ADB to Help India Attract Private Sector Participation in Infrastructure Projects

MANILA, PHILIPPINES - The Asian Development Bank (ADB) is helping India develop infrastructure projects that can attract private sector investment through the modality of Public-Private Partnerships (PPPs).

The Japan Special Fund, through ADB, will provide a $2 million technical assistance grant to help government agencies in India develop a number of pilot PPP projects which can eventually serve as models for future projects. All infrastructure sectors covered under this initiative include urban development, transport, water, health and education sectors.

Under the technical assistance, “project development” entails all aspects of project structuring including institutional, financial, commercial, legal, social, environmental, and technical structuring leading to a competitive bid process to attract private sector participation.

ADB’s technical assistance is complemented by the India Infrastructure Project Development Fund (IIPDF), a facility of the Government of India. This unique collaboration allows for a much wider impact.

ADB’s experience in the infrastructure sectors, institutional and financial reforms, and innovative financial products will help promote the PPP modality in India.

According to the Planning Commission of India, the current infrastructure deficit requires a massive ramp up in infrastructure spending to 8% of gross domestic product from the current 4.7% in order to meet India’s growth and poverty alleviation targets. India needs around $500 billion in infrastructure investment funds between 2007 and 2012 – an amount too large to be met by the public sector alone.

ADB has been assisting state and central governments with capacity building in the area of PPPs. This technical assistance is a further step by focusing on the actual structuring of selected projects.

The Government of India has already identified a number of potential projects for selection as pilot projects with help from the ADB-assisted PPP cells already established at state governments and central line ministries.

“The ADB-IIPDF partnership will play a crucial role in actually demonstrating the benefits of PPPs through setting forth replicable PPP models with well-balanced risk and bankability structures. These should catalyze much needed private sector capital and efficiencies along with competitive commercial co-financing into the infrastructure sectors and eventually help promote equitable outreach of infrastructure services to the common man,” said Anouj Mehta, Senior Infrastructure Finance Specialist (PPPs) at ADB’s Indian Resident Mission.

ADB has supported India’s plan to bring in more public-private partnerships through two advisory technical assistance grants. The Indian government will provide $5.7 million equivalent from its IIPDF on a project-by-project basis. The project sponsor agencies will contribute $500,000 to cover project-specific office facilities, administrative support, and workshop facilitation.

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