- The government is working to improve the rating of infrastructure projects to help the national infrastructure pipeline
- Infrastructure projects face 7% funding gap due to lower ratings based on default probability method
- The Ministry of Finance asks pension funds, including EPFO and PRFDA, to consider the expected loss method for exposure to infrastructure projects
By Meghna Mittal.
The improved infrastructure project rating will help the national infrastructure pipeline by Rs 111 lakh crore. The default probability method leads to a lower score because it marks an infrastructure project as a non-performing asset (NPA) even with a payment delay of one day. The expected loss method takes into account the recovery potential of an infrastructure project after default.
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The expected loss method is followed globally because it improves the rating of infrastructure projects.
Infrastructure projects receive approximately 40% of funding from centers and states, an additional 40% from NBFC, and 3% from other sources of funding. They raise about 7% of infrastructure investment trusts (INviTS) and equity and 3% of multilateral funding, which still leaves a shortfall of 7% of funds.