 20 per cent.

... contd.

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