Scheme for Financing Viable Infrastructure Projects through a Special Purpose Vehicle called the India Infrastructure Finance Company Limited (IIFCL) (Revised)

 1.  Preamble

A.  Whereas the Government of India recognizes that there is a significant deficit in the availability of physical infrastructure across different sectors and that this is hindering economic development

B.  Whereas the development of infrastructure requires debt of longer maturity to supplement the debt funds presently available; and

C.  Whereas the Government of India recognizes that such debt is usually not available because of the following constraints:

(i) Absence of benchmark rates for raising long term debt from the market;

(ii)Asset - liability mismatch of the tenor of debt in case of most financial institutions; and

(iii) High cost of long term debt

D.  Now, therefore, the Government of India has decided to put into effect the following Scheme for providing financial support to improve the viability of infrastructure projects.

2.  Short Title and Extent

2.1 The Scheme will be called the Scheme for financing Viable Infrastructure Projects.  It will be administered by the Ministry of Finance through IIFCL.

2.2 The modified Scheme will come into force with effect from 30th March 2015.

3.  Definitions

In this Scheme unless the context otherwise requires:

(a) Empowered Committee means a Committee set up for the purposes of this Scheme consisting of Secretary (Economic Affairs), Secretary, Planning commission, Secretary (Expenditure) and Secretary (Financial Sector) as Convener and in his absence Special Secretary / Additional Secretary (Financial Sector) and Secretary of the line Ministry dealing with the subject. 

(b) IIFCL means the India Infrastructure Finance Company Ltd (A company incorporated under the Companies Act, 1956).

(c) Lead Bank means the Bank/Financial Institution (FI) that is funding the project and is designated as such by the Inter-Institutional Group or consortium of Banks/Financial Institutions. In case of multiple banking arrangements, the bank / institution having largest exposure would be treated as Lead Bank.

(d)  Long Term Debt means the Debt provided by the IIFCL to the project company where the average maturity for repayment exceeds 10 years (8.5 years in the case of IIFC(UK) Ltd). However, in case of project loans where the flexible structuring model (5/25 model) is adopted by the consortium of lenders, the average maturity for repayment should be of 5 years.

(e) Private Sector Company means a company in which 51% or more of the subscribed and paid-up equity is owned and controlled by private entities;

(f) Project Company means the company which is implementing the infrastructure project for which assistance is to be given by the IIFCL.

(g) Project Term means the duration of the contract or concession agreement for a PPP project.

(h) Public Private Partnership (PPP) Project means 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, for delivering an infrastructure service on payment of user charges; 

(i) Public Sector Company means a company in which 51% or more of the subscribed and paid-up equity is owned and controlled by the Central or a State Government, jointly or severally, and includes any undertaking designated as such by the Department of Public Enterprises and companies in which majority stake is held by Public Sector Companies other than financial institutions. 

(j) Total Project Cost means the total capital cost of the project as approved by the Lead Bank subject to the condition that IIFCL should be able to cover the risk between the PPPAC approved cost and the Lead Bank approved cost by seeking guarantees from the holding company or any other form of recourse.

(k) Subordinate Debt means a debt which ranks lower in security than the project debt carrying a pari passu charge.

4. Sources of funding for IIFCL

4.1 Apart from equity, IIFCL shall be funded through debt raised from the following sources:

(a) Rupee debt raised from the market, through suitable instruments created for the purpose; while the IIFCL would ordinarily raise debt of maturity of 10 years and beyond, for the purpose of repayment / retiring of higher cost debt in a falling interest rate regime, the IIFCL may raise shorter term debt.

(b) Debt from bilateral or multilateral institutions such as the World Bank and Asian Development Bank. Foreign currency debt, including through external commercial borrowings raised with prior approval of the Government.

(c) Short term debt from banks/financial institutions only for the purpose of managing Asset–Liability mismatch or for refinancing to the extent of its Net Worth at any given point of time.

4.2 IIFCL would raise funds as and when required. The funds so raised may be utilised for on-lending and surplus funds may be invested in marketable government securities (G-Sec and T-Bills) and / or Certificates of Deposit, Fixed Deposits and, for Treasury Management purposes, in AAA rated PSU Corporate Bonds,

4.3 The borrowings of IIFCL may be guaranteed by the Government of India. The extent of guarantees to be provided shall be set at the beginning of each fiscal year by the Ministry of Finance, within the limits available under the Fiscal Responsibility & Budget Management Act.

4.4 The guarantee fee payable by IIFCL and IIFC (UK) would be as decided by Ministry of Finance from time to time.

4.5 The facility of guarantees including the terms for guarantee will be reviewed in the Ministry of Finance from time to time and its continuation shall be subject to the outcome of the review.

5.  Eligibility Criteria for Projects

5.1 The IIFCL shall finance only commercially viable projects.  Viable projects may also include those projects that will become viable after receiving viability gap funding under a government scheme.

5.2 In order to be eligible for funding under this Scheme, a project shall meet the following criteria;

A. The project shall be implemented (i.e. developed, financed and operated for the Project Term) by:

(i) A Public Sector Company

(ii) A Private Sector Company selected  under a PPP  initiative; or

(ii) A Private Sector Company

a) Provided that IIFCL shall accord overriding priority for lending under this Scheme to Private Public Partnership projects that are implemented by Private Sector Companies selected through a competitive bidding process.

b) Provided further that IIFCL can lend directly to projects set up by private companies subject to the following conditions:

(i) The service to be provided by the Infrastructure project is regulated, or the project is being set up under an MOU arrangement with the Central Government, any State Government or a PSU.

(ii) The tenor of IIFCL lending should be larger than that of the longest tenor commercial debt by at least two years.

(iii) Direct lending (including Subordinate Debt) plus the refinance business, if any, on account of this category of borrowers (private sector companies not selected through a competitive bidding process) should not exceed 40% of the total lending by IIFCL in any accounting year. In case of IIFC(UK) Ltd, direct lending plus refinance business, if any, on account of this category of borrowers (private sector companies not selected through a competitive bidding process) should not exceed 50% of total lending in any accounting year.

B. Provided that in case of Railway projects that are not amendable to operation by a Private Sector Company, the Empowered Committee may relax the eligibility criterion relating to operation by such company.

C.  The project should be from one of the following sectors:

Sl. No.


Infrastructure sub-sectors



Roads and bridges



Inland Waterways


Railway Track, tunnels, viaducts, bridges3

Urban Public Transport (except rolling stock in case of urban road




Electricity Generation

Electricity Transmission

Electricity Distribution

Oil pipelines

Oil/Gas/Liquefied Natural Gas (LNG) storage facility4

Gas pipelines5


Water and Sanitation

Solid Waste Management

Water supply pipelines

Water treatment plants

Sewage collection, treatment and disposal system

Irrigation (dams, channels, embankments, etc.)

Storm Water Drainage System

Slurry Pipelines



Telecommunication (fixed network)6

Telecommunication towers

Telecommunication & Telecom Services


Social and Commercial Infrastructure

Education Institutions (capital stock)

Sports Infrastructure7

Hospitals (capital stock)8

Three-star or higher category classified hotels located outside cities with population of more than 1 million

Common infrastructure for Industrial Parks and other parks with industrial activity such as food parks, textile parks, Special Economic

Zones, tourism facilities and agriculture markets

Post-harvest storage infrastructure for agriculture and horticultural

produce including cold storage

Terminal markets

Soil-testing laboratories

Cold Chain9

Affordable Housing10


1.     Includes Capital Dredging

2.    “Shipyard” is defined as a floating or land-based facility with the essential features of waterfront, turning basin, berthing and docking facility, slipways and/or ship lifts, and which is self sufficient for carrying on shipbuilding/repair/breaking activities.

3.     Includes supporting terminal infrastructure such as loading/unloading terminals, stations and buildings.

4.     Includes strategic storage of crude oil.

5.     Includes city gas distribution network.

6.     Includes optic fibre/wire/cable networks which provide broadband / Internet.

7.    Includes the provision of Sports Stadia and Infrastructure for Academies for Training/Research in Sports and Sports-related activities.

8.    Includes Medical Colleges, Para Medical Training Institutes and Diagnostics Centres.

9.    Includes cold room facility for farm level pre-cooling, for preservation or storage of agriculture and allied produce, marine products and meat.

10. “Affordable Housing” is defined as a housing project using at least 50% of the Floor Area Ratio (FAR)/Floor Space Index (FSI) for dwelling units with carpet area@ of not more than 60 square meters.






@ “Carpet Area” shall have the same meaning as assigned to it in clause (k) of section 2 of the Real Estate (Regulation and Development) Act, 2016.  


Further, updating of the list of infrastructure subsectors in the SIFTI under this clause may be automatic as and when the list is updated by the Government of India and RBI.  


The following sectors are added as applicable in case of IIFC (UK) Ltd.

·         Mobile telephony services/ companies providing cellular services

·         Mining

·         Exploration and

·         Refining

Further, modifications relating to infrastructure subsectors in the clause may be automatic as and when changes are made by the Government of India and RBI (ECB guidelines).

5.3  Only such projects, which are implemented by the borrower company directly, or through a special purpose vehicle on a non-recourse basis, and where an escrow account or other suitable mechanism for securing servicing of debt obligations (eg. DSRA) is in place,, shall be eligible for financing by IIFCL.

5.4 In the event that the IIFCL needs any clarification regarding eligibility of a project, it may refer the case to the Empowered Committee for appropriate directions.

5.5 In case of PPP projects approved by PPPAC/EC/EI which have provision of compulsory buyback by the authority on termination, IIFCL may offer loan with tenor longer than other lenders and remain sole lender, if necessary, after other lenders are paid out.

6.  Appraisal and Monitoring by Lead Bank

6.1 IIFCL shall consider sanction of loan to a project based on the appraisal of Lead Bank or of reputed appraising institutions/banks/international financial institutions. IIFCL may also consider sanction of a loan on the basis of its own appraisal and assume the role of lead lender.

Based on such appraisal, the IIFCL may consider and approve funding to the extent indicated in Article 7 below.

6.2 The Lead Bank shall carry out regular monitoring and provide periodic evaluation of compliance of the project with agreed milestones and performance levels.  It shall send periodic progress reports to IIFCL. IIFCL may also carry out the regular monitoring of projects on its own.

7.  Mode of Funding

7.1 IIFCL may fund viable infrastructure projects through the following modes:

(a) Long Term Debt;

(b) Refinance to Banks and Public Financial Institutions for loans granted by them.

(c) Take out Financing

(d) Subordinate Debt

(e) Credit enhancement

(f) Any other mode approved by the Ministry of Finance from time to time.

7.2 The total lending by the IIFCL to any Project Company shall not exceed 20% of the Total Project Cost.  In case of takeout financing, direct lending to the project shall not exceed 10% of the project cost and total lending including takeout financing by IIFCL shall not exceed 30% of the total project cost. Loans will be disbursed in proportion to debt disbursements from banks/ financial institutions. The above exposure shall further be subject to applicable regulatory norms.

7.3 The rate of interest charged by IIFCL shall be determined on the basis of its Base Rate plus which will be arrived at on the basis of average cost of funds including administrative costs, average return on net worth and cost of guarantee fee etc.

7.4 The charge on project assets shall be pari passu with project debt (other than subordinate debt) and will continue beyond the tenure of project debt (other than subordinate debt) till such time the amounts lent by IIFCL, together with interest and other charges thereon remain outstanding.

Subordinate Debt

7.5 Provided that IIFCL can provide subordinate debt subject to following conditions:

a)  The project should have been awarded through open competitive bidding;

b)   It should have been approved by the PPPAC (Public-Private-Partnership Approval Committee) under the Guidelines for Formulation, Appraisal and Approval of PPP projects or by the Empowered Institution under the Guidelines for Financial Support to PPP in infrastructure;

c)  The Concession Agreement should provide for an Escrow Account that would secure the annual repayment of subordinate debt before returns on equity are paid.

d)  In case of termination of concession agreement, the concessioning authority will pay in terms of termination payment at least 80% of the subordinate debt on account of a concessionaire default or Concessioning Authority default, during operation period of the concession in the escrow account as mentioned in the Model Concession Agreement (MCA).  Where MCA is not available, a similar provision should be incorporated.

e)   Subordinate debt shall not exceed 10% of the total project cost and shall form part of the maximum limit of 20% as specified in para 7.2 of the SIFTI; and

f)   Subordinate debt to be borrowed by the project company from any or all sources shall not exceed one half of its paid up and subscribed equity.

g)  Subordinate debt lenders shall have second charge on all assets (including receivables) of the Borrower, both present and future, to secure the subordinate debt as mentioned in the loan agreement.  The said second charge to secure subordinate debt shall rank pari passu with all lenders for their subordinate debts.  The above mentioned second charge of subordinate debt lenders shall be subordinate to the first pari passu charge of the senior lenders for their senior debts; and

h)  Subordinate debt shall not be converted into equity.

7.6 IIFCL may extend sub-debt facility to non- PPP projects in the power sector only in extenuating circumstances on a case by case basis and in compliance with clauses 7.5 (e-h)

8.  Lending to PPP projects

8.1 In case of PPP projects, the private Sector Company shall be selected through a transparent and open competitive bidding process.

8.2 PPP projects based on standardized/model documents duly approved by the respective government would be preferred.  Stand – alone documents may be subjected to detailed scrutiny by the IIFCL.

8.3 Prior to inviting offers through a open competitive bid, the concerned government or statutory entity may seek ‘in principle’ approval of the IIFCL for financial assistance under the Scheme.  Any indication given by IIFCL at the pre-bid stage shall not be treated as a final commitment.  Actual lending by IIFCL shall be governed by the appraisal by the Lead Bank carried out before financial closure of the project.

9.  Review of the Scheme

9.1 The Scheme may be reviewed by the Government in the Ministry of Finance, Department of Financial Services, as and when required.

9.2 IIFCL would be regulated by Reserve Bank of India.

9.3 Modifications to the SIFTI may be made at the level of Empowered Committee subject to the approval of the Finance Minister.