Public Finance Links of Infrastructure Projects

Government of India (GOI) is promoting participation of private entrepreneurs in development of infrastructure with a focus to overcome the limitations of public Finance. In EPC model, the tax payer’s money were used to finance the projects and public were allowed to use project services free of cost. But under PPP model the charges, for services offered, are paid by the user (Public) instead of the tax payer. PPP’s may results in delinking of infra projects from public finance. Infra-project risks make private firms to either not to show their participation interest or demand for public guarantees. Under exceptional situations i.e. debt repayment default, service level default, the government may have to take over the PPP projects. Extension public guarantees/project takeovers, to mitigate the risks, result in linking of Infrastructure projects with public finance. This paper describes: 1. Public finance links of infrastructure projects in India; 2. Policy measures required to delink public finance and Infrastructure projects.