The Treasury plans to release a new public-private partnership (PPP) architecture and standard model concession agreement (MCA) framework for various sectors in FY24 to revitalize the allure of capital-intensive infrastructure projects and attempt to attract funds by increasing their Emphasizes ‘feasibility’ and bankability.’
The focus will be on turning the tide of sectors such as urban infrastructure, railways and roads, where private involvement is either minimal or far from realizing true potential, a senior official said.
Likewise, the proposed MCA framework would serve as a standard reference document for various infrastructure departments and government agencies. It gives them enough flexibility to suitably incorporate clauses specific to their sectors.
“Private capital and bank loans automatically flow in when an infrastructure project is deemed viable and bankable,” said the official, who asked not to be named. “Therefore, a lot of value is placed on designing infrastructure projects in such a way that they stand on their own and generate money.”
According to a November 2022 World Bank report, India needs to invest $840 billion over the next 15 years — or an average of $55 billion a year — in urban infrastructure alone if it is to effectively meet the needs of its fast-growing urban population.
The Economics Department coordinates with the responsible ministries and departments of the central government in order to specify the framework conditions.
The PPP framework is unlikely to have an incentive-driven architecture, but there could be some government support in the early stages of projects in selected sectors to make them viable.
For example, various models are being examined for metro projects, including by the authorities in Bengaluru, Hyderabad and Pune. To attract investors, subway projects in some of these cities are combined with a certain amount of developed real estate, which also generates a steady cash flow, the official said.
The Bangalore Metro Rail Corp. offers investors a range of privileges, including naming and advertising rights and space for commercial activities, for around £100m.
User fees could also be levied in some sectors to make the projects attractive to private investors.
Sectors such as telecoms, ports and airports have managed to attract private investors thanks to the user fee model, he said.
The move to introduce a new approach to infrastructure development and financing came after the pandemic, when the central government sharply increased its own capital spending to boost employment and boost economic growth, betting on its high multiplier effect. A government task force on the National Infrastructure Pipeline (NIP) had in April 2020 envisaged capital investment of 111 lakh crore by FY25.