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OT IAS Revision Card 9: National Investment and Infrastructure Fund (NIIF)

OT IAS Revision Card 9: National Investment and Infrastructure Fund (NIIF)*

The creation of National Investment and Infrastructure Fund (NIIF) was approved in August, 2015 with the objective of increasing investment flows into infrastructure projects. The First meeting of its Governing Council was held under the Chairmanship of the Union Finance Minister Shri Arun Jaitley. It sought to oversee and provide the broad road map for NIIF & its future activities. 

 
Here are some important points that you need to know about NIIF:
 
Objective:
Maximise economic impact mainly through infrastructure development in commercially viable projects, both greenfield & brownfield, that would also include stalled projects.
Certainly national projects if found commercially viable could also be considered by the NIIF.
 
Structure of NIIF:
  1. It has been registered as Category II Alternate investment Fund with the SEBI.
  • “Alternative Investment Fund” means any fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate which:
    • is a privately pooled investment vehicle which collects funds from investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors; and
    • is not covered under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999 or any other regulations of the Board to regulate fund management activities.
  1. Out of the initial authorised corpus of NIIF, the government has budgeted to contribute Rs.20,000 crore to the fund in the current fiscal year while another Rs.20,000 crore is expected to be raised through sovereign wealth funds.
 
Sources of Funds:
  1. It would invite equity participation from Anchor partners. While the Government’s contribution to the NIIF enables it to be virtually seen as a sovereign fund. It also seeks to attract foreign sovereign/quasi-sovereign/multilateral/bilateral investors. Several sovereign funds and pension funds across the world have already expressed their willingness to participate and cooperate in various manners with the NIIF. This includes suggestions from Singapore, UAE (United Arab Emirates), UK and Russia.
  1. It has to be ensured that the Government’s share does not exceed 49% of the corpus.
  1. It is also not obligatory for other partners to maintain their share of equity.
  1. The contributions of Central Public Sector Enterprises, Pension Funds, Provident Funds, National Small Savings Funds would be over and above Government’s 49%.
 
Governance of NIIF:
  1. It would be set up as a Trust/other legal entity for taxation & flexibility purposes.
  1. There would be a Governing Council of the NIIF that includes Government Representatives and experts in International Finance, Eminent Economists & Infrastructure Professionals. The current members are : Arun Jaitley (Head of Governing Council), Secretaries of economic affairs and financial services, SBI Chairperson Arundhati Bhattacharya, former Infosys executive TV Mohandas Pai and Hemendra Kothari.
  1. The NIIF would be supported by one or more CEO’s and a small Investment team consisting of expert staff.

 

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