What is mean by Infrastructure investment trusts (InvITs)? How National Highways Authority of India plans to monetise its highways through InvITs? Explain (200 Words)
Refer - The Indian Express
Enrich the answer from other sources, if the question demands.
IAS Parliament 4 years
KEY POINTS
What are InvITs?
· Infrastructure investment trusts are institutions similar to mutual funds, which pool investment from various categories of investors and invest them into completed and revenue-generating infrastructure projects, thereby creating returns for the investor.
· NHAI’s InvIT will be a Trust established by NHAI under the Indian Trust Act, 1882 and SEBI regulations. The InvIT Trust will be formed the objective of investment primarily in infrastructure projects.
Why does NHAI need fund and how will it benefit the economy?
· At a time when private sector investment in the economy has declined, fund-raising by NHAI and spending on infrastructure will not only provide a fillip to the economy, but will also crowd-in private sector investment. So NHAI’s InvIT offer, which is expected to come soon, is a way for the government to tap alternative sources of financing to boost public spending in the roads and infrastructure sector.
· It is important to note that in October 2017, the Centre had launched Bharatmala Pariyojana, its flagship highway development programme, for development of 24,800 km of roads at a total investment of Rs 5,35,000 crore.
· In order to complete the projects, NHAI needs adequate funds and one of the options is to monetise the completed and operational NH assets and offer attractive schemes to private players to invest in construction of National Highways.
· A retail or even a large financial investors may not be typically able to invest in infrastructure projects such as roads, power, energy etc. InvITs enable these investors to buy a small portion of the units being sold by the fund depending upon their risk appetite.
· Given that such trusts comprise largely of completed and operational projects with positive cash flow, the risks are somewhat contained.
· The investors can benefit from the cash flow that gets distributed as well as in capital appreciate of the units. Unitholders also benefit from favourable tax norms, including exemption on dividend income and no capital gains tax if units are held for more than three years.
