Why in News ?

Union Cabinet approved the National Highways Authority of India (NHAI) setting up Infrastructure Investment Trust (InvIT) in December 2019, the company has recently started meeting investor groups, as it prepares to come up with its InvIT issue.

• Issue will enable NHAI to monetise its completed National Highways that have a toll collection track record of at least one year.
• NHAI reserves the right to levy toll on identified highways and it will help the company raise funds for more road development across the country.

About Infrastructure Investment Trust (InvIT)

• NHAI’s InvIT will be a Trust established by NHAI under the Indian Trust Act, 1882 and SEBI regulations.
• Institutions similar to mutual funds
  • It pool investment from various categories of investors and invest them into completed and revenue-generating infrastructure projects, thereby creating returns for the investor.
  • The unit-holders will get the distributions at least once every six month.
• Structured like mutual funds, they have
  • A trustee – Responsibility of inspecting the performance of an InvIT
  • Sponsor – Promoters of the company that set up the InvIT
  • Investment manager – Supervising the assets and investments
  • Project manager – Execution of the project
• The fund will be raised by monetising the completed NHs by introducing toll systems on the identified highway.

Why it required Immediate funds ?

• Centre had launched Bharatmala Pariyojana, its flagship highway development programme, for development of 24,800 km of roads at a total investment of Rs 5,35,000 crore.
• The highways authority plans to raise more than Rs. 85,000 crore by fiscal year 2025 through the toll-operate-transfer (ToT) model and infrastructure investment trusts (InvITs).

How The investor Get Benefit ?

• InvITs enable these investors to buy a small portion of the units being sold by the fund depending upon their risk appetite.
• Such trusts comprise largely of completed and operational projects with positive cash flow, the risks are somewhat contained.
• Investors can benefit from the cash flow that gets distributed.
• Besides the Unit-holders benefit from tax norms including exemption on dividend income and no capital gains tax if units are held for more than three years.

Source : Indian Express

Topic

GS III : Infrastructure and Indstry

• Infrastructure: Energy, Ports, Roads, Airports, Railways etc

Current Affairs Compilation : 22 September 2020