GENESIS
The importance of
infrastructure for sustained economic development and improving the
living standards of the population is well recognized. Yet, millions
of people, across the world lack access to roads, transport,
electricity, safe drinking water, proper sanitation and communication
facilities. Inadequate and inefficient infrastructure not only adds to
transaction costs but also prevents the economies from realizing
their full growth potential.
With
Indian economy moving on to a high growth trajectory facilitated by a
consistent and steady growth of 8 - 9% in the recent years, there is a
critical need to accelerate investments in the infrastructure sector.
In fact, infrastructure has emerged as a key driver for sustaining the
robust growth of the economy and the government has been focusing on
development of infrastructure. Although there has been progress in
attracting private investments into infrastructure, Gross Capital
Formation (GCF) in infrastructure has hovered around 5 percent of
Gross Domestic Product (GDP). The 11th Five Year Plan
(2007-2012) has envisaged raising the level of GCF in infrastructure
to 9 percent of GDP by 2012 , thereby matching the levels obtaining in
some of the Asian economies.
The
Hon’ble Finance Minister of India, while presenting the Union Budget
for 2005-2006 acknowledged the need and significance of building
adequate infrastructure in the country when he made the following
announcement:
“
The importance of infrastructure for rapid
development cannot be overstated. The most glaring deficit in India is
the infrastructure deficit. Investment in infrastructure will continue
to be funded through the Budget. However, there are many
infrastructure projects that are financially viable but, in the
current situation, face difficulties in raising resources. I propose
that such projects may be funded through a financial Special Purpose
Vehicle ….. The SPV will lend funds, especially debt of longer-term
maturity, directly to the eligible projects to supplement other loans
from banks and financial institutions. Government will communicate the
borrowing limit to the SPV at the beginning of each fiscal year”.
Government of India, accordingly approved a Scheme for Financing
Viable Infrastructure Projects through a Special Purpose Vehicle
called the India Infrastructure Finance Company Ltd, broadly referred
to as SIFTI.
Accordingly, India
Infrastructure Finance Company Ltd (IIFCL) was established in January
2006 as a wholly owned Government of India company and commenced its
operations from April 2006.
IIFCL
: CATALYSING DEVELOPMENT OF INFRASTRUCTURE
India Infrastructure Finance
Company Ltd (IIFCL) is providing long term financial assistance to
various viable infrastructure projects in the country in terms of the
SIFTI. The authorized capital of the company is Rs20 billion and the
Paid-Up capital is currently Rs10 billion. Apart from equity, IIFCL
raises long term debt from the domestic market , debt from bilateral
and multilateral institutions and in foreign currency through external
commercial borrowings. The borrowings of the company are backed by
sovereign guarantee.
Salient
features of SIFTI
IIFCL shall
finance only commercially viable infrastructure projects. In order to
be eligible for funding by IIFCL, the following will be the
eligibility criteria:
Eligibility
Ø
The project shall be
implemented by
§
A Public Sector Company ;
§
A Private Sector Company
selected under a Public-Private Partnership (PPP) initiative ;
§
a private sector company
provided
§
it has undertaken a
project where the service to be provided is regulated or
§
the project is being set
up under an MoU arrangement with the Central, any State government or
a Public Sector Undertaking.
§
Total lending for such
private projects shall not exceed 20% of the lending programme of the
company in any accounting year
§
The tenor of IIFCL lending
should be larger than that of the longest tenor commercial debt by at
least two years.
Ø
The project should be from
one of the following sectors
§
Roads and bridges,
railways, seaports, airports, inland waterways, other transportation
projects;
§
Power;
§
Urban transport, water
supply, sewage, solid waste management and other physical
infrastructure in urban areas;
§
Gas pipelines
§
Infrastructure projects
in Special Economic Zones (SEZs) and
§
International
Convention Centres and other tourism infrastructure projects.
Ø
Projects which are set up
on “non-recourse” basis would only be eligible for financing by IIFCL.
Ø
Disbursement of loans by
IIFCL is subject to the appraisal being done by reputed appraising
institutions and the lead bank accepting and adopting the same. IIFCL
shall disburse the loan only after getting the sanction from the Lead
Bank.
Ø
IIFCL would not normally
carry out any independent appraisal of the project.
Ø
Lead Bank shall be
responsible for regular monitoring and periodic evaluation of
compliance of the project with the agreed milestones.
Lending Terms
Ø
IIFCL may fund viable infrastructure
projects through the following modes:
§
Long term debt;
§
Refinance to banks and financial
institutions for loans with tenor of more than 10 years, granted by
them.
§
Any other mode approved by Government of
India
Ø
Total lending to any project by IIFCL
shall not exceed 20% of the total project cost subject to exposure of
IIFCL being less than that of the lead bank.
Lending to PPP projects
Ø
A project awarded to private sector company through PPP
shall be accorded priority for lending by IIFCL.
A PPP project has been defined under the Scheme as a
project based on a contract or concession agreement between a
government or a statutory entity on the one side and a private sector
company on the other side, delivering an infrastructure service on
payment of user charges.
Ø
In case of PPP projects, the private
sector company shall be selected through a transparent and open
competitive bidding process.
Ø
PPP projects based on standardized/model
documents duly approved by the respective government would be
preferred.
Business
Performance (as on 31st March 2009)
Ø
Within a short span of its inception, the
company has expanded its activities and has sanctioned financial
assistance of Rs 187.60 billion to 107 projects involving a total
project cost of Rs1492.03 billion.
Ø
Of the 107 projects which have
been sanctioned, 88 projects have achieved financial closure and
documents have been executed.
Ø
The 107 assisted projects are
spread across 19 states of the country
Ø
77 cases, disbursements have
been made to the tune of Rs 48.81 billion involving a project cost of
Rs 1076.57 billion.
Financial Performance (FY 2008-09)
IIFCL
has been earning Net Profit from the first year of its operations. The
company has continued its strong growth during the subsequent years which
is reflected in its improved financial performance.
·
Non-performing Advances (NPAs)
were NIL%
·
Net Worth increased from Rs8.29
billion to Rs14.34 billion
·
Profit Before Tax
increased by 344% from Rs0.34 billion to Rs1.51 billion
·
Provision for Standard assets
increased from Rs 0.07 billion to Rs 0.13 billion
·
Infrastructure reserve
improved from Rs0.08 billion to Rs0.17 billion
-
Profit After Tax grew by 396% from Rs0.14
billion to Rs 0.70 billion.
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