Govt will tap capital markets to fund road projects: Nitin Gadkari

Govt will tap capital markets to fund road projects: Nitin Gadkari

Subject :Economy

What is a capital Market?

The capital market involves the sale and purchase of both equity and debt instruments, including equity shares, debentures, preference shares, secured premium notes, and zero-coupon bonds. It also caters to all forms of lending and borrowing financial transactions.

Functions:

• Mobilisation of savings for financing long-term investments.
• Aids in the trading of securities.
• Reduces transaction and information costs by encouraging the ownership of a broad spectrum of productive financial assets.
• Facilitates the quick valuation of shares and debentures.
• offers a wide range of investment instruments to investors, thereby fostering the creation of capital in the economy.

Types

Primary Market

In this type of capital market, companies, governments, and public-sector institutions can raise funds through issued bonds. The primary capital market consists of corporations that raise money through the selling of new stocks through an initial public offering (IPO). Therefore, in a primary capital market, investors directly purchase shares from a company. Primary markets are characterised by the trade of new issues of stocks and other securities.

Apart from IPOs, rights issues, private placement shares, and e-IPOs are also issued in the primary market.

Secondary Market

In the secondary capital markets, financial and investment instruments such as stocks, shares, and bonds, among others, are purchased and sold by customers. In a secondary capital market, the chief feature is the exchange and trade of existing or previously-issued securities. Stock exchanges such as the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) are examples of secondary capital markets.

The Central Road Fund (CRF) is a non-lapsable fund created under Central Road FundAct 2000.

• It is procured out of the out of cess/tax imposed by the Union Government on the consumption of Petrol and Diesel.
• CRF should be used to develop and maintain National Highways, State roads (that have economic importance with inter-state connectivity), rural roads, railway under/over bridges etc, and national waterways (waterways from 2017 onwards only).
• The CRF was replaced with a Central Road and Infrastructure Fund (CRIF) through amendments introduced in the Union Budget for 2018-19.
• The main purpose of the convention is to use CRIF ‘s road reinstatement proceeds to fund other infrastructure projects, including waterways, some railway infrastructure, and sometimes even social infrastructure, such as educational institutions, medical colleges.
• CRIF’s subject matter belongs to the Ministry of Finance.

Section 7 of the Central Road and Infrastructure Fund Act, 2000 lays down that CRF shall be utilized for the–

1. Maintenance and development of National Highways;
2. Rural road development;
3. Development and rehabilitation of many State highways including interstate and commercially important highways;
4. The building of highways under or over the railway by methods of a bridge and installation of protection works at unauthorized railway crossings; and
5. Disbursement in support of such ventures as the Ministry may recommend.