That's a serious concern that needs to be settled first
The National Infrastructure Investment Fund (NIIF), when it finally gets operational, has the potential to solve many of India’s problems. With a Rs 20,000 crore contribution from the central government whose share will be kept at below 49%—to ensure the company formed is not a ‘government’ company—the NIIF will have a bit over Rs 40,000 crore of equity at the first level itself. It is to get the extra funding that the finance ministry is holding the two-day India Investment Summit, to convince various sovereign wealth funds (SWFs) and other institutional investors to invest in it. Assuming the government is able to get the investments it wants—the crash in oil prices does mean many SWFs from oil-exporting countries are less flush with funds—the NIIF can then be leveraged more. If, for the sake of argument,Rs 10,000 crore is put into a step-down subsidiary (with a 49% stake) in the power finance sector, another Rs 10,000 crore can be raised. The number of times the Rs 20,000 crore can be leveraged depends upon investor interest. Given that private sector investment in the country fell from 27% of GDP in FY12 to 23.3% in FY15—it may have fallen further in FY16—it is clear India needs alternative sources of finance. Apart from the infrastructure needs, a stressed asset fund is also planned as one of NIIF’s step-down subsidiaries.
There is, however, a big fly in the ointment and the government needs to address this squarely: does the CVC/CBI/CAG have the power of oversight when it comes to the NIIF? Given the 49% structure which makes it a private sector venture, the answer should be obvious, but there are enough instances of the government wanting to conduct CAG audits on firms where any public money is being spent/received, and the courts have been sympathetic to this view on occasion. In the case of Delhi’s electricity distribution companies (discoms), for instance, the Delhi government wanted a CAG audit—the Delhi High Court ruled in favour of the discoms that objected to this, but the matter is now pending in appeal at the Supreme Court. In the case of telecom companies, however, a different view has been taken by the courts. When a dispute arose on whether they could be audited since they were private firms, the government argued—and the Supreme Court concurred—that the CAG could audit their accounts to see whether they were declaring the correct revenues to the government; the licence/spectrum fees paid are based on the declared revenues. In the case of other PPP projects like the Delhi airport also, the issue of a CAG audit has been raised. It would be good to have some clarity on the issue, else the NIIF will not serve the purpose it is meant to serve.