In order to achieve the targeted growth rate of 9 per cent for the 11th Five Year Plan; country requires enormous investment in physical infrastructure. This cannot be met by public sector alone. Moreover, investment in the social sectors is the priority charge on the Government’s own resources as they are not amenable to private investment in a big way. Therefore, it is necessary to explore avenues for increasing investment in infrastructure through a combination of public investment, Public Private Partnerships (PPPs) and also, exclusive private investments wherever feasible. PPPs offer a number of advantages in terms of leveraging public capital to attract private capital and undertake a larger number of infrastructure projects, introducing private sector expense and cost reducing technologies and bringing efficiency in operations and maintenance.

The Government has taken several initiatives to create an enabling framework for PPPs by addressing issues relating to policy and regulatory environment. Progressively more sectors have been opened to private and foreign investment, levy of user charges is being promoted, regulatory institutions are being set up and strengthened and fiscal incentives are given to infrastructure projects. The Government has taken various steps to address the financing needs of these projects. India Infrastructure Finance Company Limited has been set up to provide long tenor debt to infrastructure projects and a scheme for financial support to PPPs in infrastructure has been launched to provide Viability Gap Funding to PPP projects.

Multilateral agencies such as Asian Development Bank have been permitted to raise Rupee bonds and carry out currency swaps to provide long term debt to PPP projects. Setting up of dedicated infrastructure funds are also being encouraged to increase the flow of equity investments. As per the survey of the 221 PPP projects in the main sectors of focus, undertaken at the instance of Department of Economic Affairs for preparation of the Online Database on PPPs, where a contract has been awarded and projects are underway. The road projects account for 78 percent of the total number of projects because of the small average size of projects. Ports, with a much larger average size of project, account for 17 percent of the total number of projects. It is noteworthy that if ports and central road projects are excluded from the total, there is a relatively small value of deal flow, in basic infrastructure PPPs to-dale, suggesting a significant potential upside for PPP projects across sectors where states and municipalities have primary responsibility.

The potential use of PPPs in e-governance, health and education sectors remains largely untapped across India as a whole, though of late there have been some activi¬ties shaping in these, sectors. Almost all contracts have been of the BOT/BOOT type of close variants. The Central Government is working with the State Governments and all other stakeholders to expand the horizon of PPPs in infrastructure development in the country. It has created a favorable atmosphere, provided fiscal incentives and facilitated funding of PPP projects. The Government now allows FDI in most infrastructure sectors to the extent of 100 percent. The time is ripe for the foreign strategic investors for taking greater interest in PPP Projects for infrastructure development.