Infrastructure Projects Financing

Infrastructure projects typically bear a long period of gestation, which needs to be supported by debt of a longer tenure.  Inadequate availability of long-term debt from domestic financial institutions posed an challenge for sustainable financing of PPP projects.

The Government decided to create a new financing vehicle  India Infrastructure Finance Company Limited (IIFCL) with a mandate to provide long-term debt to PPP projects . The exposure of IIFCL in any project was limited to 20 % of the project costs, which translated to about 30% of project debt, assuming a debt equity ratio of 70:30.

Provisions in income tax act

Section 10(23G) of the Income Tax Act

This clause exempts tax on income from dividends, interest and long term capital gains from any investment made in an enterprise engaged in the business of developing, maintaining and operating an infrastructure facility — and has been of great help in facilitating infrastructure investments.

Tax holidays under section 80IA

Section 80IA of the Income Tax Act relates to infrastructure projects and provides for 100 percent tax deduction on profits for 10 years and 50 percent for the next five.

Hybrid Annuity Model (HAM)

Hybrid annuity means that payment is made in a fixed amount for a considerable period and then in a variable amount in the remaining period. In this, Government will contribute to 40% of project cost in the first five years through annual payment (annuity). The remaining payment will be made on the basis of the assets created and the performance of the developer. Here, hybrid annuity means the first 40% payment is made as fixed amount in five equal instalments whereas the remaining 60% is paid a variable annuity amount after the completion of the project depending upon the value of assets created

National Investment and Infrastructure Fund (NIIF)

The Government has set up National Investment and Infrastructure Fund (NIIF), as announced in the Union budget 2015-16, with a proposed corpus of INR 40,000 crore, which may be raised from time to time. The Government’s share/contribution in the corpus will be 49 percent, the balance 51 percent raised from strategic anchor partners viz., Multilateral/bilateral institutions, Sovereign Wealth Funds, Pension funds and domestic Public sector enterprises. This would help in leveraging resources from public as well as private sector and augmenting equity flow to infrastructure projects

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Project Planning and Management  Study notes for M. plan Sem-II

project planning and management.pdf

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