Funding Infrastructure through

Public Private Partnerships

Presented by
Ms. Charu Modi
Infrastructure Financing
 Characteristics of Infrastructure
Financing Projects
• Longer maturity
 Financing for infrastructure needs to have enough maturities
ranging from 5 to 40 years.
• Larger amount
 Infrastructure finance is included with different set of
initiatives which essentially measure the range of amount
needed in order to complete the projects in the local
rationalities.
• Higher risk
 When large range of amounts are invested for long duration
of time a risk may be elevated which can cause immense
uncertainty in its course.
 Various Models of Financing

• Wholly financed by Government

and/or its agencies
• Wholly financed by Private sector
• Public – Private Partnership (PPP)
 Various Models of Financing

Type Salient Features Examples

• Ministry of
Railways laying
railway lines
Directly through Cash
• Ministry of Water
Contracts
Resources
building dams
Wholly financed by and canals
Government • Nuclear Power
and/or its agencies Corporation
Through wholly owned setting up Nuclear
agencies/corporations Power Plants
Joint Venture between • Delhi Metro Rail
the Central and the Corporation
State governments (DMRC)
• Bengaluru Metro
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 Various Models of Financing

Type Salient Features Examples

Private sector
manages the
entire project right
Wholly financed from
by Private -acquisition of land Healthcare and
Companies/Agen -arranging Power Plants
cies finances
-constructing and
operating the
project

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 Public Private Partnership
Government of India’s Definition

A public-private partnership means a

project based on a contract or
concession agreement, between a
Government or Statutory entity on the
other side, for delivering an
infrastructure service on payment of
user charges.
Another Definition

A public-private partnership exists

when public sector agencies (central,
state, or local) join with private sector
entities (companies, foundations,
academic institutions or citizens) and
enter into a business relationship to
attain a commonly shared goal that
also achieves objectives of the
individual partners.
 Various Models of Financing

Type Salient Features Examples

Government provides land,

facilitates in providing
clearances through State
Public Support Agreement (SSA) National
Private Highways,
Partners In certain cases, it also Metro
hip provides Viability Gap Railway,Airport
(PPP) Funding (VGF) s,Ports
Private sector arranges the
entire funding except the
Viability Gap amount
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 Distinctive Uses

Contracting with a private company to:

 Renovate
 Construct
 Operate
 Maintain
 And/or Manage
A facility or system
Why Funding Infrastructure through
Public Private Partnerships ? ?
 Traditional funding sources are not
keeping pace with infrastructure
investment needs and the growing public
demand for services.
 In short, P3 is a tool that can help
government meet demands for the
development of modern and efficient
facilities, infrastructure and services.
Means of Infrastructure Funding
Sources of Funds for PPP:
 Sources of Funds for PPP:

 Equity offerings
 Debt offerings
 Bank guarantees/ letter of credit/
performance guarantees
 Bond/ capital markets financing
 Mezzanine/ subordinated contributions
 Inter creditor agreement
 Conclusion
PPP routes have been adopted by the
government to meet the funding gap and use
techno-managerial efficiencies of the private
sector to obviate the inefficiencies in the
traditional public procurement system. Various
reforms have been introduced by the Union
Government of India to create an enabling
environment for participation of the private
sector in the development of the infrastructure
projects through the PPP route.