FM may clear $5 Bn fund for Indian companies M&A play

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New Delhi: In an attempt to embark on a merger and acquisition drive, the government is considering a sovereign investment fund with an initial corpus of $5 billion, which will be used to bolster the country's energy security by acquiring coal mines and oil and gas blocks abroad, reports The Economic Times. In this regard, Prime minister Manmohan Singh has issued a directive to the finance ministry, and an announcement is likely in the Budget, an official said. According to officials, one of the options available to the government is to create a special purpose vehicle (SPV), which will borrow funds from RBI in the form of long-term securities in foreign currency and lend the same to Indian companies at lower rates. The decision to form a fund was reportedly taken at a recent meeting of the PM's council on trade & industry, which was attended by industry leaders, Planning Commission deputy chairman Montek Singh Ahluwalia, finance minister P Chidambaram and commerce & industry minister Kamal Nath. The sovereign fund is part of the government's plan to maintain high economic growth. Kuwait Investment Authority, the Government of Singapore Investment and Temasek Holdings are examples of such sovereign funds. Last September, China floated a $200-billion sovereign wealth fund, called China Investment.