SIFTI

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Scheme for Financing Viable Infrastructure Projects through a Special Purpose Vehicle called the India Infrastructure Finance Company Limited (IIFCL) (As applicable from 19-March-2020)

1. Preamble

  1. 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
  2. Whereas the development of infrastructure requires debt of longer maturity to supplement the debt funds presently available; and
  3. 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.

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, Niti Aayog, Secretary (Expenditure) and Secretary (Financial Services) as Convener and in his absence Special Secretary / Additional Secretary (Financial Services) 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 door to door tenure for repayment exceeds 10 years. However, in case of project loans where the flexible structuring model (5/25 model) is adopted by the consortium of lenders, the door to door tenure for repayment should be of 5 years.

The door to door tenure of debt in the case of IIFC (UK) Ltd. should be equal to or higher than the minimum tenure on External Commercial Borrowings (ECBs) as per extant norms of RBI

(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 (Public-Private-Partnership Approval Committee) 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;

  1. 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

  1. 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.
  2. b) Provided further that IIFCL can lend directly to projects set up by private companies subject to the condition that the tenor of IIFCL lending should not be less than the longest tenor of commercial debt. However, since IIFCL was set up for providing long term debt, endeavour would be to provide loans with longer tenure than the commercial debt.
  3. Provided that in case of Railway projects that are not amenable to operation by a Private Sector Company, the Empowered Committee may relax the eligibility criterion relating to operation by such company.
  4. The project should be from one of the following sectors:
Sl. No.CategoryInfrastructure sub-sectors
1.

Transport and

Logistics

·       Roads and bridges

·       Ports1

·       Shipyards2

·       Inland Waterways

·       Airport

·       Railway track including electrical & signalling system, tunnels, viaducts, bridges

·       Railway rolling stock along with workshop and associated maintenance facilities

·       Railway terminal infrastructure including stations and adjoining commercial infrastructure

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

·       Logistics Infrastructure3

·       Bulk Material Transportation Pipelines4

2.Energy

·       Electricity Generation

·       Electricity Transmission

·       Electricity Distribution

·       Oil/Gas/Liquefied Natural Gas (LNG) storage facility5

·       Energy Storage Systems (ESS)6

3.Water and Sanitation

·       Solid Waste Management

·       Water treatment plants

·       Sewage collection, treatment and disposal system

·       Irrigation (dams, channels, embankments, etc.)

·       Storm Water Drainage System

4.Communication

·       Telecommunication (fixed network)7

·       Telecommunication towers

·       Telecommunication & Telecom Services

·       Data Centres8

5.Social and Commercial Infrastructure

·       Education Institutions (capital stock)

·       Sports Infrastructure9

·       Hospitals (capital stock)10

·       Tourism infrastructure viz. (i) three-star or higher category classified hotels located outside cities with population of more than 1 million, (ii) ropeways and cable cars

·       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 Chain11

·       Affordable Housing12

·       Affordable Rental Housing Complex13

·       Exhibition-cum-Convention Centre14

 

Notes:

  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. “Logistics Infrastructure” means and includes Multimodal Logistics Park comprising Inland Container Depot (ICD) with minimum investment of Rs 50 crore and minimum area of 10 acre, Cold Chain Facility with minimum investment of Rs 15 crore and minimum area of 20,000 sft, and/or Warehousing Facility with investment of minimum Rs 25 crore and minimum area of 1 lakh sq ft.
  4. Includes Oil, Gas, Slurry, Water supply and Iron Ore Pipelines
  5. Includes strategic storage of crude oil.
  6. Includes dense charging infrastructure and grid scale Energy Storage Systems (ESS) with a minimum qualifying capacity of 200 MW-Hr, provided that ESS is not being established on merchant basis.
  7. Includes optic fibre/wire/cable networks which provide broadband / Internet.
  8. Data Centre housed in a dedicated/centralized building for storage and processing of digital data applications with a minimum capacity of 5 MW of IT load.
  9. Includes the provision of Sports Stadia and Infrastructure for Academies for Training/Research in Sports and Sports-related activities.
  10. Includes Medical Colleges, Para Medical Training Institutes and Diagnostics Centres.
  11. Includes cold room facility for farm level pre-cooling, for preservation or storage of agriculture and allied produce, marine products and meat.
  12. “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.
  13. “Affordable Rental Housing Complex” means a project to be used for rental purpose only for urban migrant/poor (EWS/LIG categories) for a minimum period of 25 years with basic civic infrastructure facilities such as water, sanitation, sewerage/ septage, road, electricity along with necessary social/commercial infrastructure and the initial rent fixed by Local Authority/ Entities based on local survey of surrounding area wherein the project is situated.

 Project means a listed project having at least 40 Dwelling Units of double room or single room or equivalent Dormitory Units or a mix of all three in any ratio but not more than one third of total built up area under double bedrooms units.

 Dwelling Units (DUs) means a unit comprising of double bed room with living area, kitchen, toilet and bathroom of up to 60 square meters carpet area@ or single bed room with living area, kitchen, toilet and bathroom of up to 30 square meters carpet area@.

 Dormitory Units means a set of 3 Dormitory Bed with common kitchen, toilet and bathroom in 30 square meters carpet area@ meaning 10 square meters carpet area@ per Dormitory Bed.

 @ “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.

  1. “Exhibition-cum-Convention Centre” is defined as Exhibition and Convention Centre Projects with minimum built-up floor area* of 100,000 square metres of exclusively exhibition space or convention space or both combined.

 

* Built up floor area includes primary facilities such as exhibition centres, convention halls, auditoriums, plenary halls, business centres, meeting halls etc.

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, Public Financial Institutions and Infrastructure focused FIs for loans granted by them.

(c) Take out Financing

(d) Subordinate Debt

(e) Credit enhancement

(f) Any other mode as permitted by the Reserve Bank of India under any specific scheme applicable to NBFC-IFCs.

(g) Any other mode under a scheme/ mechanism approved by the Central Government from time to time.

Further provided that IIFCL and IIFC (UK) Ltd. may convert part of their lending to equity (or equity like instruments) as part of the resolution process under the Insolvency and Bankruptcy Code (IBC) or any other regulatory mechanism.

7.2 In case of direct lending the total lending by the IIFCL to any Project Company shall not exceed 20% of the Total Project Cost.  In case of takeout financing, the 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 networth 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:

  1. a)  The project should have been awarded through open competitive bidding;
  2. b)   It should have been approved by the PPPAC 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;
  3. 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.
  4. 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.
  5. e)   Subordinate debt shall not exceed 10% of the total project cost and shall form part of the maximum limit as specified in para 7.2 of the SIFTI; and
  6. 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.
  7. 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
  8. 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.  Standalone 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.