FinMin to push funds to projects of Rs 500cr-plus



The government is looking to push loan flow to projects worth Rs 500 crore and above in a bid to revive investment and accelerate economic growth.

Sources said during a presentation to finance minister Arun Jaitley on Thursday , the department of financial services had suggested the setting up of a mechanism to ensure that credit flow to industrial and infrastructure projects does not stall, hurting overall growth. "The plan is to have a mechanism to monitor approved projects every month--see how credit is flowing and what are the problems holding it back," an official who was present at the meeting said. The move to develop the so-called effective monitoring mechanism follows the success of the Project Monitoring Group in the cabinet secretariat, which has removed hurdles for projects worth over Rs 3.8 lakh crore. The PMG deals with projects worth Rs 1,000 crore and more that are referred to it either by government departments and ministries or by the promoters themselves. The majority of the cases so far relate to green clearances and supply of coal to power plants, many of which are already operational. On last count PMG had received proposals for projects involving investment of over Rs 15 lakh crore. Held -up projects, mainly on account of lack of coordination and indecision, are cited as a major reason for a slowdown in investment in recent years. This has led to a near collapse of industrial growth and hurt the broader economy . Industry chambers like CII had approached the UPA government to reduce the bar for projects being referred to the PMG to Rs 500 crore. Although the Centre did not clear the move, over a dozen states are in the process of setting up PMG-like bodies to remove bottlenecks and spur investment.

Now, the finance ministry wants the new monitoring mechanism to be within one of its departments as it deals with banks, many of which have been hit by delay in project implementation and have seen bad loans soar.

Along with the new mechanism, the department of financial services has also suggested that a new financing mechanism for long-term projects, especially infrastructure, be put in place.