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India's growth potential has been significantly constrained by inadequate infrastructure. Quality infrastructure serves as a foundation to a country's growth. Infrastructure development requires considerable resources and long term planning to ensure the healthy and sustainable growth of a country's resources. Moreover, limited public resources are available for investing in physical infrastructure, as social sectors have a priority in the allocation of these budgetary resources.

Public Private Partnership
As a solution to this, the Government of India has been promoting investment in infrastructure sectors through a combination of public investment, private investment and Public Private Partnerships (PPPs). PPPs are steadily becoming the preferred mode for development, construction and operation of commercially viable infrastructure projects. PPPs are prevalent in sectors such as highways, airports, ports, railways and urban transit systems.

To promote and create an enabling environment for private participation, the Government has undertaken a number of initiatives. These include the creation of an institutional framework starting with the apex Committee on Infrastructure under the chairmanship of the Prime Minister. The Government has also constituted a Cabinet Committee on Infrastructure that steers the policy framework, approves projects and monitors implementation. A mechanism for the appraisal and approval of Public Private Partnership (PPP) projects has also been institutionalized. Since some of the infrastructure projects may not be commercially viable, the Government has initiated a scheme for providing financial support. The Government has also established the India Infrastructure Finance Company that provides up to 20 per cent of the project costs as long-term debt, half of which can be provided in the form of subordinated debt which typically serves as quasi-equity.

The transition from traditional procurement to PPPs has created a change in procedures, perceptions and mindset. A significant feature of the policy framework is the adoption of model documents such as concession agreements and other bid documents for sanction of PPP projects.

The PPP modality is the only device that allows private investment into public projects with the objective of enhancing public welfare. The application of standard documents and processes facilitates decision-making and project sanction in a manner that is fair, transparent and competitive.
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