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What Is The India Infrastructure Finance Company (IIFC) ?

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12 views3 pages

What Is The India Infrastructure Finance Company (IIFC) ?

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farhanr.2023
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The IIPDF will be available to the Sponsoring Authorities for PPP projects for

the purpose of meeting the project development costs which may include the
expenses incurred by the Sponsoring Authority for achieving Technical Close
of such projects.
On successful completion of the bidding process, the project development
expenditure would be recovered from the successful bidder.

The procurement costs of PPPs, particularly costs of engaging transaction


advisory services, are significant and often burden the budget of the
Sponsoring Authority.
Department of Economic Affairs (DEA) has identified the IIPDF as a
mechanism through which Sponsoring Authority can source funding to cover
a portion of the PPP transaction costs, thereby reducing the impact of costs
related to such procurement on their budgets.
From the Government of India's perspective, the IIPDF must increase the
quality and quantity of bankable projects that are processed through the
Central or States' project pipeline.

What is the India Infrastructure Finance Company (IIFC)?

There is urgent need for providing long-term debt for financing


infrastructure projects that typically involve long gestation periods.
Debt finance for such projects should be of a sufficient tenure which enables
cost recovery across the project life, as the Indian capital markets were
found deficient in long-term debt instruments;
IIFC was set-up to bridge this gap.

What are the recommendations of Kelkar Committee?

Periodic reviews - Such reviews should ideally therefore be done


frequently, perhaps once every three years.
Change in attitude and in the mind-set - The Committee urges all parties
concerned to foster trust between private and public sector partners when
they implement PPPs.
The Government may take early action to amend the Prevention of
Corruption Act, 1988 which does not distinguish between genuine errors in
decision-making and acts of corruption.
Structured capacity building programmes for different stakeholders
including implementing agencies and customized programmes for banks and
financial institutions and private sector need to be evolved. The need for a
national level institution to support institutional capacity building
activities must be explored.
Optimal allocation of risks across PPP stakeholders - Project specific
risks are rarely addressed by project implementation authorities in this “One-
size-fits-all” approach.
A rational allocation of risks can only be undertaken in sector and project-
specific contexts. Committee also emphasizes that a generic risk monitoring
and evaluation framework should be developed encompassing all aspects
across project development and implementation lifecycle.
The Committee recognizes the need for a quick, equitable, efficient and
enforceable dispute resolution mechanism for PPP projects.
The authorities may be advised against adopting PPP structures for
very small projects, since the benefits of delivering small PPP projects may
not be commensurate with the resulting costs and the complexity of
managing such partnerships over a long period.
Unsolicited Proposals (“Swiss Challenge”) may be actively
discouraged as they bring information asymmetries into the procurement
process and result in lack of transparency and fair and equal treatment of
potential bidders in the procurement process.
The Committee is of the view that since state owned entities SoEs/PSUs are
essentially government entities and work within the government framework,
they should not be allowed to bid for PPP projects.
PPP should not be used as the first delivery mechanism without checking its
suitability for a particular project.
Monetisation of viable projects that have stable revenue flows after EPC
delivery may be considered.
Equity in completed, successful infrastructure projects may be
divested by offering to long-term investors, including overseas
institutional investors as domestic and foreign institutional investors with
long-term liabilities are best suited for providing such long-term financing,
but have a limited appetite for risk.
Improving a PPP project’s risk profile so that it is more suitable for overseas
and domestic long-term investors can be accomplished through partial
recourse to credible third-party institutions. This could be implemented
through a partial credit guarantee or cash flow support mechanisms.
It is necessary to explore options for sourcing long term capital at low cost.
Towards this, the Committee recommends, encouraging the banks and
financial institution to issue Deep Discount Bonds or Zero Coupon Bonds
(ZCB). These will not only lower debt servicing costs in an initial phase of
project but also enable the authorities to charge lower user charges in initial
years.

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