ADB is supporting public-private partnerships in infrastructure development in India. The project will help state-owned India Infrastructure Finance Co. Ltd. (IIFCL) catalyze private-sector investments in infrastructure. IIFCL will provide long-term debt financing at commercial rates.
|Project Name||India Infrastructure Project Financing Facility - Project 2|
|Project Type / Modality of Assistance||Loan
|Source of Funding / Amount||
|Strategic Agendas||Inclusive economic growth
|Drivers of Change||Governance and capacity development
Private sector development
|Sector / Subsector||
Finance / Infrastructure finance and investment funds
|Gender Equity and Mainstreaming||No gender elements|
|Description||The Investment Program supports the "Scheme for Financing Description Viable Infrastructure Projects through the India Infrastructure Finance Company Limited" (the Scheme) for promoting infrastructure development through public-private partnerships (PPPs). Pursuant to its Scheme (Appendix 3), IIFCL will provide long-term debt financing at commercial rates for stand-alone non recourse infrastructure subprojects. IIFCL will prioritize the financing of PPP subprojects selected through transparent and competitive bidding process and assessed for commercial viability. IIFCL will finance subprojects only as a member of lending consortium where its total lending to any subproject will not exceed 20% of the total capital cost for the subproject.|
|Project Rationale and Linkage to Country/Regional Strategy||
Poor infrastructure is India's "Achilles' heel" which is estimated to cost India 3 4% of lost gross domestic product (GDP) a year. India needs to increase its spending on infrastructure from 4-5% to 9% of GDP to achieve the growth projection of 9% during the 11th (FY2007 FY2012) Five-Year Plan (FYP). With higher growth targets and a rising population, even maintaining current levels of infrastructure will require a staggering increase in investment. The total investment required is estimated at about $475 billion during the 11th FYP.
Public sector has been the main provider of infrastructure in India. However, public financing alone will not be able to generate the needed level of investment ($475 billion). Accordingly, the Government's priorities for bridging the infrastructure deficit includes (i) revising policies and regulations for enhancing private sector participation (PSP) in infrastructure development including through PPPs, (ii) strengthening the capacity at all levels for promoting PPPs, and (iii) enabling arrangements for bridging the enormous deficit in infrastructure financing especially for long-term funds through all possible sources. Corresponding reform measures are underway.
Infrastructure sector reforms are enhancing the enabling environment and encouraging participation of PSP from domestic and international sources. In addition, significant efforts are ongoing for mainstreaming PPPs in the states and in central line ministries. While a paradigm shift from public financing to PPP modality requires time, these measures have already facilitated the application of PPP modality in sectors such as road and power.
India has also witnessed a visible shift in financial sector policies since the 1990s. The reform measures have led to increased allocative efficiency of the financial system brought about by a reduction in intermediation costs, enhanced competition, and increased diversity of products and services. Notwithstanding these, the infrastructure finance market in India is largely characterized with inadequate flow of long-term funds. In this context, the Government is pursuing reforms in contractual savings (pensions and insurance) and the corporate debt market.
Considering several interlocking factors including policy and regulatory inadequacies in infrastructure and financial sectors, the impact of the ongoing reforms will only be felt over the medium- to long-term and as a result, the already significant gap in infrastructure financing will further increase. These concerns were extensively discussed within the Government as well as with financial market experts and international institutions for framing innovative responses consistent with the PSP and PPP agenda.
Among the options, establishing IIFCL to provide the much needed long-term debt at commercial terms specifically for promoting PPPs was considered important in view of the limited availability of long term debt for infrastructure financing. Central to the Government's PPP development strategy, IIFCL's operating paradigm is guided by the Scheme approved by the Government's Committee on Infrastructure chaired by the prime minister.
The Government has also designated IIFCL as the debt manager of a $3 billion debt fund of the $5 billion India Infrastructure Financing Initiative. IIFCL, in partnership with Blackstone Group, CitiGroup, and Infrastructure Development Finance Company are the initial investors in the $2 billion equity fund of the India Infrastructure Financing Initiative. Further, IIFCL and 3i Group plc. have entered into a strategic partnership for equity and long-term debt financing for projects in power, port, airport, and road sectors. IIFCL is also expected to be the lead agency for utilizing India's foreign exchange reserves for infrastructure financing. For this purpose, IIFCL is likely to establish two offshore special purpose vehicles.
The proposed India Infrastructure Project Financing Facility (the Facility) will directly support the Government's infrastructure development agenda by enhancing the availability of the much needed long-term funds for infrastructure financing. With ADB's assistance through the Facility, IIFCL will provide funds at commercial terms with over 20-years maturity for infrastructure subprojects which is currently not being provided by the market.
The Facility is an integral part of the ADB's sector strategy and complements ADB's parallel initiatives in contractual savings, corporate bonds, PPPs, and infrastructure development, all of which contribute to creating an enabling environment for infrastructure development in India.
|Impact||Improved per capita infrastructure availability in India|
|Description of Outcome||
(i) Increased private sector participation in infrastructure development through PPPs;
(ii) Containing and reducing fiscal deficit through private sector participation in infrastructure;
(iii) Improved lending terms of IIFCL for infrastructure subprojects;
(iv) Improved capacity in IIFCL to ensure that ADB funds are used for subprojects that conform to ESSF through relevant TA support;
(v) Improved resource management and project risk assessment capabilities in IIFCL.
|Progress Toward Outcome|
|Description of Project Outputs||
1. High quality infrastructure assets created in various subsectors across the country
2. Availability of long term funding to IIFCL and improved ability of IIFCL to provide long-term financing to subprojects;
3. International credit rating attained by IIFCL and periodically updated
4. Improved (i) financial policies, (ii) staff capacity, and (iii) risk management systems of IIFCL
5. Implementation of ESSF
|Status of Implementation Progress (Outputs, Activities, and Issues)|
|Summary of Environmental and Social Aspects|
|Stakeholder Communication, Participation, and Consultation|
|During Project Design|
|During Project Implementation|
|Consulting Services||No consulting services required.|
|Procurement||IIFCL will undertake the same obligations in respect to procurement as under Tranche I which will be 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||Kim, Cheolsu|
|Responsible ADB Department||South Asia Department|
|Responsible ADB Division||Public Management, Financial Sector and Trade Division, SARD|
India Infrastructure Finance Company Limited
10th Floor, Jeewan Prakash Building
25 Kasturba Gandhi Marg
New Delhi, India 110001
|MRM||28 Feb 2008|
|Approval||24 Feb 2009|
|Last Review Mission||-|
|PDS Creation Date||30 Jan 2009|
|Last PDS Update||09 Apr 2007|
|Approval||Signing Date||Effectivity Date||Closing|
|24 Feb 2009||26 Feb 2009||20 Mar 2009||30 Nov 2011||-||26 Aug 2011|
|Financing Plan||Loan Utilization|
|Total (Amount in US$ million)||Date||ADB||Others||Net Percentage|
|Project Cost||200.00||Cumulative Contract Awards|
|ADB||200.00||24 Feb 2009||0.00||0.00||0%|
|Cofinancing||0.00||24 Feb 2009||200.00||0.00||100%|
|Status of Covenants|
Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.
The Public Communications Policy (PCP) recognizes that transparency and accountability are essential to development effectiveness. It establishes the disclosure requirements for documents and information ADB produces or requires to be produced.
The Accountability Mechanism provides a forum where people adversely affected by ADB-assisted projects can voice and seek solutions to their problems and report alleged noncompliance of ADB's operational policies and procedures.
In preparing any country program or strategy, financing any project, or by making any designation of, or reference to, a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.
|Title||Document Type||Document Date|
|India Infrastructure Project Financing Facility||Project/Program Completion Reports||Nov 2012|
|Loan Agreement for India Infrastructure Project Financing Facility -- Project 2 between Asian Development Bank and India Infrastructure Finance Company Limited dated 26 February 2009||Loan Agreement (Ordinary Resources)||Feb 2009|
|Guarantee Agreement for India Infrastructure Project Financing Facility -- Project 2 between India and Asian Development Bank dated 26 February 2009||Guarantee Agreements||Feb 2009|
|India Infrastructure Project Financing Facility||Design and Monitoring Frameworks||Nov 2007|
Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.
None currently available.
Evaluation Documents See also: Independent Evaluation
|Title||Document Type||Document Date|
|India: India Infrastructure Project Financing Facility||Validations of Project Completion Reports||Nov 2014|
None currently available.
The Public Communications Policy (PCP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.
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