Budget eases lending, allocates funds to infra

Construction workers work at a site as the sun sets in Chandigarh in this December 2006 file photo.

MUMBAI (Reuters) - The budget said it would enable easier financing for infrastructure firms and allocated more funds to the country's highways, urban and irrigation projects.

Finance Minister Pranab Mukherjee asked state governments to remove hurdles for speedy implementation of projects and said government-run Indian Infrastructure Finance Co (IIFC) would be given "greater flexibility" to fund projects.

IIFC will release long-term funds for projects and this "can be used to effectively address the asset-liability mismatch of commercial banks arising out of financing infrastructure projects and also to free-up capital for financing new projects," Mukherjee said in his speech to Parliament.

IIFCL will refinance 60 percent of commercial bank loans for public-private partnership (PPP) projects in critical sectors over the next 15 to 18 months, he added.

IIFCL and banks are now in a position to support projects involving a total investment of 1 trillion rupees, he said.

The budget allocated 128.87 billion rupees for urban infrastructure, 87 percent higher than a year-ago and provided 39.73 billion rupees for housing and basic amenities to the urban poor. It aimed to make the country slum-free in five years.

Mukherjee also increased spending for India's National Highway development program by 23 percent over 2008/09.

Mumbai, the financial capital that is prone to flooding during the monsoon, will get 5 billion rupees in 2009/10 to speed-up its storm water drainage project. The project was initiated in 2007 with an estimated cost of 12 billion rupees.

The budget also allocated 10 billion rupees for irrigation projects for agriculture development.

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