National Infrastructure Pipeline ( NIP) 2020 – 2025: (Indian infrastructure )

• In 2019, the Ministry of Finance estimated that to achieve a GDP of $5 trillion by 2024-25, India needed to spend about $1.5 trillion (Rs 111 lakh crore) over these years in infrastructure. Keeping this in mind, the government has launched the National Infrastructure Pipeline (2020-25) with a projected indian infrastructure investment of around Rs 111 lakh crores. It also envisages improving project preparation and attracting domestic and foreign investment in indian infrastructure.
• –  Progress So Far:

Jointly funded by Central Government, State Government and Private Sector:( indian infrastructure)

Some steps to improve the implementation of NIP:

Invest India Grid (IIG):

NIP is hosted on the Invest India Grid (IIG) platform and provides and provides opportunities states/UT and ministries to collate all major indian infrastructure projects at a single location. It is thus a centralized portal to track and review project progress across all economic and social infrastructure sub-sectors. It also provides the project sponsoring authorities to showcase investment opportunities to national and international investors.

Project Monitoring Group (PMG):

It is an institutional mechanism put in place by the government for resolution of issues related to large-scale projects. It is also involved in fast tracking of approvals/ clearances for projects with an anticipated investment of Rs 500 crore and above. Now it has been proposed to integrate NIP and PMG portals. PMG portal will pick up data, as per requirements (project cost of Rs 500 crore.or more), from the NIP database. This will save substantial time and effort by Ministries and States/UTs and ease monitoring of large-scale projects.

NATIONAL MONETIZATION PIPELINE (INFRASTRUCTURE)

Background
Asset Monetization is one of the key recommendations of National Infrastructure Pipeline (2020-25) or india infrastructural peipeline.

Consequently, National Monetization Pipeline was announced in 2021. It focuses on the principle of ‘asset creation through monetization’ and thus taps private sector investment for new indian infrastructure creation.

– Details:

»  Asset monetization entails a limited period license/lease of a brownfield underutilized asset owned by government or a public agency, to a private sector entity for an upfront or periodic consideration.

• ▫  The private sector entity is expected to operate and maintain the asset based on the terms of the contract/concession, generating returns through higher operating efficiencies and enhanced user experience.
• ▫  Public authority, which receives the fund, will invest it in new infrastructure or deploy it for other public purposes.

• »  A robust asset pipeline has been prepared to provide a comprehensive view to investors and developers of the investment avenues in indian infrastructure.

▫ It includes selection of de-risked and brownfield assets with stable revenue generation profile (or long rights) which will make for an attractive investment option.

Total indicative value of NMP for core assets of the Central Government has been estimated at Rs 6.0 lakh crore over 4-year period (FY22 – 25) (5.4% of the total infrastructure investment envisaged under NIP)

• –  National Land Monetization Corporation (NLMC): Cabinet approved the setting up of the NLMC to monetize surplus land and building assets of CPSEs and other agencies linked to government (March 2022)
• –  Progress so far: ESI 2022-23:
  • ▫  Against the monetization target of 0.9 lakh crore in FY22, Rs 0.97 lakh crore have been achieved during the period under roads, power, coal and mines.
  • ▫  NMP’s 2nd year target, i.e. FY23 target is ₹ 1.6 lakh crore (27% of the overall NMP target).

3) PM GATISHAKTI NATIONAL MASTER PLAN:

Need of PM GatiShakti:

▫ There are many infrastructure projects ( indian infrastructure projects) like roadways, railways, airways, waterways, internet connectivity (optical fiber), Gas Pipelines etc. These projects come under different ministries, leading to lack of coordination in planning and implementation of these projects. This leads to duplication of work, delays, financial loss, increase in cost etc., which eventually puts more burden on the public exchequer and impacts the quality of services reaching people.

• E.g. 1: Newly built roads being dug by water departments to lay pipelines.
• E.g. 2: Newly built fertilizer factory not working properly as the gas supply infrastructure isn’t available.
• E.g. 3: Separate tunnel for roadways and railways.

Details
▫ PM GatiShakti is aimed at breaking departmental silos and bring more holistic and integrated planning and execution of projects with a view to address the issue of Multi-Modal connectivity and last mile connectivity.

• This will help in bringing down the logistic cost and will translate into enormous financial gains to consumers, farmers, youth as well as those engaged in businesses.

• –  The PM GatiShakti National Master Plan entails creation of a common umbrella platform with all infrastructure projects pertaining to various ministries/ departments incorporated within a comprehensive database for efficient planning and implementation on a real-time basis.
  •  This indian infrastructure projects pertaining to seven engines (roads, railways, airports, ports, mass transport, waterways, and logistic infrastructure) in the NIP have been aligned with PM GatiShakti framework.
  •  In order to facilitate integrated planning and coordinated implementation, a GIS based and data driven decision support called PM Gatishakti National Master Plan has been introduced.
  •  The portal will also allow various government departments to track, in real time and at one centralized place, the progress of various projects. This will enable various government departments to synchronize their efforts into a multi-modal network.
  • ▫  The portal will also highlight all the clearances any new project would need, based on its location – and allow stakeholders to apply for these clearances from the relevant authority directly on the portal.
• Six Pillars of PM Gati Shakti

PM Gati Shakti is based on six pillars: Comprehensiveness, Prioritization, Optimization, Synchronization, Analytics and Dynamic.

•  How were inter-ministerial issues resolved earlier?
  •  At regular meetings of infrastructure related ministries.
  •  PM PRAGATI (Pro-Active Governance and Timely Implementation) portal also helped in resolution of several issues even prior to inter-ministerial meetings.
  •  How would Gatishakti portal help?
    It will reduce the human intervention required as ministries will be in constant touch, and projects will be reviewed by the project monitoring group in real time.
•  Who has built the portal?

▫ The Bhaskaracharya Institute for Space Applications and Geoinformatics (BISAG-N).

NATIONAL INVESTMENT AND INFRASTRUCTURE FUND (NIIF) or ( indian infrastructure fund):

Introduction

» NIIF was proposed in Union Budget 2015 and was set up by GoI in Dec 2015 with a corpus of Rs 40,000 crore to provide long term capital for infrastructure projects.

– Objectives

» To maximize economic impact through infrastructure development in viable projects both greenfield and brownfield, including stalled projects, mainly in the core infra sector.

– Structure:

•  NIIF has been structured as a Fund of funds and set up as Category II Alternate Investment Fund (AIF) under SEBI.
•  GoI has 49% stake in NIIF with rest being held by marquee foreign domestic investors such as Abu Dhabi Investment Authority (ABIA), Temasek and HDFC group. This helps NIIF to be seen with characters of both sovereign fund as well as private fund (and is sometimes referred as India’s quasi sovereign wealth fund).
•  The government invested Rs. 20,000 crores into it from Budget while the remaining 20,000 crores are expected to come from private investors (including foreign).
•  Fund of funds means that there would be multiple alternative investment funds underneath the main fund. § How much does it manage presently?
  $ NIIF manages about $5 billion of capital commitments across four funds, each with a distinct investment strategy.
• NIIF Master Fund: It focuses on infrastructure and operating assets. It is the largest infrastructure fund in India, with commitment of over US$1.8 billion. It has the largest size of US$2.1 billion.
• NIIF Private Market Fund: It invests in funds managed by third-party managers in indian infrastructure and associated sectors.
• NIIF Strategic Opportunities Fund: It invests and develops large-scale businesses and greenfield projects that are of strategic importance to the country. It has a target size of $3 billion.
• India-Japan Fund: It is NIIF’s first bilateral fund and invests in environmental preservation in India. It also seeks to enable opportunities for collaboration between Indian and Japanese companies in India.

– Governance
» NIIF has been set up as a Trust registered under the Indian Trust Act. The activities of NIIF will be overseen by a Governing Council, which will be headed by Finance Minister.

•  Functions of NIIF
  •  NIIF would raise funds from investors and markets and would invest the same in companies, institutions and infrastructure projects.
  •  It will also provide advisory services.
•  Sources of Funds
• The sources of funds of NIIF are as follows.
• GovernmentBudgetaryFunds to each AIF setup under NIIF,these funds will be provided every year as required.
• § Private investors. The funds will solicit equity participation from strategic anchor partners. It is also expected to attract overseas investors, PSUs, domestic pension, provident funds and NSSF (National Small Savings fund) also.

A) ALTERNATE INVESTMENT FUND (AIF):

• Alternative Investment Funds are a class of investment entities that are not covered under the usual SEBI regulatory framework for investment institutions. § AIF refers to any privately pooled investment fund (trust, company or LLP) which are not presently covered by any regulation of RBI, SEBI, IRDA and PFRDA. They may be foreign or Indian.
•  They include private equities, Venture Capital Funds, Hedge Funds, Commodity Funds, Debt Funds, indian infrastructure funds etc. They are generally owned by big corporate houses or wealthy individuals.
•  This classification is done for the purpose of regulation.
• SEBI in 2012 had notified guidelines for AIFs as funds established or incorporated in India for pooling in of capital from Indian or foreign investors for investing as per a pre-decided policy. § SEBI guidelines have classified AIF in three categories:
  1. Category1: AIFs which can produce positive spillovers in the economy and for that getincentives from government, SEBI or other regulators. They include social venture funds, Infra funds, Venture capital funds including angel investors, SME funds etc.
  2. Category2: For these funds no specific incentives or concessions are given by the government or any regulator. These includes private equity funds, debt funds, Funds of Funds and such other funds.
  3. Category 3 AIFs are institutions like hedge funds that trade with a view to make short term returns. They employ diverse or complex trading strategies and do leverage including investment in listed or unlisted companies.

5) INFRASTRUCTURE INVESTMENTS TRUST (INVITS)( or indian infrastructure trust):

• InvITs are mutual funds like institutions that enable investment into the indian infrastructure sector by pooling small sums of money from multitude of individual investors for directly investing in indian infrastructure so as to return a portion of the income (after deducting expenditures) to unit holders of InvITs, who pooled the money.
• –  They are designed to attract low-cost, long-term capital in indian infrastructure sector and reduce pressure on the banking system.
• –  Structure of InvITs in India
  » InvITs are set up as a trust and registered with SEBI. » Regulation
  •  InvITs are regulated in India by SEBI.
  •  SEBI notified SEBI (Infrastructure Investment Trusts) Regulations, 2014, providing for regulation and registration of InvITs in India with an objective of facilitating investment in indian Infrastructure sector.
    • InvITs can invest in indian infrastructure projects, either directly or through a special purpose vehicle (SPV). In case of a PPP project, such investments can only be through SPV.
    • As per the present regulations, InvIT unit’s minimum size is Rs 10 Lakh and thus are suitable only for High net worth individuals, institutional and non-institutional investors like pension funds, FPI, MF, banks and insurance firms.
  • InvITs are listed on exchanges just like stocks – through IPO
  • – Taxes
  • • Capital Gain Tax
  • – India’s First InvIT issue was done by road developer IRB indian Infrastructure in May 2017 which garnered Rs
  • 5,035 crore through IPO.

PUBLIC PRIVATE PARTNERSHIP (PPP):

Introduction:
▫ In 1997, the report of the Rakesh Mohan Committee (RMC) concluded that India’s problem was that of poor indian infrastructure holding back development. It also highlighted the importance of bringing in the private sector into most areas of indian infrastructure in the country.

• –  Public Private Partnership (PPP) is a collaborative arrangement between government and private sector to jointly plan, mobilize resources, develop, and/or operate indian infrastructure projects.
• –  Significance of Public Private Partnerships:
  • ▫  Mobilization of Resources: For e.g. in the BOT (Toll/ Annuity) model of road construction, private player invests the entire initial money for the construction of the road project).
  • ▫  Getting Private Sector expertise and Innovation: E.g. in the EPC model, private sector engineers and construct the entire road.
  • ▫  Risk Sharing
  • ▫  Increased Efficiency and Reduced cost of the project
  • ▫  Increased Transparency and Accountability
  • ▫  Better Infrastructure
• –  But, the success of PPPs lies in the robustness of institutional structure, financial support, and use and availability of standardized documents, such as Model Requests for Qualifications (RFQ), Model Request for Proposal (RFP) and Model Concession Agreement (MCAs).
• –  Government of India has taken several measures:
• Government of India has streamlined the appraisal and approval mechanism for Central Sector PPP projects to ensure speedy appraisal of projects, eliminate delays, and have uniformity in appraisal mechanisms.

» Procedure for approval of PPP projects was finalized in 2005 and in 2006, the Public Private Partnership Appraisal Committee (PPPAC) for the appraisal of was notified in 2006. It has cleared 79 projects with a total cost of Rs 2,27,268 crore from FY15 to FY23.

Viability Gap Funding (VGF) Scheme, 2006

» It provides financial assistance to financially unviable but socially/economically desirable PPP projects.

» Economic Sector Projects may get upto 40% of Capex as VGF grant.
» Social Sector Projects include higher provisions of VGF grant. It may get upto 80%

of CAPEX and upto 50% of the Operating Expenditure (OPEX).

India Infrastructure Project Development Fund (IIPDF) Scheme notified in Nov 2022

•  The scheme aims to develop quality PPP projects by providing necessary funding support to project sponsoring authorities, both in the central and the state governments, for creating a shelf of bankable and viable PPP projects by on-boarding transaction advisors.
•  It has an outlay of Rs 150 crores for a period of 3 years from FY23 to FY25.
•  Under the scheme a maximum amount of Rs 5 crores for a single proposal, inclusive of any tax implications, can be funded which can include cost of consultants/transaction advisors of a PPP project.
•  By: Department of Economic Affairs (DEA), Ministry of Finance, GoI

– Several types of PPP Models are used in India infrastructure in different sectors:

• »  EPC Model (Engineering, Procurement, and Construction): In this model, the cost of project is completely borne by government. Private sector with its expertise is responsible for engineering, procuring raw material and constructing the project. Ownership remains with government.
• »  Built Operate and Transfer (BOT) model involves private player entity designing, financing, constructing, operating, and maintaining an indian infrastructure projects for a specific period. After the specified period, the ownership is transferred back to government. This model has been used in sectors like Roadways, Ports, Airports and Power Generation. It can be of two types – BOT (Toll) & BOT (Annuity).
• »  Hybrid Annuity Model (HAM): It is a mix of EPC and BOT (Annuity) model.
• »  Build Own Operate (BOO): The private sector entity builds and owns the asset, and then operates it for a specified period of time.

• Government has agreed to “buy” the goods and services delivered by the project on mutually acceptable terms and circumstances.

• »  Build Own Operate Transfer (BOOT):
  • It is a model of PPP in which a private company is granted a concession to finance, build, own, and operate a project for a specified period of time. At the end of the concession period, the project is transferred back to government. § E.g. of project under BOOT model, Delhi Mumbai Expressway, The Mumbai Metro, the Bangalore International airport etc.
  • It involves a private sector entity being responsible for the complete lifecycle of the project, including design, financing, construction, operation, and maintenance. However, here private sector entity retains ownership of the project even after the concession period.
• »  Build Own Lease Transfer (BOLT): It is a PPP model in which a private company is granted a concession to finance, build, own and lease a project to the government for the specified period of time. At the end of the concession period, the project is transferred back to government. Some notable BLT projects in India are, the Delhi-Gurgaon Expressway and the Mumbai-Pune Expressway.
• »  Design Build Finance and Operate (DBFO): It allows a private sector to design, build, finance, and operate a project for a specified period of time. This public sector client retains the ownership of the indian infrastructure project, but the private sector contractor is responsible for all aspects of its delivery.
• • E.g. Delhi Metro: Project was awarded to a consortium of private companies, which designed, built, financed, and operated the metro for a period of 30 years. At the end of the concession period, the metro will be transferred back to government.
• »  Lease Developed Operate (LDO) Model: Private company is granted a concession to finance, develop, and operate a indian infrastructure project for a specified period of time. The government sector retains the ownership of indian infrastrucuture projects, but the private sector is responsible for all aspects of its delivery. At the end of the concession period, government may choose to operate the indian infrastructure project itself, or it may contract with another private company to operate the project.
• »  Rehabilitate-Operate-Transfer (ROT) Model: Under this model, government allows private promoters to rehabilitate and operate a facility during a concession period. After the concession period, the indian infrastructure project is transferred back to government / local bodies.
• – Recommendations of Vijay Kelkar Committee (on indian infrastructure projects)
• » Vijay Kelkar Committee on “Revisiting & Revitalizing the PPP model of indian infrastructure Development” was set up in the Union Budget of FY15-16. It recommended:
• The Need of PPP contract to be more focused on service delivery.
• The need to identify, balance and allocate risks amongst the different stakeholders.
• Viability Gap Funding for unviable social and economic projects
• Careful monitoring of performance as well as managing the risk.

To be continued >.. next article coming soon

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