India to launch its first surety bond for projects guarantee
Tremendous interest from retail investors for infrastructure investment trusts (Invit)
Speaking at CII’s Global Economic Policy Summit 2022, Road Transport and Highways Minister Mr Nitin Gadkari Road Transport and Highways Ministry said that retail investors can participate in infrastructure building by investing in Invits and get about eight per cent returns. He also said that the Ministry will launch India’s first insurance scheme for providing guarantee for construction projects.
This announcement comes in the backdrop of India looking to build 26 Expressways, multimodal logistics parks, funicular railway in Ladakh, 35 multimodal logistic parks, 670 wayside amenities, 28 emergency landing facilities and 260 ropeway and cable cars, among others.
India has seen a sharp increase in highway development to 1.47 lakh km up sharply from 91,000 km in 2014.
The Minister called for developing indigenous, affordable models of construction without compromising on quality. “We have to improve quality and reduce the cost,” said the Minister, adding that ethics, ecology and environment should not be compromised. A project to develop bio-bitumen is underway using rice straw that will replace the imported bitumen used for constructing roads.
“Recently we launched Invits on the stock market. In just seven hours, our bonds were oversubscribed. There is tremendous response from the investor. There is no shortage of money. Strong political will is there. We are giving eight per cent returns. Retail investors are giving good response,” said the Minister, as he sought cooperation from industry stakeholders including bankers.
His idea is to raise funds from the capital market every 15 days with two-three projects so that the middle class including senior citizens can invest in nation building and get healthy returns.
The Minister added that on 19th December, Highway Ministry will launch India’s first ever surety bonds (an insurance product) for project implementation. The surety bonds will boost liquidity in infrastructure sector by freeing the contractors’ working capital stuck in bank guarantees, the Minister said. Highway project developers were facing difficulties in getting bank guarantees for their projects.
“Robust infrastructure is the backbone of the economy. In this direction, the Government of India has launched the PM GatiShakti to promote integrated infrastructure development,” he said as he invited investors to participate in building infrastructure assuring them that they will be given all regulatory clearances on time.
Mr Uday Kotak, Chairman, CII Global Economic Policy Summit and Past President, CII and Managing Director and CEO, Kotak Mahindra Bank, stated, “under the leadership of Shri Nitin Gadkari, the Ministry of Road Transport and Highways has actually made it a point to bring all stakeholders together to find a solution when a problem arises.”
8 December 2022
New Delhi