To achieve the goals of the National Monetisation Pipeline scheme, the NITI Aayog has recommended that the government provide tax incentives for investment in InvITs and bring them under the IBC. This will attract both retail and institutional investors.
This month, the Aayog, in collaboration with infrastructural ministries, developed and presented a study on the National Monetisation Pipeline (NMP).
"More tax-efficient and user-friendly mechanisms like allowing tax benefits in Infrastructure Investment Trust (InvITs) as eligible security to invest under Section 54EC of the Income-Tax Act, 1961, are important starting points for initiating retail participation in the instruments," according to the Aayog.
Nirmala Sitharaman, the Finance Minister, announced on August 23 a Rs 6 lakh crore NMP scheme to unlock value in infrastructure assets across sectors, from power to roads and railroads.
She also stated that asset monetisation does not entail the sale of land, but rather the monetisation of brownfield assets.
"The Insolvency and Bankruptcy Code (IBC) restrictions do not apply to InvIT loans since trusts are not considered "legal persons" under current regulations. As a result, the lenders lack a method for recourse to project assets "In the NMP manual, Aayog makes a point.
While lenders are protected under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and the Recovery of Debts and Bankruptcy Act, 1993 (RDBA), the provision of recourse under IBC regulations will provide investors with an additional level of comfort, it stated.
InvITs are pooled investment vehicles that attract institutions and high-net-worth individuals by offering profits on underlying assets such as toll roads.
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