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Government sets up Rs 40,000-cr National Investment and Infrastructure Fund

Government sets up Rs 40,000-cr National Investment and Infrastructure Fund

Government has set up Rs 40,000-crore NIIF with the objective to boost infrastructure and stalled projects in the country.

Government has also appointed IIFCL as investment advisor and IDBI Capital Market Services Ltd. as advisor to NIIF Trustee Ltd for 6 months and one year, respectively.

The first meeting of the Governing council of NIIF under the chairmanship of Finance Minister Arun Jaitley was held to provide the broad roadmap for future activities of the NIIF.

Important features:

  • The government will invest Rs 20,000 crore in NIIF from the Budget; another Rs 20,000 crore is expected to come from private investors.
  • The government’s share in the corpus shall not exceed 49%.
  • SEBI has approved the setting up of the NIIF.
  • It has been registered with SEBI as Category II Alternative Investment Fund (AIF) on December 28, 2015.
  • The NIIF would invest in greenfield, brownfield and stalled projects.
  • The Investment Management Company would be responsible for taking investment decision of NIIF corpus.
  • Finance Minister will be the Chairman of the Governing Council.

Green field Project

Greenfield projects are projects that do not require any effort to clear the past structures, rather it starts a fresh. For example:

  • Construction of new factories, power plants, airports or any project which are built from scratch on green field land.
  • In wireless engineering jargon, a green field project could be rolling out the second generation of cell phone networks. These are called green field project because these networks are built afresh as their designs were free from the constraints of existing systems.
  • In software development, a green field project could be one developing a system for a totally new environment and for new customers, without any concern for integrating with other systems. Today, any new network designed from scratch to enable new Radio Access Network technologies, such as 3G, 4G and WiMAXare also referred to as green field projects
  • In transportation industries (e.g., automotive, aircraft, engines) the equivalent concept to green field project is called “clean sheet design”.
  • Agreen field opportunity in sales refers to a marketplace that is completely untapped and free for the taking.
  • From an Information Technology Service Management (ITSM) perspective, an IT organization that is being set up from scratch is said to start from a “green field” situation. This is because it would have no live services or practices in place to start with.
  • Benefits of Greenfield projects
  1. Pre-development cost is nil
  2. Planning does not require any adjustment for pre-existing structure
  3. Area specific perfect model can easily be drawn.
  4. A new facility offers the maximum design flexibility and efficiency to meet the project’s needs.
  5. New facilities are typically much less costly to maintain than used facilities

Brown field Project

The term brown field project applies to previously used land or to sections of industrial or commercial facilities that are to be upgraded. So, these are the facilities which are modified /upgraded from existing projects.

Features of brown field project:

  • In a brown field project the structure would need to be demolished or renovated.
  • Today, the term brown field project is used in many industries, including software development, to mean to start a project based on prior work or to rebuild (engineer) a product from an existing one.
  • The term brown field was originally used in construction and development to reference land that at some point was occupied by a permanent structure.

Benefits of brown field project:

  1. The costs of starting up may be greatly reduced.
  2. The time devoted to construction can be avoided as well.
  3. If the existing national or municipal government requires licenses or approvals, the brown-field facility may already be “up to code.”
  4. In cases where the facility previously supported a similar production process, brown-field investments can be a real coup for the right company.

Demerits of brown field project:

  1. Often the pre-existing site/facilities are contaminated/polluted
  2. Brown-field investments run the risk of leading to buyer’s remorse.
  3. It is rare that a company looking to engage in FDI finds a facility with the type of capital equipment and technology to suit its purposes completely.
  4. If the property is leased, there may be limitations on what kinds of improvements can be made.

 

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