The government has allowed 13 public sector institutions to raise Rs.48,000 crore through tax-free bonds in 2013-14 to meet their infrastructure investment needs. For the first time, sovereign wealth funds (SWFs) have been allowed to invest in the private placement segment of these bonds.
Private placement will be 30 per cent of the issue and subscription by SWFs would bring more dollars into the country, at a time when a high current account deficit and the falling rupee are a cause of concern.
“The issuers shall earmark suitable amounts within their private placement allocation for placing with SWFs, pension and gratuity funds without the requirement of a book building procedure,” the Central Board of Direct Taxes said in a circular.
Half the tax-free bonds would be from three entities — India Infrastructure Finance Company, Indian Railway Finance Corporation (Rs.10,000 crore each) and Power Finance Corporation (Rs.5,000 crore). They’ve also been asked to raise dollars by issuing quasi sovereign bonds of $4 billion (about Rs.24,000 crore).