ADB is helping India accelerate its rollout of infrastructure projects through public-private partnerships. The project will help state-owned India Infrastructure Finance Company Ltd. (IIFCL) support investments in a broad range of infrastructure projects by providing long-term financing on commercial terms with more than 20-year maturities, which are otherwise not available in the market.
|Project Name||MFF - Second India Infrastructure Project Financing Facility (IIPFF-II) - PFR1|
|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|
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|
|Description of Outcome||Increased private sector participation in infrastructure projects, particularly through PPP|
|Progress Toward Outcome|
|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)|
|Summary of Environmental and Social Aspects|
|Stakeholder Communication, Participation, and Consultation|
|During Project Design|
|During Project Implementation|
|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||Kim, Cheolsu|
|Responsible ADB Department||South Asia Department|
|Responsible ADB Division||Public Management, Financial Sector and Trade Division, SARD|
India Infrastructure Finance Company Limited
5th Floor, Block Number 2, Plate A & B,
NBCC Tower, East Kidwai Nagar,
New Delhi, India 110023
|MRM||06 Mar 2009|
|Approval||27 Nov 2009|
|Last Review Mission||-|
|Last PDS Update||23 Jun 2009|
|Approval||Signing Date||Effectivity Date||Closing|
|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||0.00||0.00||0%|
|Cofinancing||0.00||27 Nov 2009||210.00||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.
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|Title||Document Type||Document Date|
|Guarantee Agreement for Second India Infrastructure Project Financing Facility - Project 1 between India and Asian Development Bank dated 22 December 2009||Guarantee Agreements||Dec 2009|
|Loan Agreement for Second India Infrastructure Project Financing Facility - Project 1 between India Infrastructure Finance Company Limited and Asian Development Bank dated 22 December 2009||Loan Agreement (Ordinary Resources)||Dec 2009|
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.
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Evaluation Documents See also: Independent Evaluation
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