Govt May Relax ECB Norms For Infra Cos

India urgently needs more bridges, ports and power plants. But infrastructure projects are starting to face a cash crunch after the government and the RBI cracked down on external commercial borrowings last month.

Infrastructure companies have now once again asked policy makers to relax ECB restriction in the infrastructure sector and this time their voice may finally be heard in the corridors of north block.The government is considering relaxing the $20 million cap on ECBs for rupee expenditure in the case of infrastructure companies. The limit may now be raised to $50 million. The government may also agree to keep funds raised through exchangeable bonds out of ECB limit.

We have asked the government and are hoping for some relaxation, Prabal Banerji, CFO, Hinduja Group said. While sections in the finance ministry are coming around to the view that ECB ceilings may have to be revisited, the Reserve Bank of India is still reluctant to ease restrictions.

Ample liquidity

The RBI still feels that there is ample liquidity in the domestic markets. At the same time, spreads in the international market have also tightened making domestic borrowings as competitive as international borrowings.

But the infrastructure sector argues that the estimated $300-400 billion investment needed over the next five years cannot be met through domestic borrowings.

While the RBI has so far resisted requests to ease off on ECB restrictions even for infrastructure companies, the RBI and the government are expected to review the situation.