innovative infrastructure financing -...

Innovative Infrastructure Financing

The Urbanising World

• The 20th Century began with a population of 2 billion which increased to 6 billion population by the end of the century.

• The Century also witnessed the biggest exodus of human population from Rural to Urban areas

• The global urbanisation level increased from 10% to 50% during the century; The world has turned urban with more than half the population living in urban areas

Extra-ordinary Urban Growth in Less Developed Countries

• 600 Million people added to the world’s urban population between 1990-2000

• Close to 3 million people are added in Asia alone every month, i.e. equivalent to one new City a month

• Of the 21 mega cities (popln. 10 million+) in the world today, 17 are estimated to be in developing countries

World Population Trends

8200 (88%)

DEVELOPING COUNTRIES

(in millions)

Source: UN Population Division; WORLD POPULATION PROSPECTSPopulation Reference Bureau: WORLD POPULATION DATA SHEET

Population in and developing (lesser developed) countries to be 88% of total population by 2050

1350 M

361330 M

459 M(34%)

366.3(31.13%)285.35

(27.78%)217.61

(25.71%)62(17%)50 M (16%)

0

300

600

900

1200

1500

1947 1951 1961 1971 1981 1991 2001 2011 2021

Total Urban

Urbanisation Scenario in India

Decadal Growth Rate of Population (1991-2001) Urban: 31.13% Rural 17.97%

1027 M11 May, 2000, 1000 M

1 March, 2001,

705335

23950

20

40

60

80

1951 1971 1991 2001 2011 2021(Projected)

No. of Cities/Agglomerations with more than 1 Million Population

(37.8 % )(33.0 % )

No.of Class-I Cities(> 1 Lakh) - 300 (1991)% of Urban Population - 65%

India: Urbanisation Scenario Metropolitan Cities/Agglomerations

India : Million plus Cities and Urban Agglomerations - 2001Category City

10 Million+ (3) Greater Mumbai, Kolkata, Delhi5 – 10 Million (3) Chennai, Bangalore, Hyderabad3- 5 Million (2) Ahmedabad, Pune2 – 3 Million (5) Surat, Kanpur, Jaipur, Lucknow, Nagpur1 – 2 Million (22) Patna, Indore, Vadodara, Bhopal, Coimbatore,

Ludhiana, Kochi, Visakhapatnam, Agra, Varanasi, Madurai, Meerut, Nashik, Jabalpur, Jamshedpur, Asansol, Dhanbad, Faridabad, Allahabad, Amritsar, Vijayawada, Rajkot

35 million plus cities/ urban agglomerations

Protected Water Supply

Sewerage & Sanitation

Latrine

Refuse Collection/ Disposal

Electrification

Urban Population Coverage (%)

Availability Deficiency

75

72

69

46

84

25

28

31

54

16

Urban Infrastructure Scenario in India – National Perspective

1991 Census

Urban Infrastructure Scenario in India

• According to estimates of the Rakesh MohanCommittee total requirement for urban infrastructuredevelopment covering backlog, new investments andO&M costs for the next ten years is Rs. 2,50,000Crores (US$ 57 Billion)

• The ninth Plan proposal identifies only around Rs.12000 Crores. With anticipated growth in Tenth planproviding additional funds of Rs.13,000 Crores, thetotal expected plan outlay comes to Rs. 25,000 Crores(US$ 5.7 Billion).

• Funds for UI development fall short by more than 10times the requirement

The Vicious Circle

Low Collection/Recovery

Low Maintenance

Low ServiceLevel

Low Level of Infrastructure

Low Capacity to Pay

Low Investments

Low Equilibrium

Cycle

VS/ KS

Cities and Citizens get the infrastructure theydesire and deserve.

Challenges facing Infrastructure

• Characteristics of infrastructure projects:– natural monopolies - non-exclusive nature– in-elastic demand - huge investment required

for capital & maintenance • Traditionally Infrastructure provision seen as role of

government• Schemes conceived as unitary service - no experience in

unbundling • Although Financing options are rapidly changing due to

financial, technological and organisational innovations at project and policy levels- no clear guidelines for Private sector Participation

Major Concerns in Urban Infrastructure Sector

• Inadequate coverage and service level• Poor quality of service to consumers• Institutional inefficiency and high administrative

overheads• Insufficient financial and managerial resources

with Urban Local Bodies• High non-revenue component due to wastage,

pilferage, unaccounted-for losses and free riders• Inefficient operation and maintenance• Poor monitoring and cost recovery• Unsustainable resource management practices• High investment needs and project costs• Lower priority accorded to certain urban services

Financing of Infrastructure Schemes• Budgets of

– Central Government – State Governments– Local Governments

• Raising loans from LIC/HUDCO and other Financial Institutions

• Loans from International Funding Agencies like OECF(JBIC), World Bank, ADB, KfW, USAID, etc.

• Grant funds from Donor Agencies like DANIDA, DFID, CIDA, National Trust/ Missions“Every One Crore rupees spent in infrastructural provision now,

saves Ten Crore on cost escalation and public health care due to deficient services later!”

Role of Financing Agencies as Facilitators of Change

• Principles of “user-pay”, “abuser pay” or “polluter pay”to be used while determining the service charges to assess the practical aspect of pricing.

• Willingness to Pay OR Willingness to Charge• For improving the sustainability of UI projects

emphasises– Principle of full cost recovery– Transparent, Targeted and Measurable subsidy, if

needed– Cost savings through energy efficiency, reduction of

leakages, manpower rationalisation etc.– Full autonomy to local bodies to determine tariffs – Tariff fixation taking care of annual incremental cost,

O&M cost, debt dues, depreciation charges etc.– Compulsory 100% metering – Operation of escrow account

Issues Involved in Infrastructure Financing: Financial Institution’s PerspectiveISSUES:

• Asset liability mismatch due to short term borrowing vs. longterm funding.

• Large volume of resources for capital intensive projects• Locking up of funds in specific large projects.• High risk involved in greenfield ventures • Non-uniformity in appraisal, guidelines and documentation

requirements• Lack of tangible security and partial or nil recourse basis of

funding projects.• Norms restricting exposure to individual agencies.RISKS:• Political risks & Implementation risks.• Risks of default by borrowing agency• Risks of prepayment in falling interest rate scenario• Foreign Exchange Risks and currency fluctuations

In this context, alternatives in service delivery and innovations in resource mobilisation being explored by Financial Institutions HUDCO, IDFC, ICICI, IL&FS and LIC

Some Innovative ‘User pay’ InstrumentsInfrastructure Type Innovative user pay Instruments• Water Supply - Advance registration charges, Connection

charges, Enhancement of water tariff, Water benefit tax/water tax, Betterment charges, Development charges, Utilization from other sources such as octroi, property tax, sale of plots etc. and Charges from water Kiosks

• Sewerage - Connection Charges, Sewerage Cess Tax, Conservancy Tax, Sale of Renewable waste, Sale of Sludge and Sale of Nutrient rich wastewater.

• Solid waste - Collection Charges, Cess, Sale of Renewable waste, and Fines for dumping waste.

• Roads/Fly-overs/ - Toll Tax, Land as a Resource and Advertising Bridges

• Airports/Rly. Stations/ - Surcharge on tickets,using land as a resource, Bus Terminals Toll Tax, User, Charges for transportation

terminals and advertising rights.

• WATER SUPPLY– Water resource management & Development of source– Treatment of water and bulk supply - Water Purchase

Agreement– Distribution / Operation and Maintenance (O&M)– Billing / Collection

• SANITATION– Sewerage network (collection system) – Pumping Stations(Installation and O&M) – Disposal system - Through taxes (on the basis of water

consumed)

Commercialisation to Privatisation:Illustrative List of Potential Unbundling Packages

Commercialisation to Privatisation:Illustrative List of Potential Unbundling PackagesSOLID WASTE MANAGEMENT• Collection• Separation and treatment• Distribution of by-products (scrap material, manure, fuel

pellets & bio-gas)

URBAN TRANSPORT• Development of urban mass transit systems• Operation and maintenance of urban mass transit systems • Development and maintenance of terminals• Operation of bus and intermediate public transport (IPT)

systems• Construction and maintenance of toll bridges• Construction and maintenance of parking facilities

Increased emphasis on Private Sector Participation in Urban Infrastructure

The imperative need for Private Sector Participation for:

• EXTENDED RESOURCES

• EFFICIENT PROJECT MANAGEMENT / MAINTENANCE

• STATE-OF-THE-ART TECHNOLOGIES

Route to Private Sector Participation

• The concept of Public-Private -Partnership is generally seen as one of these models:– Build-Operate-Transfer (BOT)

– Build-Operate-Own-Transfer (BOOT)

– Build-Operate-Lease-Transfer (BOLT)

– Rehabilitate-Operate-Transfer (ROT)

– Design-Build-Finance-Operate-Transfer (DBFOT)

• In INDIA full blown Private Sector Participation models have not been put into place, so far

Options for Private Sector Participation (PSP)

• However, the various options available, in order of increasing Private Participation in Water Supply & Sanitation Projects being taken up are:– Service Contracts– Management Contracts– Lease– ConcessionWith experience and later on, through– BOT/BOOT etc.– Divestiture

Private Sector Participation in Water Utilities -Manila Experience

• Successful involvement of Private Sector in Power Generation and Distribution; Largest effort in privatisation of Water utilities.

• Metropolitan Water Works and Sewerage System (MWSS) had covered only 67% population with intermittent water supply and 8 % with sewerage system in 1994.

• 56 per cent of 3000 mld supply was non-revenue water• MWSS privatised in 1997 and split into two.• Manila divided into two Zones - East and West. • Two Consortia led by - BENPRES for West and AYALA for

east -selected to run water works on 25 year franchise; Both Groups offered rates lower than the prevalent rate (8.78 pesos)

Private Sector Participation in Water Utilities -Buenos Aires Experience

• National Public Company OSN was in charge of water & sewerage.

• Unaccounted-for water was about 45% of production• Objective of PSP: To reduce Government burden and minimise

the price for service delivery• Privatised in 1993 - Through Concession, thus effectively

keeping the fixed assets under Public Ownership• Single private firm to operate on 30 years concession period to

be revived by re-bidding later• Responsible to operate and maintain fixed assets and expand

coverage and guarantee water quality• Pricing to incorporate subsidy already existing, first price

review after 5 years

Improvements in Water and Sanitation Services after Awarding the Concession in

Buenos AiresIndicator Before the

Concession (1992)

December 1995

Percentage change (%)

Production capacity (millions cum/ day)

3.4 4.3 27

Population served(M) Water Sewerage

6.0 4.9

6.5 5.3

8.8 6.4

Employees per 1,000 connections

7,450 4,250 -43

Response time for repairs (hours)

180 48 -73

Meters in service 30,000 170,000 460

Reasons for success :• Comprehensive and transparent bidding process - Two

Envelope System• Independent Regulatory Agency established by Government to

monitor concessionaire, enforce the terms of contracts and regulatory specifications and levy fines where necessary

• Contract had provision for adjustment and re-negotiation during enforcement of concessional period (after 2 years the initial reduction of tariff partly withdrawn in view of more capital investment on system improvement, than originally estimated)

• Re-negotiation : transparent and stakeholders involved• Tariff policy had a fixed portion to cover cost of infrastructure

and a variable part proportional to consumption

Private Sector Participation in Water Utilities - Buenos Aires Experience

Indian Experience in Privatisation of Water Supply & Sanitation

Tiruppur Water Supply and Sewerage Project

• Implemented through a SPV New Tiruppur Area Development Corporation (NTADC) promoted by– Infrastructure Leasing & Financing Services(IL&FS) – Tiruppur Exporter’s Association (TEA) – TamilNadu Corporation for Industrial Infrastructure

Development (TACID)• Estimated Project cost - Rs. 900 Crores at 1998

prices (Rs. 1000 crore at present). – O&M contract to consortium of

Mahindra & Mahindra+United Utilities International, North West Water +Bechtel

– Attained financial closure with 10% stake by LIC & GIC.

Pune Water Supply and Sewerage Project -• Developed by Pune Municipal Corporation at a

estimated project cost of Rs. 750 crores ($ 187.5 M) later revised to Rs. 392 Crores with HUDCO assistance– Private Sector Participation envisaged in Construction,

Operation and Maintenance, Tariff collection– Financial Participation in addition to HUDCO expected from

IL&FS, ICICI, HDFC, IDFC and Bank of Maharashtra – Request for proposal sought– Tie-ups: Anglian Water + Trafalgar House & Shirkes

Binnie Black + Veatch & Thames Water + L&T Krugger + Generale Des eaux & Shanska Int.Preussag + Tata ProjectsHyundai + Sundram ChemicalsHanjin + Krupp and Zoom Development Group

– Political Risk - work re-tendered at RfP level

Indian Experience in Privatisation of

Water Supply & Sanitation

Bangalore Water Supply Project • BOOT arrangement for sourcing 500 mld

water.– Establishment of two Tertiary Water

Treatment Plants (of total 60 mld capacity) with HUDCO assistance

– Private Sector (Industries) to undertake laying of feeder mains

– envisages provision of 500 mld of water to the city on a BOT basis with estimated project cost is Rs. 800 Crores (US$ 173 M).



Chennai Metro Water• Out of 119 Sewerage Pumping Stations, Operation

& Maintenance of 70 by private sector• Sourcing of water in 7 wells through private sector• Construction of 300 mld Water Treatment Plant by

- M/s Hindustan Dorr Oliver Ltd. And O&M by M/s Richardson Cruddas

• New Chembarampakkam WTP of 530 mld capacity (over and above the existing 600 mld capacity) – Bid documents for BOT by TCS – HUDCO funding availed



• Private Sector Participation on the anvil in water supply & Sanitation– Nagpur - Dewas– Kolhapur - Cochin– Vishakhapatnam - Dharwad– Goa - Alandur

• Karnataka Urban Water Supply and Drainage Board (KUWS&DB) for Management Contract in Distribution and O&MTowns Selected for the initiative are

- Mysore - Mangalore- Hubli – Dharwad - Gulbarga



Privatisation experience in India in Solid Waste Management

• ENBEE Infrastructure Ltd. on BOO basis in Nagpur

• M/s Excel Industries –Bio-degradation of solid waste in – Vijayawada, Calcutta,

Mumbai, Bhopal, Bangalore, Gwalior, Cochin & Calicut

• M/s CELCO in Hyderabad• Common hospital waste

treatment plant by GJ Multiclave in Hyderabad

• Compost plant by IVR Enviro at Tiruppur

Privatisation experience in Transportation• Pali Bye-pass, Rajasthan - TCI

Infrastructure Ltd• Coimbatore Bye-pass (L & T)• Karur Bridge on BOT basis by

East Coast Constns & Infrastructure Pvt. Ltd.

• Kemptee-Kalamana Toll Road in Nagpur

• Karur Bridge on BOT basis• Faridabad Byepass

• NOIDA Toll Bridge Company • Cochin International Airport

in Joint Sector by CIAL• Bangalore Airport• Ports – Pipavav, Positra, Adani,

Kakinada, Ennore, Cochin, Mumbai

Important issues in a BOT arrangement

• Who are the parties to the contract ?• What are the objects and scope of the BOT

arrangement?• What is the duration that might lead to early

termination?• What are the obligations of the BOT operator ?• What are the obligations of the guarantor ?• What are the key regulatory provisions ?• How will the key risks be managed ?• How will performance be measured and monitored ?• How will the assets be transferred to the BOT operator?• What are the consents required ?• Who will be responsible for environmental liabilities ?• How will disputes be resolved ?

Countdown Steps for Structuring Private Sector Participation

Process Structuring and Stages - countdown• 09 Expression of Intent by Public Agencies• 08 Firming up the Project Contours (Consultants)• 07 Short-listing of Private Parties• 06 Project Description Report• 05 Pre-qualification of existing bidders• 04 Issue of Request for Proposal (RFP)• 03 Evaluation of Bids• 02 Negotiations• 01 Award of the Contract (Financial Closure)• 00 Commencement of Work

• Legal and Regulatory Framework– Simplification of Legislation– Techno -Legal Regime (Australian Utilities

Commission, U.K. initiatives-OFTEL, OFWATS)– over-arching legislation in the line of Federal Law of

Philippines (BOT, BOO,etc)– State/City Level Regulatory Bodies in India

• CERC / SERC in Power Sector• TRAI (set to become CCI) in Telecom / ICE sector• NHAI in highways sector• Need for similar regulators in Urban Infrastructure

Evolving Appropriate Organisational/Institutional

Mechanisms

Urban Infrastructure -Regulatory Authority

Utility & Shareholders

Users

Political Authorities

The Regulatory Mechanism• Regulate prices• Promote operating efficiency• Specify and monitor service standards• Control externalities• Maintain public good functions• Ensure asset serviceability• Ensure development of essential infrastructure• Prevent manipulation of land values• Prevent unfair trade practices• Promote efficient use• Ensure responsiveness to final customer needs

Model BOT Laws• Gujarat Infrastructure Development Act – 1999

– First State to formulate a separate act– Draws from the experiences in Philippines

• Authorises the Govt./agencies to enter into concession agreements

• Provides a list of various forms of assistance to be provided to the developer including exemption of taxes etc.

• Competitive bidding mandatory for ensuring transparency

• The concession agreement to prescribe the user fee to be charged by the developer

• Need for replication in other States

Infrastructure Authority• Infrastructure Authority formed under Infrastructure

Development Enabling Act (IDEA), Andhra Pradesh• Envisaged Roles for Infrastructure Authority:

– Conceptualisation of projects - Processing of the projects– Mobilising public opinion - Advisory role to the government– Co-ordination - Monitoring / approval of bidding– Implementation of P-P-P-P - Prioritisation of projects– Preparation of schedule. - Approval of TOR for consultancy– Budgeting / financial allocation - Expedite clearances and permits– Tariff fixing, user/abuser charges and cost recovery– Model contract principles– Supervision over implementation and project management

• Proposes a “Swiss Challenge Approach” for evaluating the single bid for projects brought by proprietary agencies

Legal Issues in Urban Infrastructure FinancingSecurity Mechanism for UI Projects

• Non-availability of Conventional securities (government guarantees, corporate / bank guarantees)

• “Letters of comfort” not a legal security option• Collateral Securities and Equipment Leases used in

certain infrastructure• Mortgages not viable securities in most UI projects• Need for partial or non-recourse financing and

legislative changes for treatment as Secured Loans in the Book of Accounts

• Negative lien could be considered only as a transient security instrument

• Escrow accounts of receivables– enhances transparency of the cash-flows– ensures sufficient balance for immediate repayments.

Innovative Escrow Account for Transportation

fleet augmentation

upgradation of infrastructure

computerisation

Escrow

Rs. 1000 / bus / day (US$ 20.8) deposited in

escrow account out of the anticipated daily

revenue of Rs. 5760 per bus (US$ 120)

Innovative Resource Avenues in

UI Financing

Financing Options MatrixS.No

Characteristics of Infrastructure

Projects

Issue(s) Options/ Alternatives

1 Capital intensive Scarcity of Resources

• Multilateral financing• Consortium/Syndication• Federal Govt. Guarantee with

financial support2 Long Gestation

period Asset Liability

Mismatch• Take out financing• Long Term Borrowing• Securitisation of receivables

3 Working Capital requirements based on Project Phasing

Overlapping of project

implementn schedules

• Flexible financing delinking construction stage from post-construction phase

• Cash flow financing4 Inadequate

returns and uncertainty on returns

High cost of funds,

Defaults/NPA risk

• Tax Incentives• Priority Sector Lending• Sub-ordinate debt finance• Firm tariff policy• Escrow Accounts • Power Purchase Agreements• Sinking funds

Financing Options MatrixS.No

Characteristics of Infrastructure

Projects

Issue(s) Options/ Alternatives

5 Long Term borrowing Interest rate & Currency

fluctuations

• Interest Rate Swap• Forward Rate Agreements• Floating Interest Rates

6 Multiple debt servicing obligations

High debt equity ratio

• Sub-ordinate debt financing• Equity infusion from strategic

partners7 Lack of tangible

assets and collateral/security

Realization of loan amount

on liquidation or default

• Letters of comfort• Pari passu charge on Escrow

Account• Bank Guarantees

8 Varied expertise and advanced technology

Lack of appraisal & operational

skills

• Joint Ventures• Special Purpose Vehicles

9 Pioneering nature / Feasibility risk

Risk of en masse

deployment

• Venture Capital Funds• Project Initialisation Funds

Consortium financing /Group lending

• For capital intensive projects and greenfield ventures beyond lending capacity of single financial institution

• Pooling of resources for funding the project.• Ensures sharing of the risks involved. • Needs rationalisation and standardisation of appraisal

procedures, lending guidelines and legal documentationof the constituent financial institutions

• Need for pari passu charge on the escrow account as security to the partner institutions.

• Desirable to provide a single window facility based on tripartite or joint agreements with the borrowing agency.

Takeout Financing

Partner Institution

5 years 10 years

Primary Lender

TENURE OF LOAN(15 years)

Outstanding Loan Amt. (Principal + Interest)

Transfer of Loan

Accounts

Fees / Commitment

Charges

• Liabilities of primary lender on project absolved at the end of a specified period

• Partner institution transfers pertinent loan accounts to its own books, in lieu of an agreed fee or commitment charge.

• Both parties bear the project risks after the take-out based on a non-recourse structure.

• pari passu charge on the escrow account as security option.

Innovative Financing Mechanisms

Sub-ordinate (Mezzanine) Debt Financing:• Internal restrictions on equity participation by financial

institutions, • Lower equity and hence limited debt-equity ratio of new

State level bodies for infrastructure projects restrict them from market borrowing on a large scale.

• Funding could be considered as deemed equity for a specific period granting the bodies better financial leverage

Cashflow financing:• institutional funding to be tailor-made to suit the financial

requirements at various stages of the project calling for cash-flow financing.

Securitisation of Receivables

SPV Investors

Lending Institution Borrower

Periodic Cash Flows

Pass Through Certificates

Loan

Fees

Outstanding Loan

Portfolio

Repayments

Securitisation of receivables• Conversion of future cash receivables into financial or

debt instruments tradable in capital market • Role of SPV as intermediary:

– assumes the entire credit risk on the securitised receivables of selected outstanding loan portfolio

– Insulates the lender from bankruptcy & insolvency risks– repackages the receivables into pass-through certificates of

manageable lots for onward trading in the secondary market. – Principal and interest components of the repayments are

passed on to the security owner. • Merits to Investor:

– Continuous cash flow on Securitised instruments over the life of the loan and principal “depletes” over time.

• Advantages to Lending Institution:– reduces the locking up of funds in a few projects. – facilitates reduction in borrowings – ensures better asset-liability management. – provides efficient exit option for the financial institutions to

transfer the risks of default and prepayment

Municipal Bonds• In United States, account for nearly 70% of the capital

financing for infrastructure. – General Obligation Bonds (GO)– Revenue Bonds

• Ahmedabad Municipal Corporation GO bond issue of Rs. 100 Crores

• Bangalore, Vijayawada and Ludhiana have already raised money through municipal bonds; Mumbai & Pune have obtained credit ratings; Kanpur Development Authority latest entrant

Problems faced:• Since bonds can be raised over night within a short period and

their utilisation may require 2-3 years, quite often, States/agencies tend to fall into the debt trap

• On account of the dire financial position, Credit Rating of agencies need to be enhanced to enable raising funds at lower costs.

Facilitating Urban Local Bodies in Resource Mobilisation

Government’s new strategy on the anvil for ULBs :• Credit Line

– Making available requisite loan facilities for Urban Local Bodies and other agencies

• Bond Bank– Varying capacity levels of ULBs in obtaining high credit rating,

lower borrowing costs, optimal resource utilisation & asset management

– Need for financial intermediary to pool the projects of the various agencies and float a common bond on the merit of the projects setting apart a reserve fund.

– Bond bank could be at the national level as a special purpose vehicle or as a subsidiary of the financial institutions.

• Challenge Fund– For facilitating the States and Urban local bodies implementing

the reform agenda

Project Initialisation Fund/ Project Initiative Fund /

Project Development Fund• PIF/PDF for creation of well structured projects

– Technically viable– Financially feasible and bankable– Environmentally sustainable

• HUDCO would fund 100% of the formulation cost upto a maximum of Rs. 5 Crores per project and Rs. 50 crores per year.

• HUDCO already assited– Feasibility study for alternate alignment of National Highway

connecting Jammu and Srinagar with support of Rs. 2.3 Crores– Preparation of detailed design and Bid documents etc. for the

Sports Stadia at Hyderabad for the 7th National Games to be held in 2002. Financial assistance of Rs. 2.5 Crores provided to the Sports Authority of AP

Emerging State Level Initiatives for Financing Urban Infrastructure

• State Level Urban Development Funds like TNUDF & MUDF in Tamilnadu Maharashtra, for facilitating private sector participation bringing in commercial orientation, improving financial management , assisting ULBs accessing capital markets.

• State level urban development Finance Corporationsformed– APUFIDCO - TUFIDCO– KUDFC - KUIDFC– Gujarat Municipal Finance Board

• Tax intercept concept introduced in Madhya Pradesh State for urban development loan servicing fund for local bodies.

FDI in Infrastructure• Foreign Direct Investment(FDI) could be permitted through:

– Financial Collaborations– Joint Ventures / Technical Collaborations– Capital Markets via Global Depository Receipts (GDRs / Euro

issues)– Private Placements or Preferential Allotments

• In India, FDI upto 100% permitted in airports (beyond 74% with approval) and Mass Rapid Transit Systems.

• FDI upto 100 % permitted in – Integrated township development including housing,

commercial premises, hotels, resorts– City and regional urban infrastructure facilities– Manufacture of building materials– Development of Land with allied infrastructure as part of

integrated township development• Enabling guidelines required to prevent capital flight (lock

in period) and regulate repatriation of profits in FDI

Special Economic Zones• Proposal to set up Special Economic Zones (SEZ) in

various parts of country as duty-free zones for industrial, service and trade operations to attract foreign investment and facilitate expeditious development.

• Proposal for a new SEZ at major Ports• The policy envisages the treatment of SEZs as priority

areas in provision of infrastructure, convergence in statutory clearances, exemption from duties and levies as well as liberal regulations.

• SEZs as industrial townships would need priority for integrated provision of infrastructure facilities.

Imperatives for Sustainability in Infrastructure Financing

• Development of–Legal & Regulatory–Institutional Mechanism–Fiscal & Financial Framework

• Need for an Integrated Management of Urban Infrastructure & Intersectoral Co-ordination.

• Creation of a new Breed of Urban Managers sensitised and responsible for taking on the challenges in urban infrastructure – HUDCO’s efforts for capacity building in decentalised training.

• Curriculum upgradation to provide not only technical inputs (Civil Engg.+ Transportation Engg. + Hydraulic engineering + Public Health Engineering ); but also Financial Engineering.

Towards Sustainability in Infrastructure Development

• Development of innovative financing andsecurity mechanisms

• Enabling Public-Private-People’s-Partnerships(PPPP) and Government-Citizen Partnerships

• General consensus on common national issues• Role of the media

– creating awareness and disseminating best practiceshighlighting the deficiencies and pertinent issues

– mobilising unified public opinion– attracting infrastructural investments– protecting vulnerable interest groups / environment

Towards equitable and balanced Infrastructuredevelopment and economic growth.

Vicious Circle to Virtuous Cycle

HighCollection/Recovery

Higher levelMaintenance

High ServiceLevel

High Level of Infrastructure

Higher Willingness

to Pay

Higher Investments

High Equilibrium

Cycle

VS/ KS

innovative infrastructure financing -...

Documents