Union finance minister P. Chidambaram, CII president R. Seshasayee (centre) and finance secretary Ashok Jha in New Delhi on Wednesday. Picture by Ramakant Kushwaha

New Delhi, Dec. 20: The Centre today set up a high-powered committee to suggest funding options to shovel a mammoth $320 billion into infrastructure projects in the Eleventh Five Year Plan.

To be chaired by IDFC chairman Deepakh Parekh, the committee will explore both equity and debt options, including freeing the external bond market.

Finance minister P. Chidambaram today confirmed setting up of the committee. “Parekh has agreed to head it,” he added.

This committee may also look into regulations in the public-private partnership model for infrastructure development. India needs around $320 billion in internal savings, overseas loans and FDI for the projects that have been lined up till 2012.

Part of the committee’s brief is to spell out changes in law to encourage investment by pension funds and insurance funds. It will also recommend on innovative special purpose vehicles (SPVs).

North Block officials said finance minister P. Chidambaram would make another attempt to push through the pension bill in the coming session of Parliament and persuade the Left to hike the FDI cap in insurance.

The Left is unlikely to give up its opposition to pension and insurance reforms that have thwarted the government’s plans to ramp up investment in infrastructure.

Chidambaram also said he would consider the proposals made last year by Planning Commission deputy chairman Montek Singh Ahluwalia to monetise part of the huge foreign exchange reserves and fund infrastructure projects.

Such monetisation is unlikely to occur if the government has already released money into the system against the reserves.

Chidambaram said he has sought a note from the finance secretary on utilising the reserves, which are at a massive $175.5 billion.

The committee on infrastructure, under Prime Minister Manmohan Singh, has estimated investments of Rs 3,00,000 crore in railways, Rs 2,20,000 crore in highways, Rs 50,000 crore in ports and Rs 40,000 crore in airports by 2012.

Ahluwalia supports use of foreign exchange reserves for infrastructure.

However, there was opposition from the finance ministry and the Reserve Bank of India. Many economists feared higher inflation from this policy.

In the mid-rear review of the economy, released yesterday, the government also suggested deepening the debt market to diversify risks and access funds for infrastructure projects.

Share slide

Chidambaram today allayed fears of adverse consequences on the economy from the currency controls in Thailand.

The controls sent shares packing yesterday, with the sensex losing 349 points.

“I spoke to the RBI governor. We don’t expect any fallout on India,” Chidambaram said here today.

He said the government will adopt a wait and watch policy in this regard.

The Central Bank of Thailand yesterday imposed currency controls on international investors, triggering major bear pressure on the Indian stock markets. The 30-share sensex, tumbled 349 points at the close yesterday and 511 points during intra-day trading.

Thailand later partially lifted the controls, confining them to only bonds and debt papers and exempting equities.