The Indian Infrastructure Project Development Fund Scheme (IIPDF) is a step towards promoting public-private partnerships in the country. Recently launched by the Department of Economic Affairs, this scheme is designed to share the financial burden of infrastructure project development. Here’s a closer look at what it entails and why it’s important.
An Introduction to the IIPDF Scheme
The IIPDF Scheme was set up in 2007 and is primarily a Central Sector Scheme with a total outlay of Rs 150 crore. It is designed to function for a period of three years, specifically from 2022-23 to 2024-25. Providing financial support to Sponsoring Authorities for Public-Private Partnership (PPP) projects is the scheme’s primary objective. The idea is to offset the project development costs and improve the overall quality of the projects.
A PPP Cell will have to be created and empowered by the Sponsoring Authority to undertake project development activities and address larger policy and regulatory issues. This way, the scheme aims to streamline the process of project development.
Financial Support and its Impact
Under the IIPDF Scheme, up to 75% of the project development expenses can be claimed by the Sponsoring Authority as an interest-free loan. The remaining 25% needs to be co-funded by the Sponsoring Authority itself. Once the bidding process is completed successfully, the expenditure incurred during project development gets recovered from the winning bidder.
If the bid fails, the loan amount is converted into a grant. However, if the Sponsoring Authority does not conclude the bidding process for whatever reason, the entire amount contributed is refunded to the IIPDF.
Understanding Public-Private Partnerships (PPPs)
A PPP is essentially a collaborative endeavor between a government agency and a private-sector company. It is typically used to finance, build, and operate various projects like public transportation networks, parks, and city centers.
Despite the commendable progress made in addressing issues within PPP models, there is still room for significant improvement. A variety of PPP models exist, each with its unique attributes and potential benefits.
Types of PPP Models
• Build-Operate-Transfer (BOT): The private partner assumes responsibility to design, build, operate and transfer back the facility to the public sector after the contract period.
• Build-Own-Operate (BOO): In this model, ownership of the newly built facility rests with the private sector partner.
• Build, Own, Operate, Transfer (BOOT): After a mutually agreed period, the project is transferred either to the government or the private operator.
• Build-Operate-Lease-Transfer (BOLT): The private entity builds and owns the facility, leases it to the public sector, and then transfers the ownership at the end of the lease period.
• Design-Build-Operate-Transfer (DBFOT): Here, complete responsibility for design, construction, finance, and operation lies with the private partner.
• Lease-Develop-Operate (LDO): The government retains the ownership of the facility and receives payments as per a lease agreement with the private promoter.
• Engineering, Procurement, and Construction (EPC) Model: Costs are completely borne by the government which invites bids for engineering expertise from the private sector.
• Hybrid Annuity Model (HAM): A mix of BOT-Annuity and EPC models where the government contributes 40% of the project cost in the first five years.
Global Infrastructure Facility
Launched in 2014 by the World Bank, the Global Infrastructure Facility (GIF) is a collaboration that facilitates the preparation and structuring of complex infrastructure public-private partnerships (PPPs). It allows for the mobilization of private sector and institutional investor capital.
The GIF supports governments in bringing well-structured and bankable infrastructure projects to the market. It focuses on structures that can attract a wide range of private investors by covering design, preparation, structuring and transaction implementation activities.
Overall, the Indian Infrastructure Project Development Fund Scheme (IIPDF) along with Public-Private Partnerships (PPPs) present an efficient solution to address India’s infrastructure needs. They provide a platform for the private sector to contribute to the country’s development while creating investment opportunities.