The Finance Ministry has come out with a scheme to extend financial support for project development expenses of Public Private Partnership (PPP) projects in the infrastructure sector.

Under the scheme named ‘India Infrastructure Project Development Fund’ (IIPDF), Project Sponsoring Authorities (PSA) will get assistance up to Rs 5 crore. A notification to implement the scheme has been issued.

“Funding will be made available for meeting project development costs, which may include expenses incurred by PSA in respect of feasibility studies, environment impact studies, financial structuring, legal reviews and development of project documentation, including concession agreement, commercial assessment studies, grading of projects, etc, required to achieve the Technical Close of such projects, on individual or turnkey basis,” the notification said. It will not include expenses incurred by the PSA on its own staff, but could be spent on consultant and transaction advisors.

The fund was originally conceptualised in the Fiscal Year 2007-08 budget, when the then Finance Minister P Chidambaram proposed setting up a revolving fund to quicken the process of project preparation. Accordingly, a fund was set up in the Finance Ministry with an initial corpus of Rs 100 crore.  The fund has been restructured with a total outlay of Rs 150 crore for a period of three years from 2022-23 to 2024-25.

This is a follow-up to the Finance Minister Nirmala Sitharaman’s 2022-23 Budget announcement that stepping-up public investment to finance infrastructure needs, should be complemented by private capital at a significant scale.

“Measures will be taken to enhance financial viability of projects, including PPP, with technical and knowledge assistance from multilateral agencies. Enhancing financial viability shall also be realised by adopting global best practices, innovative ways of financing, and balanced risk allocation,” she had said. Operationalisation of the fund aims to achieve these objectives.

As a Central Sector Scheme, the IIPDF Scheme will aid development of quality PPP projects by providing necessary funding support to the sponsoring authorities, both in the Central and State Governments, to create a shelf of bankable viable PPP projects. Funding under the IIPDF Scheme is in addition to the already operational Scheme for Financial Support to PPPs in Infrastructure (VGF Scheme) notified two years  back, through which infrastructure projects undertaken in the PPP mode that are economically justified but commercially unviable, are supported.

Under the scheme, the cost of consultants/ transaction advisors (TA) can be funded, where they are appointed through a transparent system of procurement, including from the list of empanelled TA. The government can also use funding under the IIPDF Scheme to engage consultants/TAs for specific assignments of professional services, including providing support to States/UTs.

A statement issued by the Finance Ministry acknowledged that all funding under the IIPDF Scheme may not result in a successful PPP project, as the success of a PPP project depends on various factors. Therefore, “funding under the IIPDF Scheme shall not be recovered,” it said.

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