Untitled

MITHIBAI COLLEGE OF ARTS, CHAUHAN INSTITUTE OF
SCIENCE &AMRUTBEN JIVANLAL COLLEGE OF

COMMERCE AND ECONOMICS
(AUTONOMOUS)
VILE PARLE (W), MUMBAI – 400 056
PROJECT REPORT ON
“INFRASTRUCTURE FINANCE”
SUBMITTED BY
NISHITA KABRA
ROLL NO – 20
IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF

T.Y.B.COM (FINANCIAL MARKETS)
SEMESTER VI
PROJECT GUIDE
MR. JAISON THOMAS
UNIVERSITY OF MUMBAI
2018-19
CERTIFICATE
This is to certify that NISHITA KABRA student of TY-B.Com (Financial Markets)

Semester VI of Mithibai College Of Arts, Chauhan Institute of Science & Amrutben
Jivanlal College of Commerce And Economics has successfully completed the project
on “INFRASTRUCTURE FINANCE” under the guidance of MR. JAISON
THOMASfor the academic year 2018-19.
INTERNAL EXAMINER EXTERNAL EXAMINER

(MR. JAISON THOMAS)
CO-ORDINATOR PRINCIPAL
(MR. MANDAR S THAKUR) (DR. RAJPAL SHRIPAT HANDE)
DECLARATION
I hereby declare that I have successfully completed the project on

“INFRASTRUCTURE FINANCE” for the academic year 2018-2019. The project is
done under the guidance of MR. JAISON THOMAS and this project work is
submitted in the partial fulfillment of their requirements for the award of the degree of
Bachelor of Commerce (Financial Markets).
The information provided in the project is true and to the best of my knowledge.
SIGNATURE OF THE STUDENT

(Name: NISHITA KABRA)
Roll No: 20
T.Y.B.F.M (2018-19)
ACKNOWLEDGEMENT
I feel great pleasure in expressing my regards and profound sense of gratitude to the
people who have extended their help in every possible way so that I can complete this
project. Help is a voluntary fulfillment of duty, which, all the people mentioned below
have performed it to their maximum, in a way giving me & my research the utmost
important.
I take this opportunity to thank the University of Mumbai for giving me chance to do
this project.
I am highly indebted to my faculty guide MR. JAISON THOMAS for his

guidance and constant supervision as well as for providing necessary information
regarding the project & also for his support in completing the project. He has taken
pain to go through the project and make necessary correction as and when needed.
At the onset, I wish to express my gratitude to DR.RAJPAL SHRIPAT

HANDE, Principal, Dr. NUPUR MEHROTRA, Vice Principal, and MR.
MANDAR S THAKUR, Programme Co-Coordinator, for their support.
I would also like to thank my college for providing me with all necessary
amenities like well-equipped computer lab and library which was very helpful as well
as the non-teaching staff members for their support without whom this project would
have been a distant reality. I also extend my heartfelt thanks to my family, peers and
well-wishers.
EXECUTIVE SUMMARY
Infrastructure is the backbone of any economy for growth and

development. For development and growth of any economy,
infrastructure needs to be strengthened in a proper and adequate manner.
The Government of India is taking a lot of initiatives in the field of
infrastructure. Due to the strategic importance of this sector, we are
analyzing the opportunities and growth-drivers of infrastructure
development in India.
There is a strong momentum in the expansion of roadways, strong

revenue growth for the Indian Railways, whereas the power generation
capacity has increased at a healthy pace.
Countries and local governments which have established proven

mechanisms for infrastructure projects, for instance by introducing
binding legal frameworks for public private partnerships or by setting up
specialized government agencies, tend to be more successful in closing
infrastructure projects.
INDEX
Sr. Topi Page

No. c No.
1 Infrastructure 2
2 Types of Infrastructure 3
3 Role of Infrastructure in Development in India 5
4 Major Infrastructure Bottlenecks in India 10
5 Infrastructure Finance and its Features 12
6 Need for Infrastructure Investments 14
7 Phases of Infrastructure Projects and Potential Investors 16
8 Sources of Infrastructure Finance 18
9 Indian Companies for Infrastructure Financing 25
10 Role of Indian Commercial Banks in Infrastructure 33
11 Recent Developments in Infrastructure Sector 35
12 Case Studies 43
13 Conclusion 48
14 Bibliography 50
INFRASTRUCTURE FINANCE
MITHIBAI COLLEGE 1
CHAPTER 1: INFRASTRUCTURE
Infrastructure means those basic facilities and services which facilitate

different economic activities and thereby help in economic development
of the country, education, health, transport and communication, banking
and insurance, irrigation and power and science and technology etc.
These are also called social overhead capital. These do not directly
produce goods and services but induce production in agriculture, industry
and trade by generating external economies.
A comprehension of infrastructure spans not only these public work

facilities, but also the operating procedures, management practices, and
development policies that interact together with societal demand and the
physical world to facilitate the transport of people and goods, safe
disposal of society’s waste products, provision of energy where it is
needed, and transmission of information within and between
communities.
Infrastructure is the basic requirement of economic development. It

does not directly produce goods and services but facilitates production in
primary, secondary and tertiary economic activities by creating external
economies. It is an admitted fact that the level of economic development
in any country directly depends on the development of infrastructure. The
developed countries have made a lot of progress due to tremendous
growth of social and economic infrastructure. There has been
revolutionary progress in transport and communication in these countries.
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CHAPTER 2: TYPES OF INFRASTRUCTURE
There are 2 broad classifications of infrastructures. They are as follows:
Social
Infrastructure
Physical
Infrastructure
1. Social Infrastructure:
They concern with the supply of such services as to meet the basic needs
of a society. In simple words, social infrastructures refer those basic
services such as education and training. It also includes health and
sanitation, drinking water, housing, sewerage, etc. Social infrastructures
are also termed as ‘social overheads’. These social overheads indirectly
support the economic systems. They indirectly increase the productivity
and the economy sees the impact after some time. Social infrastructures
lead to growth in the long run.
2. Physical infrastructure:
Physical infrastructure is those infrastructures which directly concern

themselves with the needs of such production sectors as agriculture,
industry, trade, etc. In simple words, physical infrastructure directly
supports the economic production. They also directly support the process
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of production and distribution in the economy. A few such examples are

energy, irrigation, transportation, telecommunication, banking, insurance,
technology, finance, etc. Physical infrastructures, however, directly
increase the productivity and the economy sees the impact immediately.
They also lead to an immediate growth in the short run.
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CHAPTER 3: ROLE OF INFRASTRUCTURE IN

DEVELOPMENT IN INDIA
Infrastructure is the network of power, telecom, ports, airports, roads,

civil aviation, railways, and transportation in a country. Its importance in
the development of a country cannot be over-emphasised. As a matter of
fact infrastructure is the lifeline of the economy of a country. All
developed countries have adequate infrastructure so that all the activities
are executed efficiently, smoothly in time. On the other hand, all poor
countries have little infrastructure. The plans of these countries target the
building of adequate infrastructure to put their economies on a high
growth path.
Power is an essential input for economic development and improving

the quality of life of people. Development of conventional forms of
energy for meeting the growing needs of people is the responsibility of
the government. In the pre- independence period, the power supply was
mainly in the private sector and that too restricted to the urban areas.
With the formation of State Electricity Boards during the Five-Year
Plans, a significant step was taken in bringing about a systematic growth
of power supply for industries all over the country. A number of multi-
purpose projects came into being with the setting up of hydro, thermal
and nuclear power stations.
India at present is at the threshold of becoming a developed country. Its

economy has been growing at a high GDP growth of over 8 per cent per
annum. With the increase in population the demand for goods and
services is increasing every year. The number of dwelling units in big and
MITHIBAI COLLEGE 5
small cities is increasing. There is more demand for power to run home
appliances in these as well as existing units. To meet this ever increasing
demand we need to build a huge power infrastructure.
That is why India has entered into a nuclear deal with America
whereby the sole superpower in the world shall provide us with nuclear
technology. Many nuclear reactors will be set up in India. The nuclear
fuel will be supplied by some of the countries in the Nuclear Suppliers
Group (NSG). Nuclear energy will be harnessed to be used for peaceful
purposes.
The transportation infrastructure includes roads, vehicles, railways,

tracks, trains, ports, airports, ships and vessels. Road transportation is
perhaps the most important because the railway tracks cannot be laid
everywhere. The roads are the means by which the movement of people
and goods from one place to another is ensured. Millions of people move
out of their houses everyday to reach their places of work, trade or
business daily. They not only generate income from working but also
fulfil the needs of others. They use roads and vehicles available to them.
The national highways are mainly used to move from one city to
another and for supply of essential goods-food grains and other articles of
use from one city to another. Thus, roads are a key to the success of
Public Distribution System. If there is no road transportation, the supply
of these goods will not be possible to different cities and towns. The
whole economy will collapse.
Railways are another important part of transportation infrastructure.

India has a huge railway network with a route length of 63,221 km, a fleet
MITHIBAI COLLEGE 6
of over 7,800 locomotives, 5,340 passenger service vehicles and nearly

5,000 other coaching vehicles. There are 7,031 stations across the length
and breadth of the country. The total network is divided into 16 zones.
Crores of passengers travel through railways for the job, work and
personal needs every day. Thousands of tonnes of goods are taken from
one place to another.
The transportation of heavy goods like steel and raw material like coal
cannot be transported by any other mode of transport than the railways.
Apart from performing these vital functions for the economy and the
country, the railways are a huge source of revenue for the government. It
has also given employment to lakh of employees directly or indirectly.
Airports and civil aviation are also part of the transportation network in
the country. Air travel is fast and highly comfortable. It caters to the
needs of rich sections of people and the high executives and political
delegates whose time is highly precious. It is also used for speedy
transportation of goods, particularly the perishable goods which, if sent
through road or railway transport will rot in the way.
In India the civil aviation has three main functional divisions-

regulatory, infrastructure and operational. On the operational side India
Airlines, Alliance Air, private scheduled airlines and non-scheduled
operators provide domestic air services while Air India provides
international air services. Pawan Hans Helicopters Limited provides
helicopter services to 11 and Natural Gas Corporation (ONGC) in its
offshore operations to inaccessible areas and difficult terrains. Sahara
Airlines and Jet Airways have also been permitted to operate on
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international sector. In order to help the Indian exporters and make their
exports more competitive, the government introduced an ‘open sky
policy’ for cargo.
Under this policy, foreign airlines or associations of exporters can

bring any freighters to the country for the upliftment of cargo. Charter
flights for tourists are also allowed to and from India. Thus, air services
infrastructure plays a key role in civil aviation, international flights and
cargo transportation. It benefits the economy immensely and earns
millions of rupees every year for the country.
India has a coastline of over 7500 km which is serviced by 12 major

ports and 186 other ports. The major ports are under the purview of the
central government while the minor ports come under the jurisdiction of
the respective state governments. The major ports are: Mumbai,
NhavaSheva, Kandla, Marmugao, Mangalore, Cochin, on the west coast;
Kolkata, Haldia, Paradip, Visakhapatnam, Chennai, Ennore, and
Tuticorin on the east coast.
These ports have a capacity of over 450 million tonnes. The number of
cargo vessels handled at these ports is about 16,500 per annum. The cargo
handled is liquid cargo, dry cargo and container cargo. In order to
improve the efficiency, productivity and quality of services and to bring
competitiveness in port services, the government has encouraged private
participation in it in the wake of liberalisation and globalisation of the
economy. The Eleventh Plan outlay for port sector is around Rs. 6,500
crore.
MITHIBAI COLLEGE 8
If one sector has developed more than any other sector during the last
one decade or so, it is the communication sector. It encompasses the
postal network, mail system, telecommunications, including telephones,
mobile phone services, etc. The postal service is catering to the mailing,
telegraphic services which have now been supplemented by courier
services.
India has a huge infrastructure for postal and telecommunication

services whereby letters, parcels and messages are sent to various parts of
the country and abroad. Mobile phone services are the buzzword of our
society now. Several companies like Bharti Airtel, Reliance
Communication, Hutch and Vodafone are flourishing apart from the
public sector MTNL.
Infrastructure is the base on which all economic activities of the

country depend. The government is spending thousands of crores of
rupees every year to create this infrastructure where it does not exist or is
not fully functional. It has also established adequate systems for their
maintenance and upkeep so that it remains efficient and durable.
MITHIBAI COLLEGE 9
CHAPTER 4: MAJOR INFRASTRUCTURE

BOTTLENECKS IN INDIA
There are various bottlenecks which act as impediments for the growth of
infrastructure. The major ones are summed up below:
 Financing:
Infrastructure projects are highly capital-intensive and funding is

considered as a major impediment in achieving the infrastructure goals.
The infrastructure broadly can be divided into two types, one which is
very essential for the public at large and have no or very little revenue
potential and other which has handsome revenue potential. The first kind
of infrastructure must be totally government financed whereas the later
can be developed on PPP mode. Since resource constraints will continue
to limit public investment in infrastructure, PPP-based development
needs to be encouraged wherever feasible.
 Land Acquisition:
Another significant challenge in achieving the infrastructure goal is the

way land acquisition is done for infrastructure projects. Compensation
fixed in terms of registered value is always the bone of contention. There
is always a substantial difference between the compensation offered and
the actual value of the land. The land owners always feel aggrieved which
results in dispute and litigation. However, The Land Acquisition and
Rehabilitation & Resettlement Bill would be able to tackle this issue of
land acquisition favourably.
MITHIBAI COLLEGE 10
 Clearances from numerous agencies:
Most of the infrastructure projects in India suffer from delays in

completion. This is mainly due to an inadequate regulatory framework
and inefficiency in the approval process. Infrastructure projects require
multiple sequential clearances at various levels of government. There are
various approvals needed at every stage which definitely delay the
infrastructure projects.
 Environmental Impact Assessment (EIA):
Environmental safeguards and guidelines have proven to be one of the

major reasons for delay in infrastructure projects, especially in the power
sector. While new projects need to comply with these regulations, even a
project under construction may need to comply with revised standards
midway through the execution stage.
 Poor pre-construction planning:
Due to the already adverse effect of various impediments like land

acquisition, statutory approvals, delayed financial closure, etc. the pre-
construction phase of infrastructure projects is pretty long. Therefore,
there is delayed commissioning and completion of projects.
MITHIBAI COLLEGE 11
CHAPTER 5: INFRASTRUCTURE FINANCE AND ITS

FEATURES
Financing is how you pay upfront for infrastructure. In this context, it

refers to how governments or private companies that own infrastructure
find the money to meet the upfront costs of building it. Financing is done
to construct and upgrade the infrastructure sector. There are various sub
sectors of infrastructure that require a huge amount of funds and, funding
those sub-sectors is called Infrastructure Financing.
Features Of Infrastructure Finance:
 Normally infrastructure finance has long maturity period and it

extends to five years or more. For example time to completion a bridge
may require more than eight years but once it is completed, its life may
be more than hundred years.
 Infrastructure finance involve larger amount of investment. For

example a bridge may require more than one thousands crores.
 Infrastructure finance always involves higher risk as higher amount

and long time period involvement. Prediction of long period situation is
more complicated than shorter period. In future, changes may arise in
customer preference, technological changes, government policies,
environmental issues etc.
MITHIBAI COLLEGE 12
 In this type of investment return is very low at initial stages but

with the passing of time returns will increase. Initial cost of the project
is very high but maintenance cost is very low comparing to its
investment cost.
 After completion of project to continue/run the project manpower

requirement is much low comparing to its investment cost. For example,
maintenance and collection of toll tax of a long bridge, very few persons
are required.
 The non-recourse nature, the unique risks of infrastructure

development, complexity of arrangement require unique appraisal skills
and technique.
MITHIBAI COLLEGE 13
CHAPTER 6: NEED FOR INFRASTRUCTURE

INVESTMENTS
Infrastructure investments are characterized by large capital intensive

natural monopolies such as highways, railways, and water and sanitation
systems. It is widely held that there are significant capacity constraints on
existing infrastructure, in many developing countries. The shadow costs
of such constraints on economic growth, while very hard to quantify, can
be rather high.
In the context of India, while some improvements have occurred over

the last decade in infrastructure, the state of infrastructure facilities is
generally well below what one observes in many developing economies.
The inadequate state of infrastructure in India has been well documented
and understood.
The projected investment requirements for infrastructure are placed at

$1 trillion in the 12th plan and the funding gap is estimated to be above
Rs. 5000 billion. It is anticipated that about half of the investment
requirements of infrastructure would have to be met through funding
from the private sector, and that the share of private sector in
infrastructure investment will have to rise substantially from about 37 per
cent in the 11th Plan to about 48 per cent in the 12th Plan.
Some of the constraints that have stymied the investments in

infrastructure projects are regulatory, political and legal in nature. In
addition, the absence of or insufficiency of user fees is yet another
constraint. The fact that infrastructure projects often require the
MITHIBAI COLLEGE 14
interaction of government (in acquiring land, for example), private sector

firms (in executing the construction of highways, for example), and
private investors (for funding and supplying capital), makes the problem
a challenging one.
MITHIBAI COLLEGE 15
CHAPTER 7: PHASES OF INFRASTRUCTURE AND

POTENTIAL INVESTORS
Phase Economic and Financial Potential

contractual Characteristics investors
issues
Planning Contracts are The procuring Equity sponsors
written in the authority needs need a high level
planning phase to find equity of expertise.
and are crucial investors. The They are often
to the success of equity sponsor construction
projects. The needs to secure companies or
planning phase commitments by governments. In
can take a long debt investors rare cases,
time (10 to 30 (mostly banks). infrastructure
months) and the Given the long funds or direct
involved parties planning period, investments by
may attempt to early pension funds
renegotiate commitments by may be
contract debt investors involved. Debt
commitments. come at a high investors are
Ratings from cost. Leverage mostly banks
rating agencies can be high through
are important to (10:1 or more). (syndicated)
secure interest loans. Bond
from debt financing is rare,
investors, as are as projects carry
credit insurance high risks in the
or government initial phases.
guarantees.
Construction Monitoring This is a high- Refinancing or
incentives are risk phase. additional
essential. Private Unexpected financing is very
involvement (as events are likely difficult and
opposed to due to the costly at this
MITHIBAI COLLEGE 16
purely public complexity of stage. Equity

investment) can infrastructure sponsors may
ensure this. projects. Default have an
rates are incentive to
relatively high. provide
Initial additional
commitments by finance if risks
debt-holders materialise.
must extend far
beyond this
stage, as a
project does not
generate cash
flows in this
phase.
Operational Ownership and Positive cash Refinancing of
volatility of cash flows. The risk debt from the
flows due to of default initial phase.
demand risks are diminishes Bonds are a
key. Models considerably. natural choice,
such as flexible but they are not
term present very common.
value contracts Refinancing
and availability- with bank loans
based fees or government
reduce volatility, funds is
risk and common.
financing costs,
but have adverse
incentive effects.
MITHIBAI COLLEGE 17
CHAPTER 8: SOURCES OF INFRASTRUCTURE

FINANCE
There are broadly two major sources of financing for infrastructure
projects:
Public
Finance
Private
Finance
The governments both at the central and provincial levels have been
the major source of funding for infrastructure projects in developing
countries like India. Plans for investment to various infrastructure sectors
are undertaken by the governments through formal planning exercise
wherein allocation of budget is done. The budgetary allocation is
influenced to a great extent on the emphasis by the government to
accelerate or promote growth in certain sectors which are categorized as
high priority in the plan period.
Participation of private sector has been sought in various infrastructure

sectors. Governments have adopted innovative procurement route like
public private partnerships for involvement of private sector in the
development of infrastructure projects. Private sector provides financing
to infrastructure projects using a wide range of financial instruments. The
chapter will discuss in details the funding of infrastructure using private
finance.
MITHIBAI COLLEGE 18
Public Finance:
The budgetary resources from government to fund the infrastructure

projects come from two major categories of the sources: tax collection
and public sector borrowings. Borrowings from the market are in the
form of either government stock or bonds. The other source of revenue
for the government is in the form of tax collection and duties besides aids
and donation, though this forms a small portion of public finance. Taxes
are levied by governments on income, payroll, property, and goods and
services.
For instance, taxes and duties imposed by the government can be in the
form of income tax, value added tax, vehicle excise duty, capital gains
tax, custom duties and stamp duty. In addition to this, dedicated funds are
also created by government for development of specific infrastructure
sectors by imposing various types of duties. For example, a dedicated
central road development fund has been created in India by charging a
duty of INR 1 per litre of motor spirit and INR 1 per litre of high speed
diesel oil. The proceeds from this fund are allocated for development of
rural roads, development and maintenance of national highways and state
highways.
Funding of the infrastructure projects is normally through the

traditional route where the public finance is used to finance the activities
of the projects over the entire lifecycle. Capital and operational
expenditures of infrastructure projects are funded entirely with public
finance. Public finance is also nowadays used to leverage private finance
in case of infrastructure project funding. Governments used the public
finance in the form of grants and provided as viability-gap funding to
MITHIBAI COLLEGE 19
fund a limited portion of the funding required for infrastructure while the
remaining portion comes in the form of private finance.
Private Finance:
Besides the major funding from the governments, private finance has
also been used to fund infrastructure projects to a limited extent in both
developed and developing countries. Governments provide public finance
for development of infrastructure projects with the goal of meeting the
social and economic objectives. On the other hand, private sector
participates in infrastructure projects and provides private finance with
the objective of furthering their business interests. Maximizing the return
on their investment into infrastructure projects have been amongst the key
business interests of private sector.
Let us take a further look on Public Private Partnership (PPP).
Public Private Partnership (PPP):
PPP is a mode of providing public infrastructure and services by

Government in partnership with private sector. It is a long term
arrangement between Government and private sector entity for provision
of public utilities and services.
PPP mechanism is a major element of India’s infrastructure creation

efforts as there is huge level of investment requirement in the sector. The
twelfth plan targets to spend around $1000 billion to expand
infrastructure. Conventional form of finance – the budgetary allocation by
the government is not enough to meet this big investment size. So the
MITHIBAI COLLEGE 20
government at present is making several efforts to modify and energize

the PPP mode of infrastructure generation.
India’s experience with PPP in a serious manner started from 2006

onwards. PPP requires private sector participation in public asset creation
through money, technology and management. For this, several models
inviting their participation were launched for different projects. Some of
the commonly adopted forms of PPPs include build-operate-transfer
(BOT) and its variants, build-lease-transfer (BLT), design-build-operate-
transfer (DBFOT), operate- maintain-transfer (OMT), etc.
These models operate on different conditions on the private sector

regarding level of investment, ownership control, risk sharing, technical
collaboration, duration of the project, financing mode, tax treatment,
management of cash flows etc. Following are the main models of PPPs.
a) Build-Operate-Transfer (BOT):
This is the simple and conventional PPP model where the private
partner is responsible to design, build, operate (during the
contracted period) and transfer back the facility to the public
sector. Role of the private sector partner is to bring the finance
for the project and take the responsibility to construct and
maintain it. In return, the public sector will allow it to collect
revenue from the users. The national highway projects
contracted out by NHAI under PPP mode is a major example for
the BOT model.
MITHIBAI COLLEGE 21
b) Build-Own-Operate (BOO):
This is a variant of the BOT and the difference is that the
ownership of the newly built facility will rest with the private
party here. The public sector partner agrees to ‘purchase’ the
goods and services produced by the project on mutually agreed
terms and conditions.
c) Build-Own-Operate-Transfer (BOOT):
This is also on the lines of BOT. After the negotiated period of
time, the infrastructure asset is transferred to the government or
to the private operator. This approach has been used for the
development of highways and ports.
d) Build-Operate-Lease-Transfer (BOLT):
In this approach, the government gives a concession to a private
entity to build a facility (and possibly design it as well), own the
facility, lease the facility to the public sector and then at the end
of the lease period transfer the ownership of the facility to the
government.
e) Lease-Develop-Operate (LDO):
Here, the government or the public sector entity retains
ownership of the newly created infrastructure facility and
receives payments in terms of a lease agreement with the private
promoter. This approach is mostly followed in the development
of airport facilities.
MITHIBAI COLLEGE 22
f) Rehabilitate-Operate-Transfer (ROT):
Under this approach, the government or local Bodies allow
private promoters to rehabilitate and operate a facility during a
concession period. After the concession period, the project is
transferred back to the government or local bodies.
g) Design-Build-Finance-Operate (DBFO):
In this model, the private party assumes the entire responsibility
for the design , construction , finance, and operate the project for
the period of concession.
h) Management Contract:
Here, the private promoter has the responsibility for a full range
of investment, operation and maintenance functions. He has the
authority to make daily management decisions under a profit-
sharing or fixed-fee arrangement.
i) Service Contract:
This approach is less focused than the management contract. In
this approach, the private promoter performs a particular
operational or maintenance function for a fee over a specified
period of time.
MITHIBAI COLLEGE 23
Fundamental rules which can guide the establishments of PPPs:
 PPPs require complex long-term contracts, hence they make sense

for larger projects where potentially large efficiency gains can be
expected
 PPPs are sensible when private partners bring significant expertise

and capacity for innovation
 PPPs should be seen as a method to procure infrastructure services

over a long period of time and should not focus on construction of
infrastructure only
 Compensation to private investor should be based on performance

and quality indicators
 Responsibility and the associated risks for achieving performance

and quality goals should lie with the operator
 Contract parties which take responsibilities and risk must receive

an appropriate degree of control of the project in return
 Available financing options critically depend on the legal structure

of the project. The decision for enabling structured loan instruments or
bond refinancing at a later stage should be made before the legal
structures are implemented.
MITHIBAI COLLEGE 24
CHAPTER 9: COMPANIES INVOLVED IN

INFRASTRUCTURE FINANCING
At the time of independence in 1947, India’s capital market was

relatively under-developed. Although there was significant demand for
new capital, there was a dearth of providers. Merchant bankers and
underwriting firms were almost non-existent. And commercial banks
were not equipped to provide long-term industrial finance in any
significant manner.
By the early 1990s, it was recognized that there was need for greater
flexibility to respond to the changing financial system. There was a need
for these financial institutions to directly access the capital markets for
their fundsneeds.So a number of infrastructure finance companies were
set up.Some of them have become fully private like ICICI while others
have been partly privatized. like REC and PFC.Besides a number of
private companies have recently become big players in the infrastructure
financing space like SREI,L&T Finance etc.
MITHIBAI COLLEGE 25
 Rural Electrification Corporation (REC):
REC, a listed Public Sector Enterprise Government of India. Its main

objective is to finance and promote rural electrification projects all over
the country. It provides financial assistance to State Electricity Boards,
State Government Departments and Rural Electric Cooperatives for rural
electrification projects as are sponsored by them. REC provides loan
assistance to SEBs/State Power Utilities for investments in rural
electrification schemes through its Corporate Office. The Project Offices
in the States coordinate the programmes of REC’s financing with the
concerned SEBs/State Power Utilities and facilitate in formulation of
schemes, loan sanction and disbursement and implementation of schemes
by the concerned SEBs/State Power Utilities.
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 Infrastructure Development Financial Corporation (IDFC):
IDFC is India’s leading integrated infrastructure finance player

providing end to end infrastructure financing and project implementation
services. Their business can be broadly classified into Corporate
investment banking (project finance, investment banking), alternative
asset management (private & project equity), public market asset
management (IDFC Mutual fund). The company provides financial
intermediation for infrastructure projects and services, adding value
through innovative products to the infrastructure value chain & asset
maintenance of existing infrastructure projects. It focuses on supporting
companies to get the best return on investments.
MITHIBAI COLLEGE 27
 The Industrial Finance Corporation of India (IFCI):
IFCIwas founded in July 1948, as the first Development Financial

Institution in the country to cater to the long-term finance needs of the
industrial sector. The newly-established DFI was provided access to low-
cost funds through the central bank’s Statutory Liquidity Ratio which in
turn enabled it to provide loans and advances to corporate borrowers at
concessional rates.
Until the establishment of ICICI in 1956 and IDBI in 1964, IFCI

remained solely responsible for implementation of the government’s
industrial policy initiatives. It made a significant contribution to the
modernization of Indian industry, export promotion, import substitution,
pollution control, energy conservation and generation through
commercially viable and market- friendly initiatives. Cumulatively, IFCI
sanctioned financial assistance of Rs 462 billion to 5707 concerns and
disbursed Rs 444 billion since its inception. In the process, IFCI catalysed
investments worth Rs 2,526 billion in the industrial and infrastructure
sectors.
MITHIBAI COLLEGE 28
Power Finance Corporation (PFC):
PFC is an Institution in financing for sustainable development of

the Indian Power Sector and its linkages, with an eye on global
operations. The total sanctions & disbursements for the year ended 2009-
10 amounted to Rs.65,466 crores & Rs.25,808 crores respectively.
The resources mobilized for the year ended December 2010 amounted
to Rs.764,465 million. The clientele consists of State Electricity Boards,
State Power Utilities, State Electricity/Power Departments, Other State
Departments engaged in the development of power projects, Central
Power Utilities, Joint Sector Power Utilities, Equipment Manufacturers &
Private Sector Power Utilities.
MITHIBAI COLLEGE 29
 Infrastructure Leasing & Financial Services Limited (IL&FS):
IL&FS is one of India’s leading infrastructure development and

finance companies .IL&FS was promoted by the Central Bank of India
(CBI), Housing Development Finance Corporation Limited (HDFC) and
Unit Trust of India (UTI). Over the years, IL&FS has broad-based its
shareholding and inducted Institutional shareholders including State Bank
of India, Life Insurance Corporation of India, ORIX Corporation – Japan
and Abu Dhabi Investment Authority. IL&FS has branched to become a
leading player in venture capital, private equity, asset management; road
building. It has a number of listed subsidiaries in the Indian stock market.
MITHIBAI COLLEGE 30
 India Infrastructure Finance Company Ltd (IIFCL):
IIFCL was established in January 2006 as a wholly owned

Government of India company and commenced its operations from April
2006.It was established under the Scheme for Financing
Viable Infrastructure Projects through a Special Purpose Vehicle called
the India Infrastructure Finance Company Ltd, broadly referred to
as SIFTI. India Infrastructure Finance Company Ltd (IIFCL) is providing
long term financial assistance to various viable infrastructure projects in
the country in terms of the SIFTI. The authorized capital of the company
is Rs. 20 billion and has sanctioned financial assistance of Rs 187.60
billion to 107 projects involving a total project cost of Rs1492.03 billion.
MITHIBAI COLLEGE 31
 L&T Infrastructure Finance Company:
L&T Infrastructure Finance Company is a part of L&T Finance

Holdings Limited which is a wholly owned subsidiary of L&T. Note
L&T is India’s biggest private infrastructure company with interests in a
diverse number of fields.LT Infra commenced operations in January
2007.
MITHIBAI COLLEGE 32
CHAPTER 10: ROLE OF INDIAN COMMERCIAL

BANKS IN INFRASTRUCTURE
Commercial banks in India have long assumed an important role in

funding infrastructure SPV’s but had their exposures limited on account
of asset liability mismatch, narrowing interest margins, inadequate capital
and redistribution of risk associated to other funding entities. The
problem is more profound at the initial underwriting stages were banks
lack the expertise of evaluating the underlying technical and financial
risks that are usually associated with such long term projects.
Regulatory norms like ceiling on exposures and provision of a higher

capital have forced banks to limit their contribution to such social cause
as infrastructure development. Also, absence of an organised
securitisation mechanism where a bank’s balance sheet exposure on
infrastructure can be converted to paper based securities aggravate the
systemic risks involved.
Despite such impediments, commercial banks have pioneered the cause

of infrastructure financing in one way or the other. Most Banks have
smartly diversified its role from being a fund provider to pure advisory
services. Today most banks have hired industry and economic experts to
form a distinct Line of business of providing consultancy to infrastructure
projects.
Besides pure advisory income, banks too are playing a major role in
intermediation to arrange funds from third party lenders, for a fee. A
growing expertise in evaluating projects has given banks the much
MITHIBAI COLLEGE 33
needed confidence to step into the shoes of a guarantor for such projects
as well.
As for direct financing, banks have for long been proactively engaged
with our countries policy makers to mull on initiatives to make
infrastructure financing a cheaper and viable option. It was not until the
union budget of 2009-10, that the ruling government finally announced
the setup of IIFCL (or India Infrastructure Finance Company Ltd) for
providing long term financial assistance to infrastructure projects.
The key point that came out of this budget was to empower IIFCL to
help commercial banks in effectively addressing asset-liability mismatch
arising out of financing infrastructure projects, by resorting to means as
‘takeout financing’. The scheme which was officially named “Takeout
Finance Scheme” for financing viable infrastructure projects’ came into
force from 16th April, 2010. Since then 'takeout financing' has emerged
as a potent weapon for banks to unlock its capital and participate more
and more into infrastructure financing activities.
As banks, NBFCs and FI’s join hands with infrastructure refinance

Institutions to Bridge the funding gap, the dream can only be realised if
our policy makers and private institutions come together under the aegis
of the much popular PPP model for creating more infrastructure projects
in the country.
MITHIBAI COLLEGE 34
CHAPTER 11: RECENT DEVELOPMENTS IN

INFRASTRUCTURE SECTOR
Infrastructure is the backbone of any economy for growth and

development. For development and growth of any economy,
infrastructure needs to be strengthened in a proper and adequate manner.
The Government of India is taking a lot of initiatives in the field of
infrastructure. Due to the strategic importance of this sector, we are
analyzing the opportunities and growth-drivers of infrastructure
development in India.
The recent trend and pattern of Indian infrastructure sector is

characterized by high budgetary allocation for the sector, rising
infrastructure deals, increasing private sector investment, improvement in
logistics and rising FDI in the sector.
In the Union Budget 2017-18, the government allocated a massive

amount of US$ 61.92 billion for the sector. Moreover, India witnessed 33
deals in FY2016-17 involving US$ 3.49 billion as against US$ 2.98
billion raised across 31 deals in FY2015-16, with most of the deals in the
power, roads and renewable energy sectors. It is worthwhile to mention
that the private sector is emerging as a key player across various
infrastructure segments, ranging from roads and communications to
power and airport. The FDI received in townships, housing, built up
infrastructure and construction development projects from April 2000 to
September 2017 stood at US$ 24.66 billion; and in construction activities
stood at US$ 10.70 billion.
MITHIBAI COLLEGE 35
The strong advantages of infrastructure development in India is

governed by the huge demand as it has a requirement of investment worth
Rs. 50 trillion (US$ 777.73 billion) in infrastructure by 2022 to have
sustainable development in the country.
Interestingly, with strong policy support like ‘Housing for All’ and
‘Smart Cities Mission’ the Government of India is working on reducing
bottlenecks by pushing growth in the infrastructure sector. Also 100 per
cent FDI is permitted under the various infrastructure sectors.
There is a strong momentum in the expansion of roadways, strong

revenue growth for the Indian Railways, whereas the power generation
capacity has increased at a healthy pace.
A strong momentum is also over served in the expansion of roadways.

The value of total roads and bridges infrastructure in India is estimated to
have expanded at a CAGR of 13.6 per cent over FY09-17 to US$ 19.2
billion.
The revenue growth for the Indian Railways has been strong over the
years; during FY07-17, revenues increased at a CAGR of 11 per cent to
US$ 24.60 billion in FY17. All Indian Railways trains will become
electric by 2022, resulting in an annual savings of Rs 11,500 crores (US$
1.79 billion).
MITHIBAI COLLEGE 36
Infrastructure projects completed during 12th Five Year Plan:
Number of Cumulative Expenditure

Sector
Projects (US$)
Road Transport & Highways 91 8.7 billion
Power 73 16.63 billion
Petroleum 65 19.48 billion
Railways 33 3.81 billion
Steel 20 8.13 billion
Shipping and Ports 20 1.78 billion
Telecommunications 14 463.62 million
Coal 9 2.26 billion
Fertilisers 6 596.24 million
Civil Aviation 5 861.16 million
Urban Development 5 678.83 million
Atomic Energy 1 168.93 million
MITHIBAI COLLEGE 37
The eight core infrastructure industries include coal, crude oil, natural
gas, refinery products, fertilizers, steel, cement and electricity. The
overall index grew by 4.8 per cent during FY 2016-17. The growth in the
index was led by electricity (10 per cent), steel (9 per cent), refinery
products (8.9 per cent), cement (5.8 per cent) and fertilizers (3.3 per
cent).
The growth-drivers for the infrastructure in India are government

Initiatives, Infrastructure Need, Housing Development, International
Investment, Public Private Partnerships. The total allocation for
infrastructure in the Budget of 2017-18 stands at US$ 61.48 billion and
the major sectors covered are Railways and Metro Rail, Construction,
Telecom and Energy, Roads and Airport.
A special attention is given to the infrastructure development in the

North-Eastern region of India since the North-East is deprived of
infrastructural development compared to other regions of India for a
longer period of time. In December 2017, the North-East Special
Infrastructure Development Scheme (NESIDS) was approved by the
Government of India with 100 per cent funding from the Central
Government for infrastructure projects in the region.
In October 2017, the Government of India announced that highway

projects worth US$ 22.6 billion would be undertaken in the North-East
region of the country in the coming two to three years. In August 2017,
the India-Japan Coordination Forum for Development of the North-East
was formed to focus on major projects such as road and network
MITHIBAI COLLEGE 38
development, disaster management, connectivity, and electricity

provision.
With an eye on China, India is working on a slew of road and bridge

projects to improve connectivity with Bangladesh, Nepal and Myanmar.
India is also pulling out all stops to expedite the South Asian Sub-
Regional Economic Cooperation (SASEC) road connectivity programme
in the backdrop of China’s ambitious One Belt One Road (OBOR).
The government announced plans to invest US$ 6.98 billion in the

North-East States. The North-East-Agra transmission line, which is the
biggest power transmission line to be built in the country in terms of
capacity. This means that cheap power from the hydro-rich North-East
can now reach the central part of North India.
The whole region is to be developed to give impetus to tourism.

Arunachal Pradesh was brought on to the railway map of India with
India’s longest rail-cum-road bridge—the 4.94-km long Bogibeel bridge
over the Brahmaputra. The government has also announced plans to
convert all meter gauge tracks in the North-Eastern States to broad gauge
tracks. In May 2017, Narendra Modi, Prime Minister of India,
inaugurated India’s longest river bridge—the 9.15-kilometre-long Dhola-
Sadiya bridge over the Brahmaputra River in Assam. The bridge will
provide easy access to the people of Assam and Arunachal Pradesh and
will improve its defence requirements along the Sino-Indian border.
The opportunities in the infrastructure sector are broadly coming
MITHIBAI COLLEGE 39
through government initiatives, international associations and urban

Indian real estate. The government is making an attempt to revive and
give boost to Public Private Partnerships. The total allocation for
infrastructure in the Budget of 2017-18 stands at US$ 61.48 billion.
Japanese investment has played significant role in India’s growth story.

Japan has pledged investments of around US$35 billion for the period of
2014-19 to boost India’s manufacturing and infrastructure sectors. The
Japanese Government is constantly looking for investment opportunities
in India.
The Asian Development Bank will provide US$ 275 million loan for a
piped water supply project for rapidly urbanizing small towns, covering
three lakh households, in Madhya Pradesh. India will need to construct
43,000 houses every day until 2022 to achieve the vision of Housing for
All by 2022. Hundreds of new cities need to be developed over the next
decade under the smart city programme. This has the potential for
catapulting India to the third largest construction market globally. The
sector is expected to contribute 15 per cent to the Indian economy by
2030.
India will invest as much as Rs 5.95 lakh crores creating and upgrading
infrastructure in the next financial year. Our country needs massive
investments estimated to be in excess of Rs 50 lakhs crore in
infrastructure to increase growth of GDP, connect and integrate nation
with a network of roads, airports, railways, ports and inland water ways
to provide good quality services to our people.
MITHIBAI COLLEGE 40
As a part of the new integrated infrastructure planning model the NDA

Government unveiled the largest ever rail and road Budget of Rs 1.48
lakh crores and 1.21 lakh crores, respectively in 2018-19. India needs to
fund for ambitious plans such as Sagarmala (ports) and Bharatmala to
improve its transport infrastructure by raising equity from the market.
To raise equity from the market for its mature road assets, NHAI will
consider organizing its road assets in to Special Purpose Vehicle (SPV)
and innovating monetizing structure like Toll Operate and Transfer
(TOT) and InvIT. The total investment estimated for Bharatmala is Rs 10
lakh crores—the largest outlay for a government road construction
scheme.
The Plan outlay for the Indian Railways in next fiscal has been pegged
at 1.48 lakh crores, the highest ever outlay for a national transporter.
Track renewal of 3999 km, procurement of 12,000 wagons, safety fund of
Rs 20,000 crores, and electrification of 6000 km has been planned. The
national transporter will raise Rs 28,500 crores from extra-budgetary
support from extra-budgetary resources such as IRFC bond and Rs
26,440 crores through other borrowings.
MITHIBAI COLLEGE 41
Investment Trend in infrastructure in India (2002-2017)
Infrastructure in India - Investment Trend

Private investment Public investment Infra investment
8.37
8.1
7.3 5.07 5.46 5.6 5.6
6.1 6.5 5.11 5.33
4.3 4.5 4.6 4.7

4.2 5.07 5.6
4.3 4.4 4.78 5.49 5.11 5.33 5.46 5.6
4.8
3.4 3.2 3.3 3.4 3.4
2.2 2.4 2.52 2.61 3.3 2.1 2.5 2.4 2.3 2.6
0.8 1.1 1.2 1.2 1.3 1.3
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
As we can see, the period from 2007 to 2012 can be referred to as the
golden phase, with jump in private sector investment boosting overall
investment and impacting the infrastructure sector as well to greater
heights. The downward trend was because of the decline in the private
investments.
MITHIBAI COLLEGE 42
CHAPTER 12: CASE STUDIES
SALT LAKE WATER SUPPLY AND SEWERAGE

NETWORK
The Government of West Bengal (GoWB) had identified Sector V, Salt

Lake City in Kolkata as the IT &ITeS (Information Technology /
Information Technology Enabled Services) hub of West Bengal and
intended to upgrade Sector V to international standards.
This site was spread over an area of 300 acres in the eastern fringes of
Kolkata. The consumer mix at Sector V included office spaces of the IT
companies, government institutions, and office spaces owned by other
private firms. However, Sector V was devoid of an organized water
supply and sewerage system.
Due to the lack of proper water supply and sewerage systems, the
industrial units of Sector V had to depend on ground water for water
supply and developed on-site sanitation facility at their own costs. This
practice resulted in indiscriminate extraction of underground water.
In the absence of a developed supportive civic infrastructure, the up-

gradation of the IT sector in Sector V was considered to be difficult. In
2005, the Urban Development Department of the GoWB appointed the
Kolkata Municipal Development Authority (KMDA) to lay out a
comprehensive plan for the development of basic infrastructure services
MITHIBAI COLLEGE 43
in the industrial township of Nabadiganta.
Accordingly, the KMDA along with the Nabadiganta Industrial

Township Authority (NDITA) planned a combined water supply-cum-
sewerage project. This project was planned to be implemented under the
Built-Operate-Transfer (BOT) PPP arrangement. The project was
developed with financial assistance under the central government’s
scheme of Jawaharlal Nehru National Urban Renewal Mission
(JNNURM).
The project involved the design, construction and commissioning of all

the water supply and sewerage facilities on a PPP basis. Specifically, for
the water supply infrastructure, the project required the construction of an
Elevated Storage Reservoir (ESR), a rising main, an Underground
Reservoir (UGR), and the laying of pipelines along individual roads
which would be connected to the dedicated main.
With respect to the sewerage sector, the project required the

construction of a sanitary network and a pumping station and the
development of a waste treatment system. KMDA and NDITA selected a
private developer on a competitive basis. The private developer formed a
SPV – the Nabadiganta Water Management Limited (NBWML). The
SPV was required to undertake part-financing; design the specified
components of the water supply and sewerage system; plan; undertake its
construction; and operate and manage the system including the purchase
of water, generation of bills and collection for the concession period.
MITHIBAI COLLEGE 44
The project infrastructure was planned to be developed within a total

time period of 18 months. Post completion of the construction works, the
SPV was to undertake the operation and maintenance of the water supply
system for a concession period of 30 years.
The total project cost was estimated to be Rs. 62.2 crores by KMDA
and NDITA at its inception, of which the water supply component was
estimated to cost Rs. 26.06 crores, and the sewerage component estimated
to be Rs. 36.15 crores. The scope of the water supply component was
increased to include the creation of a UGR and an additional pumping
station resulting in an increase of the cost by Rs. 7.87 crores. The revised
capital cost was thus Rs. 70.09 crores.
However, it is to be noted here that prior to the expansion of scope, the

funding arrangement was such that of the total capital cost, 35% was to
be funded under the JNNURM scheme and the remaining 65% by the
private developer. With the increase in costs due to the scope expansion,
the funding pattern only for the increased cost was reworked as - 35% of
the funding to cover the increased cost of Rs. 7.87 crores, would come via
the JNNURM scheme, 32.5% from NDITA and the remaining 32.5%
from SPV-NBWML.
MITHIBAI COLLEGE 45
MUMBAI METRO
To address both present and future public transportation needs, the

Government of Maharashtra (GOM) through the Mumbai Metropolitan
Region Development Authority (MMRDA) has planned a 146 kilometre
long rail based Mass Rapid Transit System (MRTS) for Mumbai.
This project is the first corridor of the proposed MRTS. The Versova-
Andheri-Ghatkopar line shall be an elevated line with a route length of 11
kms, with 12 stations and a car depot situated at D.N. Nagar. The line will
have a minimum curvature of 100 meters and minimum ground clearance
of 5.5 meters. The length and width of the coaches that shall ply on the
route will be 22 metres and 3.2 metres, respectively.
Other technical features of the project include 25 KV AC overhead

equipment, cab signalling with automatic train protection, and a
maximum speed of 80 kmph with an average speed of 33 kmph. Mumbai
Metro One is going to run on a dedicated elevated corridor and shall have
high levels of comfort for the passengers viz. fully air-conditioned world
class coaches, provision for lifts and escalators at stations, modern
automatic fare collection system and high levels of passenger security
systems.
The existing sub-urban trains connect the northern and southern parts
of the city. This project will provide East-West rail based connectivity to
Central and Western suburbs. The total time taken for the journey from
Versova to Ghatkopar would be approximately 21 minutes, as against a
MITHIBAI COLLEGE 46
typical time taken of 90 minutes by other modes of transport.
The total project cost is estimated at Rs. 2,356 crores. The project shall
be financed on the basis of a Viability Grant of Rs. 650 crores contributed
by the Government of India (Rs.470 crores being 20% of the project cost)
and Government of Maharashtra (Rs.180 crores being 7.5% of the project
cost). The remainder is to be financed by 70% debt, 30% equity. The
private operator and MMRDA shall provide equity contribution of Rs.466
crores in proportion of their equity stake.
The private operator has also arranged debt of Rs.1240 crores for the
project. This has been tied up from a consortium of banks led by IDBI,
Corporation Bank, KarurVysya bank, Canara Bank, Indian Bank and
Oriental Bank of Commerce. IIFCL (U.K.) is providing the foreign
currency loan for the project.
The cost of borrowing for the rupee component, which constitutes

about 75 per cent of the total debt, will be 12.25 per cent, while the
foreign currency loan will be at 3.5 per cent above LIBOR (London Inter-
Bank Offered Rate). The loan has been secured for a moratorium period
of 2 years and a total loan repayment period of 15 years. The project has
also taken into consideration a service debt facility of around Rs. 70-80
crore in the project cost to ensure that cost overruns are taken care of
during the tenure of the project. Senior Lenders have also been notified of
and have approved of these provisions.
MITHIBAI COLLEGE 47
CONCLUSION
The supply of properly structured projects seems to be a major hurdle

in channeling available finance into infrastructure. Overcoming this,
requires substantial expertise. Without a predictable pipeline of investable
projects, the fixed costs of building up this expertise are often too high for
potential investors. Governments, the concessionaire for many types of
infrastructure projects, have a critical role in setting up investable
projects. Countries and local governments which have established proven
mechanisms for infrastructure projects, for instance by introducing
binding legal frameworks for public private partnerships or by setting up
specialized government agencies, tend to be more successful in closing
infrastructure projects. The promotion of private sector infrastructure
finance hinges above all on a sensible transfer of risks and returns. If
done properly, the involvement of the private sector can lift efficiency – it
should not be seen merely as a source of financing. As returns from
projects are generated only over a long period of time, the focus needs to
turn more to the operational aspects of infrastructure, rather than merely
its construction.
But also on the financing side, challenges remain. Currently,

infrastructure finance is dominated by direct equity investments and bank
loans. Boosting infrastructure finance will require the broadening of the
potential group of investors and the tapping of the vast financial resources
of capital markets. This, in turn, necessitates a broader mix of financial
instruments. Both infrastructure funds and bonds have great potential.
The better and more widespread securitization of bank loans seems
MITHIBAI COLLEGE 48
desirable to diversify risks. It may also assist the development of

transparent capital market instruments. For emerging markets, financial
market development, trusted legal frameworks, and the development of a
long-term investor base are pertinent. Development banks and export
credit agencies play a key role in promoting infrastructure finance in
markets that are still developing.
MITHIBAI COLLEGE 49
BIBLIOGRAPHY:
 www.instituteforgovernment.org.uk/expaliners/financing-
infrastructure
 http://www.greenworldinvestor.com/2011/07/04/infrastructure-
finance-companies-of-india-sources-of-financing-of-indian-infra-
projects-idfcilfsifcipfcrec/
 https://www.icsi.edu/media/portals/86/manorama/GIM%20JOURN
AL.pdf
 https://www.bis.org/publ/work454.pdf
MITHIBAI COLLEGE 50

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MITHIBAI COLLEGE OF ARTS, CHAUHAN INSTITUTE OF

SCIENCE &AMRUTBEN JIVANLAL COLLEGE OF

IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF

This is to certify that NISHITA KABRA student of TY-B.Com (Financial Markets)

INTERNAL EXAMINER EXTERNAL EXAMINER

I hereby declare that I have successfully completed the project on

SIGNATURE OF THE STUDENT

I am highly indebted to my faculty guide MR. JAISON THOMAS for his

At the onset, I wish to express my gratitude to DR.RAJPAL SHRIPAT

Infrastructure is the backbone of any economy for growth and

There is a strong momentum in the expansion of roadways, strong

Countries and local governments which have established proven

Sr. Topi Page

3 Role of Infrastructure in Development in India 5

4 Major Infrastructure Bottlenecks in India 10

5 Infrastructure Finance and its Features 12

6 Need for Infrastructure Investments 14

7 Phases of Infrastructure Projects and Potential Investors 16

8 Sources of Infrastructure Finance 18

9 Indian Companies for Infrastructure Financing 25

10 Role of Indian Commercial Banks in Infrastructure 33

11 Recent Developments in Infrastructure Sector 35

Infrastructure means those basic facilities and services which facilitate

A comprehension of infrastructure spans not only these public work

Infrastructure is the basic requirement of economic development. It

CHAPTER 2: TYPES OF INFRASTRUCTURE

There are 2 broad classifications of infrastructures. They are as follows:

Physical infrastructure is those infrastructures which directly concern

of production and distribution in the economy. A few such examples are

CHAPTER 3: ROLE OF INFRASTRUCTURE IN

Infrastructure is the network of power, telecom, ports, airports, roads,

Power is an essential input for economic development and improving

India at present is at the threshold of becoming a developed country. Its

The transportation infrastructure includes roads, vehicles, railways,

Railways are another important part of transportation infrastructure.

of over 7,800 locomotives, 5,340 passenger service vehicles and nearly

In India the civil aviation has three main functional divisions-

Under this policy, foreign airlines or associations of exporters can

India has a coastline of over 7500 km which is serviced by 12 major

India has a huge infrastructure for postal and telecommunication

Infrastructure is the base on which all economic activities of the

CHAPTER 4: MAJOR INFRASTRUCTURE

Infrastructure projects are highly capital-intensive and funding is

Another significant challenge in achieving the infrastructure goal is the

 Clearances from numerous agencies:

Most of the infrastructure projects in India suffer from delays in

 Environmental Impact Assessment (EIA):

Environmental safeguards and guidelines have proven to be one of the

 Poor pre-construction planning:

Due to the already adverse effect of various impediments like land

CHAPTER 5: INFRASTRUCTURE FINANCE AND ITS

Financing is how you pay upfront for infrastructure. In this context, it

Features Of Infrastructure Finance:

 Normally infrastructure finance has long maturity period and it

 Infrastructure finance involve larger amount of investment. For

 Infrastructure finance always involves higher risk as higher amount

 In this type of investment return is very low at initial stages but

 After completion of project to continue/run the project manpower

 The non-recourse nature, the unique risks of infrastructure

CHAPTER 6: NEED FOR INFRASTRUCTURE

Infrastructure investments are characterized by large capital intensive

In the context of India, while some improvements have occurred over

The projected investment requirements for infrastructure are placed at