Financial Viability for DMIC Projects Centre for Urban Research

Financial Viability for DMIC Projects

Project development/preparatory activities for DMIC projects would lead to identification of several projects in wide range of sectors (viz. industrial areas/clusters/parks/SEZ/EOU, agro/food processing hubs, multimodal logistics hubs, expressways/highway linkages, rail network, ports and airports, knowledge cities, IT/Biotechnology Hubs, ubran infrastructure facilities etc). These projects may include a combination of viable and non-viable projects, which would thus be bundled/ unbundled as attractive groups of projects by sector/regions/states/agencies and amenable for participation of private sector entrepreneurs in infrastructure development (as part of special purpose companies that would be formed) through Public Private Partnership/ private sector format for development/ implementation, operation and management of facilities for a suitable concession period. Accordingly, the projects will be structured to achieve Financial Internal Rate of Return of at least 14% so as to make the projects viable for development through private sector funds.
In order to establish the bankability of special purpose vehicles that would be formed for developing various industry and infrastructure projects for developing through public private partnership/ private sector funding, detailed assessment would be carried out for estimating project costs (capital, operation, maintenance and management etc for various projects), revenues that would be generated, identifying means/sources of financing (debt and equity) and related costs, preparation of cash flow and income statements and detailed financial models.
In case, DMIC projects require essential implementation of commercially nonviable projects, preference would be given to utilize available funds through budgetary sources, funding schemes of respective central/state government agencies as well as funds that can be availed under Viability Gap Funding (VGF)/ IIFCL schemes of Government of India.
Under such circumstances wherein the available funds from various schemes of central and state government/ VGF/ IIFCL are completely utilized and in case there would be requirement for additional funds for implementation, DMICDC/GOI may contribute funds obtained through successful development of viable infrastructure projects, in the interest of the overall DMIC project and ensure speedy implementation. However, such expenses for such projects could also be reimbursed to the PDF by respective central/state government agencies, through budgetary support, at later stages.