Skip to main content

Infra projects' credit system expected soon

Six registered agencies are said to be working collectively to come up with a new ratings system for such projects
In a global first, India is set to come out with a new ratings system for infrastructure projects in the coming months, to boost domestic funding and foreign investment in the infra space. Such a move will help prospective investors put money in a project based simply on the merits of the undertaking.
India is also likely to ask the BRICS Bank to adopt the same ratings system, as the multilateral development lender plans to set up a new credit ratings system for infrastructure projects.
Six registered credit agencies, including Crisil, CARE Ratings and India Ratings are said to be working collectively to come up with a new ratings system for such projects, Business Standard has learnt. In his 2016-17 Budget speech, Finance Minister Arun Jaitley had said that “a new credit rating system for infrastructure projects which gives emphasis to various in-built credit enhancement structures" would be developed, instead of relying on a “standard perception of risk which often results in mispriced loans”.
“The credit ratings agencies are at an advanced stage of releasing the new ratings system,” Economic Affairs secretary Shaktikanta Das told Business Standard. “BRICS Bank wants to set up new credit ratings system for infra projects. Since India is coming up with its own ratings for infra projects, we feel they should adopt ours. No country has it anyway,” said another government official aware of the developments.
The move will help revive infra projects in the country. The new ratings system will look at variable risk factors in public-private partnership projects to assess their viability. The new ratings will differentiate between credit rating of contractor versus the project. "Generally, infra projects - be it ports or airport - are given corporate ratings for the contractor. We have a legacy of relationship banking instead of project financing. The new ratings agency attempts to change that,” said the official cited above. Construction projects attract low corporate ratings due to their high gestation period. “These are not necessarily high-risk projects. For instance, road projects have a monopoly purchaser in the government, with under-rated debt, no obsolescence, and 20 years of assured traffic. Only construction takes longer.  Actually, this is a low-risk project and should get ‘AAA’ rating,” added the official. The government has asked ratings agencies to distinguish between corporate ratings and infra ratings by adopting 1,2,3 or x,y,z instead of the usual AAA or BBB.
Business Standard New Delhi,18th May 2016

Comments

Popular posts from this blog

At 18%, GST Rate to be Less Taxing for Most Goods

About 70% of all goods and some consumer durables likely to cost less

A number of goods such as cosmetics, shaving creams, shampoo, toothpaste, soap, plastics, paints and some consumer durables could become cheaper under the proposed goods and services tax (GST) regime as most items are likely to be subject to the rate of 18% rather than the higher one of 28%.

India is likely to rely on the effective tax rate currently applicable on a commodity to get a fix on the GST slab, said a government official, allowing most goods to make it to the lower bracket.

For instance, if an item comes within the 12% excise slab but the effective tax is 8% due to abatement, then the latter will be considered for GST fitment.

Going by this formulation, about 70% of all goods could fall in the 18% bracket.

The GST Council has finalised a four-tier tax structure of 5%, 12%, 18% and 28% but has left room for the highest slab to be pegged at 40%. A committee of officials will work out the fitment and the council…

Coffee-Toffee, the GST Debate Continues

Hundreds of crores of rupees in the form of taxes ride on the exact categorisation of products Is Parachute hair oil or edible oil? Is KitKat a chocolate or a biscuit? Is a Vicks tablet medicament or confectionery? For the taxpayer and the tax collector, this is much more than an exercise in semantics -hundreds of crores of rupees ride on the exact categorisation.
As the government moves closer to rolling out the goods and services tax (GST) on July 1, many such distinctions are being debated so that no ambiguity remains. Not just that, the government is revisiting old tax cases that were lost over product categorisation, according to people with knowledge of the matter, presumably with a view to making sure that revenue collections can be maximised. “In the past, several tax officers had challenged some of the product categorisations, including those in the retail segment, but lost out in court or at appellate level,“ said one of the persons. “Now we have a chance to go ahead with speci…

Deposit gush:-CA Institute Bats for Special Audit