Press Information Bureau

Government of India

Ministry of Finance

 

04-October, 2012 20:57 IST

The Cabinet Committee on Infrastructure (CCI) approved the Model Tripartite Agreement for Infrastructure Debt Funds (IDFs).

The CCI also approved the constitution of empowered Inter-Ministerial Group to approve sector-specific or project-specific modifications.

This Model Tripartite Agreement will facilitate early operationalisation of the IDFs.

Setting up of Infrastructure Debt Funds (IDFs) was announced in the Union Budget for 2011-12. These are aimed at accelerating and enhancing flow of long term debt for funding infrastructure projects in the country. They will also act as a catalyst to channelize domestic savings. IDFs would provide a vehicle for refinancing the existing debt of infrastructure projects which are funded mostly by commercial banks. This would create fresh headroom for commercial banks and enable them to take up a larger number of new infrastructure projects.

An IDF can be structured either as a company or as a trust. If set up as a trust, it would be regulated by SEBI under the Mutual Fund Regulations. If set up as a company, the IDF would be structured as a Non-Banking Finance Company (NBFC) and will be under the regulatory oversight of RBI. Guidelines with enabling provisions have already been issued by the Reserve Bank of India and SEBI.

An IDF-NBFC would issue either rupee or dollar denominated bonds and invest only in debt securities of Public Private Partnership projects which have a buy-out guarantee and have completed at least one year of commercial operations. Such projects are expected to be viewed as low-risk investments and would, therefore, be attractive for risk-averse insurance and pension funds.

Regulations issued by RBI provide that a Tripartite Agreement, which shall be binding on all the parties thereto, will be entered into between the Concessionaire, the Project Authority and the IDF.

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SH/SKS

Model Tripartite Agreement mandates binding tripartite contracts for Infrastructure Debt Funds to refinance eligible PPP project debt. The Cabinet Committee approved a Model Tripartite Agreement binding concessionaires, project authorities and Infrastructure Debt Funds, and authorised an inter ministerial group to permit sector or project specific modifications. IDFs may be structured as a trust or a company; company form IDFs (NBFCs) will issue bonds and invest only in debt securities of PPP projects with a buy out guarantee and at least one year of commercial operation. Regulatory rules make the tripartite contract a binding requirement and set eligibility and investment parameters to facilitate long term refinancing of infrastructure project debt.