The government's plan of launching a special purpose vehicle to finance core infrastructure projects made some headway with consensus arriving on the divergent views of the Planning Commission and the finance ministry. The SPV is likely to start functioning by November 2005.

The empowered committee finalized two points -- one of the SPV formation and the other for public-private partnerships in road projects. The CCEA will be approached for approval on 13 October 2005.

The Planning Commission and the finance ministry had divergent views on whether the entity would refinance existing project, companies which would be eligible for funding, the counter-guarantees to be provided, and the presence of government nominees on the board of the SPV, which would be a non-banking finance company.

Infrastructure projects like the rail freight corridor, Delhi and Mumbai airport upgradation, and road and port projects would be eligible for funding via the SPV.

The SPV, announced in the Budget for 2005-06 will have an initial paid-up capital of Rs.10 crore, but the authorised capital has been fixed at Rs.1,000 crore.

The SPV will raise money from various sources. As it would not be direct government lending, it would not be reflected in the fiscal deficit, but would be a part of the contingent liabilities of the government.

The government would not provide a counter-guarantee to the amount lent by the SPV. The government would guarantee the money raised by the SPV from the market but, no counter guarantee would be provided to the SPV for its lending. It would be expected to appraise projects and fund those which would be able to repay the amount they borrow.

The SPV would provide only a portion of the debt to a company, parallel with financial institutions.