Money
Creation of infrastructure dev bank recommended
A taskforce headed by Prithvi Raj Ligal, former vice-chairman of the National Planning Commission (NPC), has suggested allowing the establishment of an infrastructure development bank to finance infrastructure projects having a fixed capital of Rs500 million or more.A taskforce headed by Prithvi Raj Ligal, former vice-chairman of the National Planning Commission (NPC), has suggested allowing the establishment of an infrastructure development bank to finance infrastructure projects having a fixed capital of Rs500 million or more.
The potential infrastructure development bank should have an authorised capital of Rs100 billion, issued capital of Rs50 billion and paid-up capital of Rs20 billion, the taskforce said.
The team, which includes chartered accountant Narendra Bhattarai and Joint Secretary of the Finance Ministry Krishna Devkota, said that such a bank was
necessary to invest in energy, irrigation, railway, airport and tourism and urban
infrastructure.
According to the terms of reference given to the taskforce which was formed by the previous government, its assignment was to explore whether an infrastructure development bank was necessary, how much the paid-up capital should be, whether the government should invest in such a bank and whether a merger between Hydroelectric Investment and Development Company Limited (HIDCL) and NIDC Development Bank would be appropriate for the purpose.
The budget statement for the current fiscal year says that preliminary work will be begun to establish an infrastructure development bank with the participation of private companies capable of investing in infrastructure development.
“NIDC Development Bank and Hydropower Investment and Development Company will be restructured to make them capable of increasing investment in infrastructure,” it states.
Devkota said that the taskforce had suggested that there should not be any restriction on the number of infrastructure development banks. A bill on the Bank and Financial Institution Act (Bafia) has also made a separate provision for the formation of such a bank.
The team has recommended that the infrastructure bank be established in the form of a development bank initially and in accordance with the new Bafia.
As far as merging HIDCL and NIDC is concerned, the two can be combined; and government institutions like the Employees Provident Fund (EPF) and Citizen Investment Trust (CIT) can invest in the proposed bank.
“The government can
also make an investment, but it should divest its shares after a few years,” the taskforce said. The team has
presented a second option
of bringing a foreign
strategic partner in such
a bank by giving it a majority stake.
Another option floated by the taskforce is that such a bank could be opened with the participation of the government, foreign strategic
partner and general
public, but the government should reduce its stake to as low as 10 percent or divest all its shares within five to seven years.
There should be three full-time board directors in the bank, the taskforce said.