India: MFF - Second India Infrastructure Project Financing Facility (IIPFF-II) - PFR1

Sovereign Project | 41036-023

Summary

The IIPFF II supports the Scheme for Financing Viable Infrastructure Projects through the India Infrastructure Finance Company Limited (the Scheme) for promoting infrastructure' development primarily through public-private partnerships (PPP). Pursuant to the Scheme, IIFCL provides long-term financing on commercial terms for stand alone nonrecourse infrastructure projects. IIFCL will finance PPP subprojects selected through a transparent and competitive bidding process and only those assessed for commercial viability.

As of August 2009, IIFCL's project pipeline included 88 sanctioned projects with a total project cost of about $32 billion. The pipeline is expected to increase by 25 projects a year. As a result, IIFCL's balance sheet is projected at around $11 billion by fiscal year (FY)2013.

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Project Name MFF - Second India Infrastructure Project Financing Facility (IIPFF-II) - PFR1
Project Number 41036-023
Country India
Project Status Closed
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 2586-IND: MFF - Second India Infrastructure Project Financing Facility (IIPFF II) - Project 1
Ordinary capital resources US$ 210.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change
Sector / Subsector Finance - Infrastructure finance and investment funds
Gender Equity and Mainstreaming
Description

The IIPFF II supports the Scheme for Financing Viable Infrastructure Projects through the India Infrastructure Finance Company Limited (the Scheme) for promoting infrastructure' development primarily through public-private partnerships (PPP). Pursuant to the Scheme, IIFCL provides long-term financing on commercial terms for stand alone nonrecourse infrastructure projects. IIFCL will finance PPP subprojects selected through a transparent and competitive bidding process and only those assessed for commercial viability.

As of August 2009, IIFCL's project pipeline included 88 sanctioned projects with a total project cost of about $32 billion. The pipeline is expected to increase by 25 projects a year. As a result, IIFCL's balance sheet is projected at around $11 billion by fiscal year (FY)2013.

Project Rationale and Linkage to Country/Regional Strategy

Reliable and high quality infrastructure is a critical determinant of productivity to support sustained economic growth and poverty reduction. While high quality infrastructure is essential to harness growth impulses in the economy, insufficient infrastructure capacity of India results in lower productivity, higher transport and logistic costs, and reduces competitiveness. With higher growth target and a rising population, even maintaining current levels of infrastructure will require staggering an enormous increase in investments.

Based on the targeted growth rate and identified deficit, required infrastructure investment is estimated at approximately $514 billion. Accordingly, the goal of the Government of India (the Government) is to increase infrastructure investment from 4.5% to 9% of gross domestic product during the 11th Five-Year Plan (FYP) period, FY 2007-FY2011. Investments deficits of this scale cannot be bridged by public financing that is already limited by fiscal constraints.

Recognizing the role of the private sector in infrastructure development, the Government has placed private sector participation (PSP) and PPP at the core of its infrastructure development strategy. In line with this approach, infrastructure development is being fostered by initiatives to create an enabling environment for PPP through (i) addressing policy and regulatory gaps in several infrastructure subsectors, (ii) enhancing the capacity of public institutions and officials to manage PPP processes, and (iii) increasing the volume of financing and availability of risk mitigation instruments to manage and allocate risks in line with the new business model. ADB is providing extensive support for mainstreaming PPP in India through four ongoing technical assistance (TA) projects.

The Government has also taken reform initiatives to develop financial markets and expand the suite of financial products for promoting PSP and PPP. As result, the equity, government securities, foreign exchange, and money markets along with their corresponding derivatives segments are now reasonably deep and liquid. The reforms have also strengthened price discovery, eased restrictions on transactions, lowered transaction costs, and enhanced liquidity. However, long-term investors, such as pension and insurance funds, have a limited presence in the Indian market due to regulatory restrictions. Further, domestic investment banks are inadequately capitalized and the asset-liability position of many large commercial banks may not support large scale infrastructure exposures.

While reforms to mitigate the financial constraints are ongoing and contemplated, mobilizing available resources and catalyzing additional resources still presents a challenge. The tight liquidity in the international financial markets as a result of the global financial crisis has further constrained the flow of long-term financing for infrastructure projects. In the circumstances, it is all the more important that reforms promote a infrastructure financing model where existing institutional capacity, skills products and services are leveraged through partnerships and synergies for bridging the infrastructure deficits through exchange of sector expertise, underwriting skills, and risk management.

Impact Improved overall availability and reliability of physical infrastructure
Project Outcome
Description of Outcome Increased private sector participation in infrastructure projects, particularly through PPP
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

1. Long-term funding for IIFCL to provide long-term financing to subprojects developed through PPPs

2. Financing of 14 infrastructure subprojects as provided in the FFA

3. Improved institutional capacity of IIFCL in areas of (i) governance framework, including risk management systems; and (ii) implementation of updated ESSF

Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location
Safeguard Categories
Environment FI
Involuntary Resettlement B
Indigenous Peoples B
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Business Opportunities
Consulting Services Consultants will be recruited in line with ADB's Guidelines on the Use of Consultants (2007, as amended from time to time).
Procurement All procurement to be financed under an ADB loan will be carried out in accordance with ADB's Procurement Guidelines (2007, as amended from time to time) and will also comply with the operations manual adopted by the Board of IIFCL on 14 November 2008.
Responsible ADB Officer Cheolsu Kim
Responsible ADB Department South Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, SARD
Executing Agencies
India Infrastructure Finance Company Limited8th Floor, Hindustan Times Building
Kasturba Gandhi Marg
New Delhi, India 110001
Timetable
Concept Clearance -
Fact Finding -
MRM 06 Mar 2009
Approval 27 Nov 2009
Last Review Mission -
Last PDS Update 23 Jun 2009

Loan 2586-IND

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
27 Nov 2009 22 Dec 2009 17 Mar 2010 31 Dec 2014 - 14 Sep 2011
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 210.00 Cumulative Contract Awards
ADB 210.00 27 Nov 2009 210.00 0.00 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 27 Nov 2009 210.00 0.00 100%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating - Satisfactory - - - Satisfactory

Safeguard Documents

See also: Safeguards

No documents found.

Evaluation Documents

See also: Independent Evaluation

No documents found.


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