FLAG A
Business Case: INDIA INFRASTRUCTURE DEBT PARTNERSHIP PROGRAMME
Intervention Summary
What support will the UK provide?
Up to £38 million over 5 years (2013-2018), in partnership with India’s leading infrastructure finance
company, IDFC Ltd:
 £36 million as returnable capital (debt), invested in infrastructure projects in India’s eight low
income states;
 £2 million as technical assistance, improving project design to attract private investment and
adhere to international standards, monitoring and evaluation
Why is UK support required?
HMG and Government of India (GoI) have agreed to test the use of returnable capital to promote
private investment into infrastructure projects that will reduce poverty in the eight low income states
of India, involving partnerships with GoI-sponsored intermediaries. Poor infrastructure, particularly
power and transport, is cited by domestic and international firms as the single largest barrier to
doing business in India. A third of the 1.5 billion people without electricity and a fourth of the 2.5
billion people without sanitation live in India. Infrastructure projects also directly generate important
short-term and long-term employment opportunities. The Planning Commission of India estimates
that infrastructure bottlenecks take 1.5 to 2 percentage points off GDP growth every year – and that
the majority of the required investment to finance infrastructure gaps has to come from the private
sector. Domestic banks have reached or are close to reaching their credit limits on infrastructure
projects and attracting international finance is crucial for India, especially the low income states.
Unfortunately, while India’s progressive states have done well in attracting private investment, the
eight poorest states1 of India, where 65% of India’s poor reside, are perceived as more risky by
investors, with consequent implications on the level of enterprise development, job creation and tax
revenues. Agricultural storage and logistics, renewable energy, transport and core urban services
such as water and sewerage that are considered ‘pro-poor’ have been especially neglected. This
programme has identified these services based on their potential to deliver benefits that are propoor, especially to women and girlsi, in the poorest states by delivering improvements in the
business environment, whether for small scale farmers (essentially micro-enterprises) or larger
scale industrial developers who will have a requirement for skilled and low-skilled labour. The
reluctance to invest in these states/sectors is considered to be due to the lack of experience and
the perception that political risk is higher. However, some of the poorer states are showing higher
growth rates in the last few years and political leadership is becoming more development oriented.
DFID India believes this is the right time for capital infusion into these states.
Whilst there are international agencies such as IFC, DEG, CDC as well as domestic Development
Finance Institutions (DFIs), aiming to address infrastructure gaps through private investment, none
of them are currently focussing on the low income states and/or these pro- poor infrastructure
sectors. DFID is actively pursuing options with IFC, CDC and the non-sovereign arm of AsDB about
co-investment opportunities with DFID at both partnership and project levels in the pro-poor subsectors in the low income states. Detailed consideration of potential partnerships and available
resources has suggested that we should initially design two separate initiatives for debt and equity
instruments. DFID India identified one of India’s leading infrastructure debt specialists, the
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Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh and West Bengal
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Infrastructure Development Finance Company (IDFC Ltd) as a strong potential partner based on its
systems; the quality of its team; experience and its pipeline of investment-ready projects.
This Business Case proposes to commit up to £38 million:

£36 million towards a concessional line of credit to IDFC to provide early stage, long-term
debt to pro-poor infrastructure projects in the low income states, in turn attracting other
lenders and investors.
For example, investment in an agricultural storage and logistics hub in Bihar is under consideration by
the IDFC. Wastage of food (up to 50%) is high across India, particularly in Bihar, and farmers are
unable to obtain a good price for their produce. The low margins in agricultural commodities implies
that high rates cannot be charged for provision of storage –innovative models, with multiple revenue
streams, e.g., from provision of storage facilities, food processing and logistics support, are needed to
make to make this profitable. By definition, these models are not yet proven making the risk higher.
The project ddeveloper has raised £1.7 million but requires a further £1.7 million. Capital from DFID
will encourage IDFC to lend the remaining amount. The facility is expected to improve farmer
incomes, generate jobs, reduce food waste and yield tax revenue.

£2 million to buy expertise that helps improve the design of infrastructure projects; improve
the quality of environmental, social and governance standards applied by IDFC to
investment proposals; conduct monitoring and evaluations that generate knowledge about
what works best; and disseminate this to other investors and infrastructure companies.
In addition, there is a need to improve the policy environment for infrastructure projects, and
support development of state government capacities to facilitate such projects. DFID India is
already undertaking programmes on this with partner states. However, a separate technical
assistance project that supports improvements in the business environment for infrastructure will be
designed.
There is strong HMG interest in partnering with India on infrastructure. The high-level Britain India
Infrastructure Group, announced by PM Cameron and PM Singh in August 2010 has begun a
dialogue on partnerships for mobilising foreign investment and tackling the skills deficit in India’s
infrastructure sector. Improvements in the status of infrastructure in the eight poorest states will
help not only the poor people in these states but also generate investment opportunities and jobs
for Indians and internationally, including the UK.
What are the expected results?
The programme is expected to directly result in:
i) At least 10 new private sector-led (including PPP) projects.
ii) At least £120 million of additional private investment mobilised for pro-poor infrastructure
services.
iii) An estimated 280 000 people get access to new/improved infrastructure services such as
electricity, sewerage, and transport.
iv) An estimated 1 500 long term jobs and 3 000 short term jobs generated directly.
Monitoring and Evaluation
The project will have a comprehensive monitoring and evaluation (M&E) framework including a
computerised management information system (MIS). DFID will undertake annual Output-toPurpose Reviews to assess progress, a mid-term review in year three, and an end-term review to
review to assess whether the targets in the logframe have been achieved and the cost-benefit
assumptions outlined in the economic appraisal have been confirmed. DFID will commission
evaluations (up to £1.5m) to assess impact and attribution.
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Business Case
Strategic Case
A. Context and need for a DFID intervention
Set the scene and provide the overarching context for why DFID is doing this
Shortage of infrastructure is an obstacle to economic growth, the challenge is more severe in
India’s eight low income states
1. The shortage of infrastructure in the world’s poorest countries is a major and growing obstacle to
economic growth and the elimination of poverty. The World Bank estimates that in developing
countries, 1.5 billion people live without electricity, 1 billion have no access to all-weather roads,
and 2.5 billion have no access to sanitationii. India’s share of the global burden is substantial:
some 450 million people in India live without electricity and more than 600 million have no access
to sanitation. Within India, indicators in the eight low-income states2 are consistently worse, e.g.
40% of the population in Bihar, Madhya Pradesh and Orissa have access to all-weather roads
compared to the 60% national average. Economic infrastructure such as markets, warehouses
and transport remain inadequate; restricting growth across the board. Poor infrastructure is cited
by firms as the single largest barrier to doing business in Indiaiii. As a result, private enterprise is
restricted, leading to fewer jobs, less services and tax revenues.
2. India recognises infrastructure as a serious issue. Current thinking on the 12th Five Year Plan
suggests that investment of $1 trillion will be needed over 2012-17. Over the 11th plan period,
2006-11, India increased its infrastructure investments to just below $100 per capita per year
(compare this to Brazil which is at $600). Per capita investment in India’s low income states is
significantly worse, at one-third to one-half of the better off states for well over a decade. Finance
requirements at the aggregate level remain an enormous challenge for the infrastructure sector.
About 30% of all foreign direct investment into India is infrastructure-related but the global
economic slowdown has reduced the overall size of all FDI from a high of $43.4 billion in 2008 to
$24.2 billion in 2010iv. Domestic banks have reached or are close to reaching their exposure
limits on infrastructure projects, and invest afresh only as their deployed capital is returned or if
they obtain new capital. Overall, even if India was to achieve its highly ambitious 12th plan target,
per capita investment will remain woefully inadequate.
3. The imbalance overall, as well as across sectors, is worse in the low income states which have
been unable to attract any serious private investment beyond a few national highway contracts.
Roughly, a third of India’s PPP projects are in the eight low income states (28.2%) v, even though
these contribute 62% of the overall populationvi.
Targeted infrastructure projects can make growth more inclusive
4. In terms of allocation of infrastructure investment, a disproportionate amount of private
investment has flowed into sub-sectors that are clearly profitable, such as telecommunications,
thermal power stations, national transport projects and gas pipelines; as well as a handful of
prestige projects like Delhi and Hyderabad airports and Mumbai’s sea-link bridge. Public
investment has been targeted at sub-sectors that are unlikely to attract private investment, e.g.
rural roads, toilets, urban roads and housing for the poorest.
5. Apart from that there are sub-sectors that are vital for growth and poverty reduction which could
attract substantial private capital but are not able to, due to: limited successful business models;
lack of well-structured PPP deals; competition with more mature sub-sectors for private capital;
weak business environment; lack of knowledge and expertise in how these could be structured to
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Bihar, Orissa, Madhya Pradesh, West Bengal, Jharkhand, Chhattisgarh, Uttar Pradesh and Rajasthan
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deliver a return; and the risk-averse nature of mainstream private capital. This programme has
identified four infrastructure sub-sectors (agricultural infrastructure; energy services; transport,
mainly road; and urban services) based largely on their potential to deliver economic growth and
services that are pro-poor in the poorest states, as well as their difficulties in attracting private
finance. According to Mahajan & Guptavii, “For India’s rural poor, strengthened infrastructure
facilities would facilitate the development of small enterprises, agro-based activities, and markets,
and increase off-farm and non-farm employment opportunities”.
6. Infrastructure projects deliver services at the door of households (urban water and sanitation,
decentralised rural energy services etc.) can offer greatest prospects for direct poverty targeting,
over infrastructure projects that deliver non-targeted public assets like roads and street lighting.
Regardless, public assets such as electrification and road availability are known to have a
significant effect on poverty reduction as established by an ADB studyviii. The benefits include
improved economic growth and access to employment, improved access to public services such
as health and education facilities, increased personal safety, better access to common property
resources by the poor and enhanced participation in public work. Whilst development of
agricultural infrastructure (such as improved storage and logistical facilities for agriculture) will not
directly benefit individual households, it will benefit farmers and reduce wastage of food grains
(20-30% food grains harvested in India are reportedly wasted due to inadequate storage
facilitiesix). It will also reduce distress sale and ensure farmers get better prices for their produce.
This increased income maybe used to leverage better health and educational services and
contribute to overall well-being of small and medium farm households.
7. From a gender perspective, the analysis of Indian women’s entrepreneurship and economic
participationx has established a clear relationship between better quality infrastructure and female
entry into industry/enterprise. Benefits for women include greater mobility and access to public
services such as health facilities and markets in district centres. Where infrastructure can be
targeted at household level, certain kinds of infrastructure services will disproportionately benefit
women and girls for example, water, toilets, and drainagexi leading to better health outcomes,
reduction in time spent on non-productive activities and improved attendance at school.
8. The main poverty reducing benefits from this programme are expected through infrastructure
services delivering improvements in the business environment, whether for small scale farmers
(essentially micro-enterprises) or larger scale industrial developers who will have a requirement
for skilled and low-skilled labour. A further positive impact on poor people is through short-term
and long-term employment opportunities generated by the construction, operation and
maintenance of infrastructure projects.
India faces significant barriers to infrastructure investment
9. The market and institutional failures that discourage private investment into low income states,
especially in some sub-sectors are:
 limited availability of local currency finance, with banks utilising their infrastructure limits in
the more profitable sub-sectors in the developed states;
 absence of a systematic approach to credit rating infrastructure projects; lack of rupee
denominated guarantees;
 high front-end cost and uncertainty attached to project development, with multiple
investors required to agree, leading to fewer deals;
 difficulties relating to policies, regulations, and institutions, with land acquisition and
environmental clearances particular problems;
 lack of locally available capacity and skills in both the public and private sectors;
 difficulty setting fair tariffs that balance affordability for poorer customers against
generating sufficient income to cover costs.
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10. On the positive side, India has a high savings rate, deep financial markets and a good track
record in channelling funds to infrastructure. Construction and allied activities are among the early
growth sectors in an underdeveloped economy, in contrast to high value addition manufacturing
or services. The development of such growth sectors along with infrastructure provision is one of
the necessary conditions required for kick starting the virtuous spiral of developing the private
sector in the low income states. The government, central as well as state, has shown great
commitment to tackling this issue. There are already almost a thousand public-private
partnerships underway, leading to several models being tried out and substantial lesson learning
and capacity development across India. The challenge is to demonstrate the viability of
infrastructure projects in India’s low income states; identifying feasible projects in sectors with the
greatest potential to directly or indirectly reduce poverty, e.g. transport; decentralised, clean
energy; urban services; agricultural storage and logistics.
11. Infrastructure development needs long term finance, in the form of debt, equity and guarantees.
Debt finance typically constitutes 70-80 per cent of project value and thus makes up the most
substantial financing gap in projects reaching project closure. This is especially true since loan
tenors beyond seven years are not generally available and, if offered, are at unattractively high
interest rates. Moreover, domestic banks have regulatory limits to infrastructure lending, making
alternative capital an imperative to ensure projects can get off the ground. Provision of long term
debt, which is heavily under-supplied in India, is important in mobilising short term debt from
other creditors.
Why DFID intervention is justified
12. There is strong HMG interest in partnering with India on infrastructure. The high-level Britain India
Infrastructure Group, announced by PM Cameron and PM Singh in August 2010 has begun a
dialogue on partnerships for mobilising foreign investment and tackling the skills deficit in India’s
infrastructure sector. DFID’s contribution will be an important HMG response to shared UK-India
goals in this area. There is strong HMG interest in Infrastructure Debt Funds (IDFs), which invest
mainly in brownfield rather than greenfield projects. Benefits through IDFs for the low income
states would be largely indirect and achieved by tackling the national challenge India faces in
mobilising new (foreign and domestic low-risk) capital for infrastructure. FCO and BIS see
important market opportunities for UK firms specialising in infrastructure delivery and financial
sector services. HMT has been providing technical assistance to the Ministry of Finance on
PPPs.
13. A number of development organisations (e.g. World Bank, AsDB, DEG) are supporting private
sector led infrastructure programmes but all of these are India wide. World Bank and AsDB
investments have focussed on routing capital through public channels e.g. the national rural
roads programme, with limited investment being channelled to the private sector. None of the
DFIs focus on the low income states or the less developed infrastructure sub-sectors – as a
result, the actual projects benefitting from support tend to be in the developed states in mature
sub-sectors. The nearest exception is the IFC which has set itself annual targets for investing in a
variety of businesses in these states, but has no targets on infrastructure. CDC has invested in
IDFC’s third PE Fund i.e. where there is unlikely to be any serious push in the low income states.
CDC does not have any immediate plans to invest in infrastructure in the low income states.
PIDG is developing a good portfolio of infrastructure projects in India but its global mandate
currently limits its debt instrument to projects in sub-Saharan Africa (the Emerging Africa
Infrastructure Fund).
14. A key element of this programme will involve ongoing discussions with DFIs about the prospects
of them co-investing with DFID either at the partnership level or at the infrastructure project level.
Where early opportunities for co-investment by DFIs are ruled out, DFID will, through TA support,
seek to directly tackle the constraints other DFIs face by e.g. strengthening environmental and
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social due diligence approaches and generating knowledge about the commercial and
development returns being generated for DFID through individual project deals.
15. Boosting wealth creation through infrastructure provision is a top priority in DFID’s Business Plan
2011-15. DFID’s private sector approach in India is unlikely to achieve sustainable wealth
creation for businesses or poor households without concerted effort to tackle the infrastructure
deficit in the low-income states. The additional interest in using returnable capital suggests that
infrastructure is one of the most viable options for testing this new approach.
Is intervention feasible?
16. The UK-supported Private Infrastructure Development Group (PIDG) has demonstrated that
investments in infrastructure projects in difficult sectors and geographical areas are feasible. They
have used a variety of instruments in Africa and Asia, in countries which are similar or worse off
than the low income states of India. The main mechanisms have been - Emerging Africa
Infrastructure Fund for debt finance; InfraCo for project development and equity; GuarantCo for
local currency guarantees; DevCo for technical assistance to government partners; and TAF for
technical assistance to projects. The mix of instruments is preferable in the infrastructure space,
allowing for flexibility in approach as well as ensuring reduced risk to capital erosion through
using more secure instruments like a line of credit, alongside riskier equity investments.
17. For India, the DFID-commissioned scoping work by a national infrastructure think tank confirms
the proposed intervention is feasible. They recommend initial deployment of long term debt
finance which is urgently needed in the sub-sectors and geographies we propose to focus on.
Multilateral banks and development finance institutions have utilised the proposed investment
instruments - largely debt, some equity and guarantees - to promote infrastructure projects,
although largely in more developed states and sub-sectors. The study also identified key
infrastructure sub-sectors which could deliver maximal impact on growth and poverty reduction,
while filling a key gap in increasing the level of private sector participation in commercially viable
areas e.g. storage and logistics infrastructure; off-grid power; transport services; and core urban
services like water and sewerage. The investments by DFID will be of a long term nature,
providing patient capital to a sector in need of long term capital instruments. DFID loans are likely
to have tenors of 15 years– detailed terms are under negotiation with potential partners.
18. The low income states of India represent a good opportunity for DFID to test and upscale the new
returnable capital instrument for infrastructure. The states are growing at a good rate, albeit from
a recent low economic base, compared to the past. The business environment has also
improved, particularly as compared to previous decades, with the ruling governments’ of several
states heavily focussing on development as the key agenda and keen to attract private
investment in infrastructure. The quality of infrastructure has become a key electoral issue. The
national and state governments are focussed on addressing this gap, allocating human and
financial resources to the extent possible, given existing constraint, to this task. Given the
substantial political demand for PPPs, particularly in economic infrastructure, PPP policies are
being actively pursued in low income states such as Bihar, Orissa, Madhya Pradesh and
Rajasthan, with state governments prepared to take on a fair degree of capital risk.
The consequences of not intervening. Set out the difference this will make to reduce poverty.
19. If DFID does not invest, the proposed results are unlikely to be achieved at the pace expected
with DFID support: about ten projects will either not come up or be heavily delayed, with a knockon effect of slowing down expansion of infrastructure services to the targeted group of 280 000
people. PPP activity in the low income states may continue but at a slower pace especially in key
sub-sectors vital to their economies. Without a concerted effort to mobilise infrastructure
investments and improve the business environment in the low income states, where the
population is about half of all of India, expansion of infrastructure services will continue to lag
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behind the more developed states where the infrastructure business models have been largely
proven and where the business environment is considered more favourable.
20. The current squeeze on foreign flows into India has heightened the competition for accessing
equity or credit. In this type of climate, the developed states and mature sub-sectors are likely to
continue to secure any free capital flows for infrastructure, maintaining regional inequalities and
missing an opportunity to begin to tackle the disparities in infrastructure service levels between
states.
21. Insufficient progress on improving infrastructure services will continue to discourage a wider set
of (non-infrastructure) investors, impeding the job-based growth ambitions of the low income
states.
B. Impact and Outcome that we expect to achieve
The expected impact of this intervention is increased investor interest in pro-poor infrastructure
sectors in the eight low-income states.
The key outcome of the programme is the expansion of better quality infrastructure services that
deliver social benefits direct to households, such as electricity and clean water, and deliver economic
benefits to businesses such as roads that give access to markets and electricity that help run storage
or manufacturing facilities.
Refer to evidence which demonstrates that the Impact and Outcome are achievable. If there is
a lack of evidence this must be acknowledged.
Infrastructure and Growth
22. There is strong global consensus across governments and businesses about the vital role
infrastructure plays in underpinning economic growth. Infrastructure is a central plank of the UK’s
economic recovery plan and it has a substantial profile in national Indian policy on sustaining
growth. Infrastructure is a major theme of G20 discussions on the global economic crisis and
featured prominently during the June 2012 G20 summit in Los Cabos, Mexico. It also featured
heavily during the March 2012 conference of the BRICS in Delhi.
23. The majority of research conducted on infrastructure’s contribution to growth has tended to focus
on transport, power and telecommunications. It is extremely challenging to research and assess
the entire 25-30 year life-cycle benefits of infrastructure assets. There is limited good quality
research available on the specific contribution of the pro-poor sub-sectors identified in this
programme, including agricultural warehouses and core urban services.
24. The economic literature on the importance of infrastructure in creating an enabling environment
for economic growth and income generation in developing country contexts is well established xii.
Similarly in an Indian context, the important enabling role of infrastructure is well established, and
its role as a key constraint in growth has been identified in numerous studies and surveys.xiii
While being viewed as a constraint by businesses in growth and job creationxiv, it is also seen as
an integral part of the India growth story. “Infrastructure development in India has a significant
positive contribution toward growth…causality analysis shows that there is unidirectional causality
from infrastructure development to output growth. From a policy perspective, there should be
greater emphasis on infrastructure development to sustain the high economic growth which the
Indian economy has been experiencing for the last few years.”xv Many infrastructure services are
often viewed from a public good perspective, where the non-excludable and non-rivalrous nature
of the good makes it a good candidate for public expenditure.xvi However, there is also
increasingly consensus that the private sector has a large role to play in infrastructure sector
given the additional efficiencies, resources and improved services that it can offer.xvii
25. An IMF Working Paper on Financing Infrastructure in India (2011) notes: “The impact of
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infrastructure development on economic growth, productivity and trade has been
extensively studied, and most studies conclude that improvements in a broad range of
infrastructure categories lead to faster growth. Roller and Waverman (2001), using data for 21
OECD countries for over 20 years, find evidence of a significant positive causal link between
telecommunication infrastructure and economic growth. Calderon and Serven (2003) find positive
and significant output contributions of telecommunications, transport and power in a sample of
Latin American countries. Donaldson (2010) using Indian historical data during 1870-1930 finds
that railroad development reduced trade cost, bolstered trade, and increased real income, while
Mohommad (2010) finds that physical infrastructure improvements lead to faster total factor
productivity growth in manufacturing. Finally, Canning and Pedroni (2008) use cross-country data
from 1950-1992 to show that infrastructure positively contributes to long run economic growth
despite substantial variations across countries.”xviii Recent researchxix also highlights the
linkages between infrastructure and the social sector, especially health and education outcomes.
Work by Sahoo and Dash (2009)xx looks at the role of infrastructure in economic growth in India
over the period 1970–2006 and finds that infrastructure development in India has a significant
positive contribution toward growth.
Infrastructure and Poverty Reduction
26. The poverty reducing impacts of infrastructure depend heavily on the characteristics of the
infrastructure sub-sector being considered (accessibility, quality and affordability). For example, a
2007 paper by Fan et al notes that “…In India, government spending on roads has the largest
impact on poverty reduction of interventions. For every one million Rupees spent on rural roads,
124 poor would be lifted above the poverty line. One Rupee invested in rural roads generates
more than 5 Rupees in returns in agricultural production. In Uganda, roads and in particular rural
feeder roads, were second only to agricultural R&D in reducing poverty. In China, roads and
particularly low-grade roads contributed to poverty reduction for both rural and urban poor
through improved transport of food and raw materials, reduced food prices and growth of
industry.”xxi Infrastructure that enables low-skilled and semi-skilled income earning opportunities
are likely to be the most poverty reducing. Rural, district and state roads; rural electrification etc.
and are more likely to be poverty reducing than many other kinds of transport infrastructure
(national roads; airports etc.).
27. An analysis of data from India Human Development Survey (2004-05)xxii finds a strong correlation
between social indicators and availability of infrastructure at the grass root level.
High Infra. Low Infra. Diff.
Villages
Villages
Role
Doctor attended delivery
43
25
18
Full immunisation
51
40
11
54
47
7
% children in private school
Mean household income
24
41595
17
32230
7
9365
% Males in nonfarm work
34
22
12
% Victim of crime or threat
6.3
8.2
-1.9
% Membership in Organisations
42
35
7
% Women visit natal family 2+ times a 72
year
64
8
of % children who can read
Infrastructure in the Low-Income States
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28. Growth diagnostic work by the World Bank for the low-income states identified infrastructure as
one of the three most significant constraints to growth: “The difference in availability of
infrastructure has made a perceptible difference: states with better infrastructure in the 1980s
experienced relatively faster growth during the 1990s. Village access to paved roads and ruralurban connectivity were particularly important for generating growth in agricultural productivity
and non-farm employment, and in supporting urban development. The evidence also suggests
that infrastructure availability, particularly of power, is one of the most important factors
determining industry location.”xxiii
29. A ranking of the investment climate in Indian states finds that “infrastructure and institutions
remain the main bottlenecks in the country’s private sector development.”xxiv It also finds that the
states with the worst investment climate are Orissa, Madhya Pradesh, Bihar, Uttar Pradesh, and
Rajasthan. A key factor in the low investment climate ranking of these states is the lack of
physical infrastructure.
Private Sector-led Infrastructure
30. The importance of private sector involvement in infrastructure provision is highlighted in the
1994 World Development Report.xxv The report states that infrastructure has an impact on
economic growth and poverty reduction, but only when it is responding to demand and is
delivered efficiently. For this to take place the providers need to face the right incentives, be run
like businesses and be subject to competition.
31. The recent PIDG-commissioned systematic review of evidence for development additionality of
DFI-supported infrastructure projects notes that hard evidence linking DFI investments to
poverty reduction is scarce, mainly because:
 “It is difficult to measure causal relationships between infrastructure and development
outcomes;
 It is harder still to attribute a share of this total impact to the work of DFIs, either individually or
as a group; and
 DFIs have traditionally focused on leveraging private finance into the infrastructure sector and
have not developed robust measurement systems to track their broader impacts…”xxvi
Empirical evidence from relevant DFID programmes
32. DFID’s experience in West Bengal through West Bengal Municipal Development Fund (WBMDF)
showed that an investment of £6.3 million helped fund additional infrastructure projects worth
£74.3 million, in turn benefiting around 3 million city dwellers (of which 0.42 million were poor).
Beyond this, DFID India’s experience of supporting private participation in infrastructure service
delivery has been through the highly successful MP Power programme and through policy and
project development support under Governance and Growth programmes in MP and Orissa.
33. PIDG documents suggest that its $55 million invested in India has attracted $1.5 billion from the
private sector; although the systematic review noted earlier notes that how much ‘additionality’
this support generated is less clear.
34. Evidence for results i) and ii) have been calculated based on DFID investment supporting no
more than 20% of the total costs of any infrastructure projects. The 20% is the standard
maximum contribution by any infrastructure creditor in India. Results iii) and iv) have been
calculated using empirical data from PIDG project documents with downward adjustments made
to take account of the decreased likelihood of the programme involving large-scale network
infrastructure.
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Appraisal Case
A. What are the feasible options that address the need set out in the Strategic case?
35. To address the need set out in the Strategic Case DFID proposes to use its returnable capital to
promote infrastructure projects that provide the maximum development benefits, in the low income
states. At one level, additionality and development impact will be assured through focus on the under
invested low income states and identification of sub-sectors that are pro-poor and, at the second level,
by examination of specific interventions (i.e. projects) themselves.
36. DFID-India had proposed an Infrastructure Sector Programme (Strategic Case approved by the
Secretary of State in June 2012), partnering with a range of partners, using a mix of instruments,
i.e.equity, loans, guarantees and technical assistance, to promote private investment in infrastructure in
the eight low income states. Further detailed consideration of potential partnerships and available
resources has suggested that we should initially design two separate initiatives for debt and equity
instruments.
37. While a single instrument (debt-based) approach may mean missing out on projects e.g. where the
project sponsor is struggling to raise early-stage equity, there is a stand-alone case for DFID to tackle
the long-term debt needs in the sector. Long-term debt is in short supply and where it is available, it
tends to reach mature sub-sectors in developed states. As discussions within DFID India’s broader
infrastructure approach with other potential DFID partners develop, there will be scope for DFID to
tackle a wider set of market failures, including by addressing the non-debt needs of specific projects. In
addition, deploying DFID capital across a suite of instruments will allow for a demonstration effect
across multiple markets.
38. DFID had invited eight potential partners to set out their interests and capability. A four-person DFID
assessment team assessed proposals against pre-agreed and weighted criteria including: i)
Demonstrated experience of financing projects in multiple infrastructure sub-sectors; ii) Capacity to use
a variety of financial instruments; iii) Pipeline of potential investments in low income states; iv) Track
record of deploying capital in low income states; v) Fit with DFID pro-poor objectives; vi) Quality of staff
and systems; vii) Experience in identified pro-poor sub sectors; viii) Good networks (project sponsors,
financiers and investors) and ix) Understanding that DFID resources and investments must be
additional.
39. Of the possible partners for providing loan finance, DFID judged the proposal from IDFC amongst the
best (in terms of their systems, the quality of their team, and experience in the relevant sectors) and
the most likely to deliver impact within DFID’s timescale (because of their existing, networks in the low
income states and pipeline of projects), PIDG was also considered due to the high score received
under MAR although its limited presence and scale in India made is less attractive than IDFC Ltd. in
terms of DFID’s timescale.
40. The feasibility of partnering with IDFC has also been judged on the basis of 9 months of detailed
discussions between DFID and IDFC involving:



Exploration of broad parameters and a shared approach, including IDFC taking on capital
risk on its balance sheet;
DFID examination of IDFC approach to risk appraisal and due diligence, particularly on
environmental and social safeguards;
Early exploration of actual projects that have struggled to reach financial closure and that
10
might benefit from DFID risk capital.
41. The programme is expected to result in (using £36 million of investment capital and £2 million
of grant assistance):
i)
At least 10 additional private sector-led, including PPP, projects reaching financial closure (e.g.
biomass, feeder roads, solid waste management).
ii)
At least £120 million of additional private investment mobilised for pro-poor infrastructure
services (e.g. crowding in investment in agricultural value chain services like cold chains,
storage facilities and market infrastructure).
iii)
An estimated 280 000 people get access to new/improved infrastructure services such as
electricity, sewerage, and transport.
iv)
An estimated 1500 long term jobs generated and 3 000 construction jobs generated.
Non-appraisable Options:
A number of other approaches were considered and rejected as appraisal options for this Business Case:
42. Appraising options by sub-sector: e.g. DFID focusing its support on either agricultural infrastructure or
energy or roads or urban services. Whilst this might provide useful insights on priority investments
under the partnership, we have judged that investment opportunities (or deal flow) in individual subsectors will be very limited and therefore not feasible in the timeframe available. We also judge that no
single sub-sector is so massively behind others in terms of private investment or in terms of quality of
service.
43. Appraising options by partner: (i.e. converting into formal cost-benefit terms the exercise DFID has
already conducted to assess potential partners). Since this approach would rely heavily on nonmonetised costs and benefits, we have concluded that this would add little value.
44. Appraising options by instrument: (i.e. comparing the impact of providing a line of credit to IDFC with
the impact of providing funds through alternative instruments like an equity fund) is dependent on the
volume of returnable capital and issues of threshold. For example, to set-up a dedicated infrastructurespecific equity fund would require a minimum investment size for the fund to attract talent and be an
effective investment manager. Secondly, to build a credible portfolio of infrastructure assets, with each
investment ranging from £1 million to £10 million, a portfolio size smaller than about £35 million would
not make the intervention substantial. The different risk and return profiles of financial instruments and
the set-up procedures (time, cost, co-financers etc.) make a debt partnership quicker to operationalize.
Given that large requirement of the sector and the complementary roles of financial instruments, a
combination of a line of credit and an equity fund that can attract co-financing is expected to have the
most significant impact.
With the review of the main alternative options already concluded at the strategic case stage, this business
case focuses on demonstrating that the partnership is worth pursuing when compared against a “donothing” option. :
Option 1: Support IDFC
45. This option involves working with IDFC to deploy up to £36 million returnable capital through a single
11
instrument, debt. Returnable capital will be provided as a concessional line of credit provided over a
long tenor (15 years) to IDFC to provide long term debt finance to infrastructure projects that would
otherwise (with access to only non-concessional funds) not have been considered as attractive
investment opportunities by IDFC.
46. Option 1 will target pro-poor infrastructure sub-sectors (particularly post-harvest agricultural
infrastructure like warehouses, markets, agri-processing facilities and refrigerated trucks; decentralised
clean energy; state and district roads; and urban services like water, solid waste management and
street lighting). . Successful DFID-supported investments are expected to demonstrate to the private
sector the market potential of particular kinds of infrastructure projects in pro-poor sub-sectors in the
poorer states of India. These projects will have a demonstration effect, leading to new private sectorled projects that mobilise capital from the private sector, deliver new services to households and
businesses, and generate construction sector related jobs.
EXAMPLE FROM IDFC CURRENT PROJECT PIPELINE: AGRICULTURAL
STORAGE FACILITY AND LOGISTICS HUB IN BIHAR
Problem
• Wastage of grains and perishable food is high across India and
particularly in Bihar (50% for perishable food)
• Innovative models needed to make provision of storage profitable
Business Model
• Investment in Bihar - one of the largest maize producing regions of the
country
• Multiple revenue streams from provision of storage facilities, food
processing and logistics support
• Rail linked logistics hub and maize processing units
Market failure
• Developer has raised £1.7 million in equity and debt but requires a further
£1.7 million in debt to develop the facility
• Banks have reached their infrastructure lending limits; risky model; less
profitable line than other infrastructure projects
Social Impact
• Improve the price retained by farmers due to higher value addition within
Bihar
• Generate revenue of up to £1.4 million per annum, jobs and tax revenue
47. Grant-based technical assistance (up to £2 million) will focus on i) monitoring and evaluating individual
investment deals (projects) and the broader portfolio and ii) improving the capacity of the private sector
to deliver and monitor stronger development outcomes, including those associated with environmental
and social objectives. Up to £2 million in grants will be used to effectively monitor and evaluate the use
of DFID returnable capital at the project and portfolio level (£1.5 million) and to strengthen the capacity
of IDFC and its borrower clients (infrastructure developers) to improve the quality of project delivery,
particularly on the social and environmental front (£0.5 million). DFID is currently scoping the potential
for a stand-alone infrastructure TA programme to tackle the challenges in the business environment.
Public policy interventions will tend to be very specific to sub-sectors (and therefore line ministries) and
geographies: this will require careful design and prioritisation. Improvements in the business
environment are currently being directly tackled through on-going DFID TA to the state governments in
Madhya Pradesh, Bihar and Odisha and these are states where the DFID-IDFC partnership will
actively explore investment opportunities.
12
48. DFID’s partnership with IDFC will adopt an appropriate risk return equation that catalyses private
investment into projects that pay back the initial capital and enable DFID to recycle this into a fresh
round of projects. The programme will provide returnable debt capital of up to £36 million to IDFC,
structured so that long-term debt can be deployed to projects that need the final debt investment before
reaching financial closure.
49. Successful projects supported by the partnership with IDFC using DFID funds will lead to the direct
provision of services for beneficiary populations, as well as demonstrate the viability of infrastructure
business models in states and sub-sectors. These are states and sub-sectors which have remained
under-invested due to high risk perceptions within the private sector, and by tackling these perceptions
the partnership is expected to catalyse further private investment in these states. This will have a
multiplier effect on the economic growth and poverty reduction efforts of the states, through the direct
impact of the investments delivering infrastructure services, as well as the impetus it will provide in
crowding in investments and other types of businesses. DFID’s involvement will also lead to
improvements in the quality of implementation, particularly on the environmental and social front;
building systems in partners to ensure this across all their projects.
50. The returnable capital component and the grant-based component are expected to lead indirectly to a
broader expansion of infrastructure services: creating a positive investment climate in the low income
states for both infrastructure and non-infrastructure businesses. This is expected to lead to greater
productivity in key job-intensive sectors such as agriculture and manufacturing, leading to inclusive
economic growth.
51. The main characteristic of this option is the tight focus it brings to the partnership and instrument that
DFID will utilise. It would however limit the programme’s ability to respond to the specific needs of
projects e.g. where a project’s main need might be for finance that is unavailable in the programme.
Option 2: Do Nothing
52. This is the ‘Do Nothing’ option with DFID not providing returnable capital through partners for private
sector-led infrastructure projects in the eight low income states, nor providing any grant support to
improve the conditions for investment. This option could see continued expansion of infrastructure
projects in the low income states, albeit at a slower pace, particularly in the pro-poor sub-sectors.
B. Assessing the strength of the evidence base for each feasible option
53. The Theory of Change (ToC), below, outlines the causal relationships between Inputs, Outputs,
Outcomes and Impact. These inter-relations are illustrated in the diagram below.
The evidence underpinning ‘Activities to short-term or medium term outcomes’ has been assessed to be
medium. The evidence linking ‘Outcomes to Impact’ is also assessed to be medium. The strength of
evidence underpinning both these sets of relationships is detailed in the diagram below. Where the
evidence has been assessed to be weak, the programme’s monitoring and evaluation framework will seek
to tackle these gaps in evidence, for example, evidence-backing link between infrastructure and growth in
the poorest states; infrastructure and jobs for poor people etc.
13
Outputs:
1.
2.
Inputs
3.
Sustainable private sector-supported infrastructure projects delivered
in target sub-sectors in the low income states
Development orientation of the project partners and portfolio
companies strengthened
Policy relevant knowledge on private sector approaches to pro-poor
infrastructure sub-sectors generated
Activities
Financial (£):
DFID:
£36 million in
returnable capital
and £2 million in
TA
People (HR):
DFID:
Senior
Infrastructure
Adviser (0.15
FTE);
Infrastructure
Finance Adviser
(0.4 FTE)
Economists (0.25
FTE);
Governance
Advisor (0.10
FTE);
Social
Development
Adviser (0.10
FTE)
Program Officer(0.5 FTE)
Staff at Partner
firms
[TBC]
Research/studie
s
Cost benefit data,
Sectorial studies,
Infrastructure
financing suite of
products







Impact
Participation
Investments/Projects
 Develop and promote commercially
viable infrastructure projects that provide
a double bottom line return
 Successful/On-track projects (including
PPPs) in the eight LIS across 4 sub
sectors demonstrating attractiveness of
subsectors/states for investment
 Pilots in clean energy, innovation or
impact interventions across sub sectors
Partner
Organizations /
Developers
/Private Sector
firms/ Financial
institutions /
Financial
intermediaries/
Technical Service
Providers
Financial Products/ Institutional
Capacity
 Use of financial products to address the
specific risk/challenges in infrastructure
sub-sectors in eight LIS
 System support and capacity building of
Partner institution to undertake projects
(incl. PPPs) in eight LIS and target subsector
 Facilitate availability of financial products
to developers via private or listed
markets meeting infrastructure’s unique
requirements of long-term financing
Direct
beneficiaries
comprise
businesses and
households who
receive
infrastructure
services (power,
roads, urban
services etc.)
Indirect
beneficiaries
would be the poor
as construction
workers or in
further
upstream/downstr
eam jobs, users of
infrastructure
(local businesses,
logistic providers
and the wider
society) including
many women and
children
Policy-relevant Knowledge Generation
 Studies on infrastructure interventions,
economic analys’before’) and
developmental impact (‘after’)
 Case studies on successful, innovative
interventions for wider adoption .
EVIDENCE Linking Activities to Short-term / Medium term
Outcome: Medium

Outcome
World Bank IEG Impact Evaluation 2008: Welfare Impact of Rural
Electrification, a reassessment of costs and benefits
DFID (2012) PIDG Business Case
PPIAF (2004) Strategic Review of PPIAF
World Bank (1994) World Development Report- Infrastructure for
Development
World Bank (2008) Accelerating Growth and Development in
Lagging Regions of India
IDS and Engineers Against Poverty, “Development Finance
Institutions and Infrastructure: A Systematic Review of Evidence for
Additionality 2011
WEF Global Competitiveness Survey 2010-11
PPPIndiadatabase.com and Census 2011
Improved access to
better quality
infrastructure
services (electricity,
roads, agri-storage
and waste/water
services) to
households and
businesses.
Increased
investor
interest in
pro-poor
infrastructure
sectors in
the eight low
income
states.
Assumptions, External Factors



Policy and regulatory environment for
private sector involvement in
infrastructure in target states is
improving (or does not deteriorate)
Stable credit rating and outlook at
sovereign, state or partner level
Political will exists to make necessary
reform to incentivize private sector
participation in infrastructure sub sectors
(incl. removal of bottlenecks, efficient
clearance for projects, tax incentives,
and tariff structure for private sector
developers etc.)
EVIDENCE Linking Outcomes to Impact: Medium





DFID (2002) Making Connections: Infrastructure for Poverty
Reduction
Sahoo, Pravakar and Dash, Ranjan Kumar (2009) Infrastructure
development and growth in India. Journal of the Asia Pacific
Economy
James P. Walsh, Chanho Park and Jianyan Yu (2011) IMF Working
Paper “Financing Infrastructure in India: Macroeconomic Lessons
and Emerging Market Case Studies”
World Bank (2012) More and Better Jobs in South Asia
Fan, S, P. Hazell, and S. Thorat (2000). Government Spending,
Growth and Poverty in Rural India.
54. In the table below the quality of evidence for each option is rated as either Strong, Medium or Limited
Option
1
Evidence rating
Medium.
Returnable capital component: This option is similar to the PIDG multi-donor group
of facilities in that a variety of financial instruments and partners (or
companies/facilities) are used. PIDG benefited from a detailed DFID Multilateral
14
Aid Review exercise where it was found to be very effective, including on the basis
of its work to date in India. The recent PIDG-commissioned systematic review of
evidence for development additionality of DFI-supported infrastructure projects
however noted that robust evidence linking DFI investments to poverty reduction is
difficult to gather, including because of the inherent difficulties of evaluating
infrastructure assets over their full life-time.
2
Grant component: This option is very similar to: the multi-donor global Public
Private Infrastructure Advisory Facility (PPIAF); the TAF and DevCo facilities in
PIDG; and also the historical and ongoing TA support provided by DFID India to
state government partners on PPP policies and projects in Odisha, Madhya
Pradesh and Bihar. Internal project review papers note the success of these TAbased approaches in achieving their stated objectives..
Medium.
Assessing the quality of evidence of a ‘without DFID returnable capital’ scenario is
relatively straightforward. Without DFID support, IDFC is unlikely to push hard with
focussing on the low-income states. One can compare the current IDFC baseline
and track record in the low-income states and in the pro-poor sectors with the
projected accelerated trend under this partnership and note the difference.
What is the likely impact (positive and negative) on climate change and environment for each
feasible option?
55. Categorise as A, high potential risk / opportunity; B, medium / manageable potential risk / opportunity;
C, low / no risk / opportunity; or D, core contribution to a multilateral organisation.
Option
1
2
Climate change and environment risks Climate
change
and
environment
and impacts, Category (A, B, C, D)
opportunities, Category (A, B, C, D)
B
B
A
C
Climate change and environment risks and opportunities
Option 1: Support IDFC
Risks
56. The eight low income states will be subjected to either increased floods (Bihar, Orissa, UP, MP) or
droughts (Rajasthan, parts of UP and MP, Orissa, Jharkhand) over the short, medium and longer term
due to climate variability and climate change. Large infrastructure projects such as roads, energy
generation, or urban services, if designed without taking these into consideration may exacerbate the
vulnerability of infrastructure assets and services significantly, both for the poor and the rich. At the
same time, the capacity of infrastructure financial institutions to correctly assess these risks and build
in safeguards may be very limited.
57. Infrastructure asset creation in each of the key sub-sectors carries its own environmental risks. For
example, for biomass based power generation, an unsustainable pace of biomass production can lead
to ecosystems getting damaged, as a result of land and water degradation/misuse and net greenhouse
emissions may occur. Similarly, solid waste management systems that use poorly sited and managed
landfills can pollute ground water and lead to methane emissions. Agricultural cold storage facilities,
like refrigerated warehouses, are often reliant on diesel based power. Road construction, particularly
on new alignments poses risks such as clearing of vegetation, soil erosion and localised flooding.
Without transparent and effective regulation and management by public sector entities, private sector
players are likely to view these risks as secondary to their core business.
15
Option 1: Support IDFC
Opportunities
58. It is well documented that physical capital such as road connectivity to markets, output storage and
value addition facilities, access to energy etc. are determining factors for climate change resilience of a
community. By enabling creation of some of these assets, this intervention will directly lead to
enhancing climate change resilience of the target communities. At the same time, through a
combination of adherence to best practice environmental safeguards and policy influencing, this
intervention can very effectively ensure that the infrastructure created is inherently low carbon and
environmental friendly in nature.
59. Parallel to this, real impact will only happen if climate resilient approaches are scalable. Many
innovative one-off models currently exist in clean energy (e.g. sustainable supply models for biomass
power generation), agricultural cold storages (e.g. solar/wind powered) etc. This intervention has an
opportunity to support them to develop into viable and scalable approaches. A lot of these will only go
ahead when financial institutions begin to genuinely consider climate and environment parameters into
project financing decisions, besides the financial ones. This intervention provides an opportunity to
influence a major financial institution like IDFC to mainstream environmental best practice into their
investment criteria in climate-sensitive sectors.
60. A number of DFID supported initiatives to support Governments in planning for climate resilient and low
carbon development are in various design stages currently. A number of Indian states themselves are
preparing the state level climate change action plans. This intervention can very neatly tie into these
and even support implementation of the infrastructure measures planned for tackling climate change.
61. At a practical level, evidence on how incorporating climate change parameters actually leads to
changes in design of specific infrastructure, their costs and returns, lifetimes, results etc. is so far very
weak globally. By exploring the extent to which the infrastructure projects financed under this
programme consider climate change aspects, strong evidence can very usefully be generated for wider
national and global benefits.
Option 2 (Do Nothing)
Risks and Opportunities:
62. The ‘Do Nothing’ option may lead to (i) a delay in delivering new infrastructure projects/services, and
(ii) climate change adaptation and mitigation aspects may not be appropriately incorporated into the
design and operation of these. That will imply that on one hand, target communities will continue to be
vulnerable to climate change impacts for much longer and on the other hand, there will be a lock-in into
high carbon infrastructure. Overall, this might mean a greatly missed opportunity to directly improve
climate resilience and the environmental aspects of planning and delivering new projects, particularly
given the absence of grant support to improve private sector capacity in this area. There are no
apparent opportunities for pro-actively tackling climate change through this option.
Institutional Appraisal
63. The institutional environment for infrastructure development has undergone significant change in the
past three decades. Initially dominated by government grants administered through public sector
entities, this sector has since the 1990s openly encouraged private sector participation. Although
involvement of the private sector and growing government interest has made a significant impact ($500
16
billion in infrastructure investments over 2007-2011), several institutional weaknesses constrain the
effective functioning of the infrastructure market. Key weaknesses include:(i) limited supply of bankable
(with well-defined and appropriately allocated risks) projects;(ii) structural and regulatory barriers to
financing of infrastructure projects; (iii) several implementation challenges; (iv) weak political will to
charge user fees from consumers and to push further reforms; and (v)impact of the current macroeconomic environment.xxvii
64. IDFC is a non-banking finance company especially designed to meet some of the regulatory limitations
facing the infrastructure sector mentioned above. It is seen as an institution capable of engaging in
innovative financing for infrastructure and helping other institutions raise funds for infrastructure. It
works with government entities and supports them in formulating infrastructure policy and regulatory
frameworks. In view of these strengths and its comparative advantage (analysed in Annex 3), IDFC is
the most appropriate partner for the infrastructure partnership programme, including for the purpose of
addressing key institutional issues.
65. IDFC has been promoted by GoI, but is now a leading blue chip infrastructure finance company,
publicly listed. It has a strong network from which it can source deals and the capacity to undertake
robust due diligence of project proposals. IDFC has solid capacity to ensure adherence to social and
environmental standards and it seeks to reach international standards by becoming India’s first
signatory to the global Equator Principles, for which it has requested DFID technical support. Adhering
to the Equator Principles is likely to strengthen its access to foreign ‘ethical’ investors as well
strengthening the likelihood of projects delivering stronger development returns. Its profit oriented
approach has led to a limited presence in difficult states and sub-sectors but it is prepared to take on
full project risk on its balance sheet for debt products supported by DFID. The detailed financial terms
are under discussion and interest rates charged by DFID are likely to range between 1-3.5% (in £
terms). If IDFC takes on the hedging risk, the effect rate of interest to IDFC would be in the range of 79% at rupee terms, which is in the lower range of the 7-14% of the current multilateral/bilateral lending
rates, government securities, and the commercial market rates. Annex 4 provides further information
on the proposed terms of DFID lending.
66. Although TA available under this programme will primarily focus on project level institutional issues
(such as helping IDFC adopt Equator Principles), it may be used to strengthen the IDFC capacity to
influence the sector policies and practices to address other institutional constraints mentioned above.
DFID and other donors are also considering separate initiatives to address wider policy environment
issues in the infrastructure sector.
67. Impact of the institutional issues will vary considerably between Options 1 and 2. Option 2 (doing
nothing) will mean depriving the sector of a significant opportunity to address project level institutional
issues for infrastructure projects in India’s poorest states. It may also mean missing the opportunity to
support IDFC’s efforts to influence wider policy constraints and formally adopting the equator principles
(first Indian company to do so) and, therefore, delaying these processes. Any delay in addressing
these issues may prove costly in the current investment climate for infrastructure.
Social Appraisal
68. The extent to which poor people will directly benefit from new or improved infrastructure services will
depend on the nature of infrastructure projects supported with DFID finance. This programme has
identified four infrastructure sub-sectors (agricultural infrastructure; energy services; transport, mainly
road; and urban services) based largely on their potential to deliver growth and services that are propoor in the poorest states, as well as their difficulties in attracting private finance. According to Mahajan
& Guptaxxviii, “For India’s rural poor strengthened infrastructure facilities would facilitate the
17
development of small enterprises, agro-based activities, and markets, and increase off-farm and nonfarm employment opportunities”.
69. Projects that expect to deliver direct to targeted households (urban services, possibly decentralised
rural energy services etc) can offer greatest prospects for direct poverty targeting, over infrastructure
projects that deliver non-targeted public assets like roads and street lighting. Regardless, public assets
such as electrification and road availability are known to have a significant effect on poverty reduction
as established by an ADB studyxxix. The benefits include improved economic growth and access to
employment, improved access to public services such as health and education facilities, increased
personal safety, better access to common property resources by the poor and enhanced participation
in public work.
70. From a gender perspective, the analysis of Indian women’s entrepreneurship and
economic
participationxxx has established a clear relationship between better quality infrastructure and female
entry into industry/enterprise. Benefits for women include greater mobility and access to public services
such as health facilities and markets in district centres. Where infrastructure can be targeted at
household level, certain kinds of infrastructure services will disproportionately benefit women and girls
for example, water, toilets, and drainagexxxi. The beneficial effect of improved water and sanitation
facilities on women and children’s health is an established fact. It also reduces the time burden of
women and girls spent in water collection and have been an important factor leading to improved
school attendance of girls.
71. Whilst development of agricultural infrastructure (such as improved storage and logistical facilities for
agriculture) will not directly benefit individual households, it will benefit farmers & reduce wastage of
food grains (20-30% food grains harvested in India are reportedly wasted due to inadequate storage
facilitiesxxxii). It will also reduce distress sale and ensure farmers get better prices for their produce. This
increased income maybe used to leverage better health and educational services and contribute to
overall well-being of small and medium farm households. The main poverty reducing benefits from
this programme are expected through infrastructure services delivering improvements in the business
environment, whether for small scale farmers (essentially micro-enterprises) or larger scale industrial
developers who will have a requirement for skilled and low-skilled labour. A further positive impact on
poor people is through short-term and long-term employment opportunities generating by the
construction, operation and maintenance of infrastructure projects.
72. The key social risk is associated with land acquisition for infrastructure projects and the related
resettlement and rehabilitation of project-affected persons (PAPs). The programme will comply, at
minimum, with robust national and local laws governing treatment of PAPs and will also encourage
partners to move towards internationally benchmarked standards for infrastructure projects, such as
the IFC-promoted Equator Principles. DFID India’s approach to identifying and mitigating project-level
environmental, social and governance (ESG) risks in our private portfolio will be managed through a
new ESG framework. This framework will set out detailed operating procedures for managing DFID’s
due diligence approach and strengthening capacity within the private sector to adequately identify and
mitigate ESG risks, including social risks. The programme will develop a detailed Monitoring and
Evaluation framework in the first six months of implementation, for tracking both commercial and
development outcomes. This will include consideration of options that help track and respond to the
extent to which poorer households, and women and girls in particular, are being affected by the
programme.
73. Option 2 (Do Nothing), will mean a missed opportunity to improve the reach and pace of infrastructure
services, particularly those that might support job-intensive economic activities in the poorest states.
74. The Climate and Environment Appraisal, the Institutional and Political Appraisal and the Social
18
Appraisal demonstrate that the best option for DFID is Option 1.
C. What are the costs and benefits of each feasible option?
75. DFID support to the Infrastructure Debt Partnership Programme will be up to £36 million. The options
appraised here are:
Option 1: Provide £36 million to IDFC through a line of credit (plus £2 million TA)
Option 2: Do nothing (Counterfactual)
76. There is a long history of appraisals being carried out for infrastructure projects, especially by
multilateral agencies that have been active in this sector.xxxiii Unlike previous interventions where the
specific infrastructure assets to be financed are known prior to the intervention, the proposed
programme will set up a broad based facility that will have the flexibility of supporting a variety of
possible projects. This economic appraisal therefore looks at the benefits that could potentially accrue
from DFID supported investments in high impact private sector infrastructure projects in the low income
states. The programme aims to support a broad range of interventions including in the four sub-sectors
of agriculture, clean off-grid energy, transport services and urban water supply, sewerage and solid
waste management. The appraisal uses available information in each of the sub- sectors and attempts
to construct a model whereby DFID supported investment translates into infrastructure assets and a
stream of monetised benefits in each case.
77. Since the exact projects and interventions are still unknown, the appraisal assumes an even spread of
capital deployment across the four sectors (and as tracked in the log frame), and then uses a model in
each sector to build up a stream of benefits that would accrue. The high level benefits that are
monetised in each sector is summarised in the table below. The detailed approach used for each one
of the sectors follows below.
Summary of Monetised benefits
Sector
Indicator monetised
Agriculture
The value of additional agricultural products that will reach the market
Clean Energy
The increase in household incomes from improved energy access
Roads
The value of better access to markets, and health and education facilities
to households.
Urban Basic Services
Benefits to individuals from improved health and economic outcomes due
to better access to better quality water and sanitation services
Agriculture
78. While a number of possible interventions are possible in the agriculture sector, for the purpose of this
economic appraisal we use the specific example of cold storage facilities which are viewed currently as
a key gap in the agricultural value chain in India.
79. India is the largest producer of fruits and second largest producer of vegetables in the world. In spite of
that per capita availability of fruits and vegetables is quite low because of post-harvest losses (25% to
30% of productionxxxiv) due to non-availability of post harvesting and food processing facilities. In many
of the low income states, this figure can be even higher, with estimates showing that nearly 40% of
horticultural produce is lost in Bihar and U.P.xxxv In addition to wastage, lack of access to facilities
forces farmers to sell their produce immediately after harvest, leading to a glut of produce driving low
market prices for farmers. The appraisal uses industry estimates of Rs.50,000/ tonne as capital
investment to build cold storage capacity. The average value of horticultural produce is determined
from the Indian Horticulture Database (2011)xxxvi. Using the cost estimates and the availability of capital
from DFID supported sources and leveraged private capital; we determine how many tonnes of storage
19
capacity can be created. Using a conservative estimate of 33% of wastage that will be prevented, we
can estimate the value of additional agricultural produce that will reach the market, thereby providing
benefits to farmers who get better prices for produce and consumers who have better access to goods
throughout the year.
Clean Energy
80. India currently suffers from a major shortage of electricity generation capacity. The per capita average
annual domestic electricity consumption in India in 2009 was 96 kWh in rural areas for those with
access to electricity, in contrast to the worldwide per capita annual average of 2600 kWh
81. A study by the ADB in the Indian state of Gujarat on the effect of electrification and road availability
finds a significant effect on poverty reduction.xxxvii Using a probability score matching (PSM) approach,
the ADB study finds that, households with electricity have between 8 and 16 percent higher incomes.
82. We use industry estimates to determine the capital cost of generating one MW of power and the
minimum benchmark household consumption set by the International Energy Agency to estimate the
number of households reached. Using a weighted average income from national accounts statistics for
the 8 low income states, we calculate a household income effect, on the basis of a conservative
estimate of 8% increase in incomes for the households getting energy access. We focus on the impact
of access to energy on households in this case due to the available evidence base, and the potential
impact on poor households. We recognise however that improved access to energy could also have an
important positive effect on businesses in the region but do not include it as a benefit as that would be
double counting.
Roads
83. Typically road projects are appraised using software like HDM-4 (Highway Design and Management)
where the specific stretch of road to be constructed is appraised. The underlying benefits that accrue
from accommodating higher levels of traffic, reducing travel time, and lowering vehicle operating costs
are estimated. The specific costs incurred within projects like construction costs, routine maintenance
costs during the construction period, and environmental and social costs are also estimated. Since we
do not know the specific road projects that are to be constructed, we use estimates of road
construction costs for state highways from similar projects financed by IIFCL in Orissa.xxxviii
84. Literature sources note the impact of building roads on local economies, agricultural incomes, health
and education outcomes, and local labour markets. A report by the Planning Commissionxxxix finds that
“rural roads helped in eliminating rural poverty, improving living standard, connecting unconnected
habitation to mainstream and generating direct and indirect employment opportunities”. Rural roads in
particular have been proved to be catalytic for economic development and poverty alleviation in rural
areas. They are also essential for providing basic access to the services like health, education,
administration, etc. The literature suggests that while computing EIRR for a road project, social benefits
should not be ignored, as these can be as significant as the conventionally used economic benefits. xl
For a good summary of the evidence linking investment in roads and development, especially
agricultural growth, economic growth and poverty reduction, in the Indian context see Government of
India (2006)xli
85. This economic appraisal uses the survey based impact assessment from a World Bank study on the
Pradahan Mantri Gram Sadak Yojana (PMGSY, or national rural roads programme) to estimate the
number of households reached and the monetised benefits that accrue to a household from
commercial, health and education benefits.
86. The social benefits accrued from living near an all-weather road include increased income of lowincome group households; increased level of literacy and improved health standards. These have been
quantified in monetary terms. In the economic appraisal of World Bank support to the PMGSY Scheme,
20
they find that the monetised benefit to households in the form of better health and education outcomes
is approximately the same as the commercial benefits which amounts to Rs. 6750 to each household
reachedxlii.
87. We use industry estimates to determine the capital cost of building roads, and use the census data to
estimate the number of households which would fall in the catchment area of the roads developed.
Using data from the PMGSY scheme, we can therefore estimate the monetary benefits provided to
households on account of improved road access allowing for better access to markets and health and
education facilities.
Urban Basic Services
88. The economic benefits of improved sanitation and water access are increasingly getting better
understood in the Indian context. A recent study carried out by the World Bank-administered Water and
Sanitation Programme, estimates that the total economic impacts of inadequate sanitation in India
amounts to Rs. 2.44 trillion (US$53.8 billion) a year.xliii The same study found that the per capita annual
cost saved as a result of improved water supply was Rs. 1268.85 and Rs. 3268.94 as a result of
improved sanitation (2012 figure arrived at based on an CPI annual average inflation rate of 9.6%).
These costs are primarily due to health care costs, increased morbidity, productivity losses, time losses
and water treatment costs.
89. Unlike earlier interventions by DFID India in the urban sector, the infrastructure projects that will be
supported under the programme will largely be at the municipal and neighbourhood level, and not at
the household level. Therefore the economic appraisal does not use available estimates on per unit
water and sanitation connections as a basis for estimating the number of households reached. Instead
we use estimates available from a comparable World Bank project in Karnataka to estimate how many
people can feasibly be reached in the supported interventions.xliv
90. This allows us to develop a monetary estimate for the value of improved access to water and sanitation
services to households through better health, education and economic outcomes.
Technical Assistance
91. A proportion of the available resources have been allocated towards technical assistance services.
This component is up to £2m of the available capital and has been allocated as a share of total capital,
based on broad benchmarks available from other project level TA facilities like the TAF in PIDG. The
technical assistance is largely expected to be used at the project level; in structuring deals and
ensuring financial closure, in maximising developmental impacts, adherence to DFID ESG
requirements and finally in implementing a rigorous M&E strategy. Since the TA facility is so closely
linked to the outcomes of the projects funded with the returnable capital, the benefits are not monetised
separately. The TA resources are however instrumental in ensuring that the investment projects deliver
the benefits assumed here.
Unmonetised Benefits
92. A number of additional benefits can be thought to occur from the intervention, which is not monetised.
These include benefits to the beneficiary households as well as to the wider economy. These benefits
make strengthen further the case for the proposed intervention.
 It will help deepen the market for long-term local currency infrastructure financing: This is an
especially important benefit given the scale of India’s infrastructure requirements and the role
domestic infrastructure finance companies have in ensuring financial flows to the sector.
 Network effects and positive externalities: Infrastructure investments typically tend to have positive
21

externalities to the wider economy through creating a more agreeable economic environment,
which are not always adequately captured in standard appraisals.
Demonstration effect: It is expected that the successful completion of projects will have a positive
effect on the confidence of promoters, financiers and policy makers in supporting similar projects.
Given that the exact scale of this effect is necessarily unknown, and its attribution to DFID is
difficult to pin down, this remains un-monetised, but is an important and stated objective of the
proposed intervention.
Option 1: Support to IDFC
93. In this option DFID engagement involves providing £36m capital through IDFC in the form of a line of
credit. The terms and conditions on which the line of credit is to be disbursed will be in line with market
expectations while ensuring that the loan is ODA compliant. It is expected that the loan will be
disbursed completely, and that the repayment will be in line with the agreed terms. Given the
institution’s balance sheet strength and credit rating, there is strong confidence of repayment. This
would give DFID a nominal financial return but due to the low rate of interest, the return; in present
value terms is negative. The returnable nature of the capital means that the funds can be recycled for
future development programmes and is a major strength in the structure of this programme.
94. Indicative terms for the line of credit include an interest rate of 3% and a 15 year tenor, including a
three year grace period. The fifteen year tenor gives the partners a long gestation period in which to
on-lend and recoup investments.
Key Assumptions
95. To arrive at the final scale of infrastructure assets that can be supported, the model explicitly looks at
the private sector capital that will be mobilised by DFID’s capital. This is a stated objective of the
programme, and DFID will actively attempt to crowd in available capital, rather than support projects
where capital is already available. The capital leverage ratio is taken to be 2 for debt and is based on
discussions with industry financiers in India, including IDFC, the India Infrastructure Finance
Corporation Ltd (IIFCL), State Bank of India, Power Trading Corporation as well as with actual
infrastructure developers during the detailed scoping exercise conducted for this programme. This is a
conservative estimate especially since our expectation is that we will support projects in their early
stages, thereby allowing them to crowd in larger volumes (and proportions) of private capital. It is also
conservative when compared to experiences by PIDGxlv where there has been greater scope to
accommodate additional instruments like guarantees that yield very large mobilisation ratios.
96. The discount rate, used throughout the economic appraisal is 10 per cent. This is in line with standard
practise in DFID India business cases, and is also aligned with Government of India rate. Given high
inflation and interest rates in the Indian context, it is felt that keeping the discount rate relatively high is
justified.
97. The majority of the deployed capital is returnable, and this has been explicitly included in the model on
the basis of the terms indicated above. Since expected returns are lower than the 10% discount rate
used here, the present value therefore is negative. It is also assumed that DFID capital is only used
once for the purpose of a project, despite the possibility of it being recycled to generate additional
development impact.
98. The benefits from the supported projects are taken over a period of 20 years, which is typically the
lifespan of infrastructure projects in these sectors.
22
Cost
99. The entire cost of the infrastructure projects, including the private sector capital mobilised is taken as a
cost when doing the economic appraisal. In addition an annual maintenance cost is taken for all the
infrastructure sectors, which is estimated as 1% of initial investments based on industry estimates in
India (see paragraph 95) and DFID central guidance on maintenance estimates for economic and
social infrastructure.
Option 2 – Do nothing (Counterfactual)
100. In this option, DFID capital will not go into supporting private sector infrastructure projects in the low
income states of India. Since DFID support is not going towards an already existing government
programme or intervention, the counterfactual would be a status quo where the expected direct
benefits from the projects will not accrue. Since DFID is providing patient capital that can take high risk,
it is able to make viable projects bankable; thereby ensuring they reach financial closure and have an
impact on the wider economy. In the absence of this capital, private sector financiers would be hesitant
to take the risk of supporting such projects and the incremental benefits derived from them would not
accrue. DFID will be able to achieve additionality by making IDFC and other leading private sector
infrastructure financiers take an active interest in projects that have high development impact and are
based in the low income states. This will allow them to move away from doing ‘business as usual’,
which would tend to focus on traditional sectors like national highways and power projects in the more
developed states in the western and southern regions of India.
101. While the infrastructure sector will continue to have large scale investments and the proposed
£36m investment remains small in comparison to the total volume needed in the sector, the
counterfactual would be that numerous projects in the low income states which have a high potential
impact on economic growth and poverty, would remain unrealised. This is both through the direct
benefits that the infrastructure projects supported will provide, and the important demonstration effect
that the projects would have on the wider community of project promoters, infrastructure financiers and
policy makers.
102. This is not to suggest that IDFC will not continue to make investments, or that these sectors and
states will not be able to attract private sector capital. However it will continue at a slower pace, and
possibly without the additional checks and balances that a DFID programme may be able to introduce
in the form of ESG norms, social impact and monitoring and evaluation, as well as inputs on the policy
side and trying innovative new products and business models.
Stream of benefits, Cost and Benefit Ratio
103. The summary of the stream of benefits, costs and the benefit cost ratio for the option is outlined in
the table below.
NPV and BCR
Option1
Present Value of Incremental Benefits (£)
249,567,175
Present Value of Incremental Costs (£)
120,180,442
NPV at 10% Discount rate
129,386,733
BCR at 10% Discount Rate
2.08
23
Key Sensitivities
104. This appraisal is based on specific assumptions, which have been intentionally kept conservative to
allow for real world challenges that may arise during implementation. We have stress-tested scenarios
in which the most significant assumptions are weakened to test of the programme would still be a good
use of public resources. This includes testing :
 Whether our assumptions on benefits are too generous or costs are too conservative
 The leverage ratios of private sector capital are too high
 The expectation of financial returns to DFID are driving the results
 The allocation to specific sub sectors is driving the results.
105. The key risk is overestimating the value of indirect benefits; however even at less than half the
value of the already conservative assumption in the model this does not affect the outcome of the
appraisal. We find that the project benefits must be reduced by over 50% (52%) to reach breakeven.
The table below shows the results when benefits are reduced by half, and the BCR remains marginally
higher than unity. On the other hand costs will need to increase by nearly 110% for the project to
become unviable, assuming benefits remained the same.
Sensitivity analysis
Option1
Present Value of Incremental Benefits (£)
124,783,588
Present Value of Incremental Costs (£)
120,180,442
NPV at 10% Discount Rate
4,603,146
BCR at 10% Discount Rate
1.04
106. Other key assumptions are also stress tested to see if they change outcomes dramatically. The
leverage ratio of private capital is reduced to zero. This is a drastic assumption, and yet we find that the
option remain strongly viable with a BCR of over 1.7. However we feel that given risk mitigation
measures put in place, and the extremely low likelihood of this scenario, the risk remains hypothetical.
107. Financial losses to DFID do not affect the outcome of the appraisal dramatically unless they start
significantly impacting on the social impact the investments expect to achieve. For example, if we
funded the investments with grants rather than investments (i.e. assume the full £36 million of DFID
capital is lost) our indicative model would still return a positive NPV.)
108. Allocation across the four identified sectors is the last assumption that is tested. We look at the
outcomes for the programme if all the resources were in turn allocated to each of the sectors, instead
of an equal distribution across them as is currently the case. We find that there is no single sector that
is driving the results and all 4 options show a strongly positive NPV when viewed individually.
109. A substantial component of our M&E framework (£1.5 million) will seek to undertake economic
appraisals of a selection of infrastructure projects supported by DFID capital. A smaller sub-set of
these will be subsequently evaluated to assess whether projected benefits/impacts actually held true.
D. What measures can be used to assess Value for Money (VFM) for the intervention?
110. The proposed intervention has strong additionality as it attempts to fill a key gap, while occupying a
unique space within the development sphere in India, due to its high impact sectoral focus, its focus on
24
partnering with the private sector and geographical focus on the low income states.
The measures that will be used to assess value for money are:
- Cost of technical assistance (input level)
- Number of people reached with improved infrastructure services
- Amount of additional capital mobilised from the private sector (promoter inputs as well as
additional investment from other private sources)
- Amount of DFID funds (£) invested per infrastructure service delivered from a sample of
investments
- Recycling of initial invested capital into providing funds for continued operations in the poorer
states
- Benefit cost ratio (BCR)
- Economic Internal Rate of Return (EIRR)
111. The intervention envisages a TA component that will help strengthen IDFC’s systems and
structures, including where required, in functions like procurement, ESG and in monitoring and
evaluation. Emphasis will also be laid on building and maintaining effective MIS, incorporating
information from the various investee companies/clients/projects. This MIS will allow for tracking of
various measures outlined above. In addition surveys will be undertaken to measure access to
services, economic impact and household level impacts on income.
112. To ensure a systemic approach to improving VFM of the programme, some of the actions we have
taken or propose to take are:




Ensuring minimal use of public/donor funds, instead leveraging private funds as much as possible.
Integrating VFM measures in the logframe, and thus in the annual, mid-term and project completion
reviews, agreeing remedial actions if these measures score low. The benchmark for poor VFM will be
reach of less than 30% of the targeted beneficiaries per year.
Contributing DFID India views and keeping abreast of on-going work on preparing a global DFID
guidance note on ‘Measuring and Maximising Value for Money in Infrastructure Programmes,’ and
ensuring relevant benchmarks and indicators are used in the partnership.
Ensuring procurement contracts integrate VFM indicators and deliverables. In particular, we will adopt
the following principles of engagement to ensure results and value for money:
-
partnerships with institutions committed to quantifying attributable results, systematically
assessing, and reducing over time, cost-benefit ratios;
use of competitive processes and/or benchmarking to ensure value for money;
use of performance against results (and input costs) as an important criterion, to be reviewed
annually, for assessing continued DFID support;
use of grant funds sparingly to avoid distortions with a preference for loans and equity support
where appropriate;
avoid duplication and ensure complementarities with existing donor and government funded
programmes;
establishment of mechanisms to incentivise partners to assess and report on VFM;
a combination of financial and development returns will be sought from every investment;
once funds are realised from investments, these will be recycled into further investments to
obtain another round of new benefits
113. Overall the benchmark for poor VFM will be if two or more purpose level indicators fall short
of targets by more than 30% at the Mid Term. In this case, DFID will consider making
recommendations to close early components of the programme, including on-going infrastructure
partnerships.
114.

We have also taken a value for money approach in designing the programme:
A preference for moving forward with IDFC initially has been based on objectively assessing the
25



robustness of their systems and capability against other potential partner candidates. A more detailed
institutional due diligence exercise will follow to assess institutional risks and mitigating actions.
The Management Case shows that IDFC will be incentivised through the capital arrangements to
ensure i) commercial viability of the infrastructure projects, ii) fast and efficient project preparation and
iii) achievement of development objectives. This is because in many cases the partner will also be
taking a financial risk when investing in a project and therefore has a stake in its success.
IDFC is seen as a market leader in the Indian infrastructure sector, and is able to provide services at
competitive prices. Some of the relevant ratios for IDFC have shown improvement in recent years. For
example, the IDFC cost/income ratio for FY12 is 17% in comparison to 21% in FY11. Similarly, the
HR/operating income ratio for FY12 is 10% against 12% in the previous year.
IDFC is not taking a management fee from DFID to deploy this capital. It is using the concessional line
of credit to on lend to projects and will return the capital to DFID on pre agreed terms, taking on project
risk on its own balance sheet, thereby exhibiting a strong commitment to the projects supported.
E. Summary Value for Money Statement for the preferred option
115. The given intervention represents an effective use of DFID resources as it relies on delivering high
impact and essential infrastructure services in under invested regions of India, while leveraging
additional private sector resources, and using returnable capital, allowing for it to be used for greater
developmental impact. The benefit cost ratios from the preferred option is higher than the alternative
doing nothing approach, as well as playing an important role in our broader approach of deploying a
variety of instruments across the infrastructure eco system. It is expected to play an effective role in
meeting the needs of infrastructure projects, while delivering maximum VFM.
26
Commercial Case
A. Clearly state the procurement/commercial requirements for intervention
116. The majority of DFID funds (£38 million) will be deployed as non-grant returnable capital. As
per the agreed aid policy between the UK and India, DFID India will seek to partner with
“government sponsored institutions” or OECD-DAC registered agencies to promote private sector
development in the eight poorest states of India. Our programme partner IDFC is India's leading
integrated infrastructure finance player providing end to end infrastructure financing and project
implementation services. Besides a commitment to building India's infrastructure, IDFC works
closely with government entities and regulators to advise and assist them in formulating policy
and regulatory frameworks that support private investment and public-private partnerships in
infrastructure development.
117. Procurement Group in DFID has confirmed that DFID rules exempt deployment of non-grant
returnable capital (e.g. debt, equity investments) from the EU Procurement Directives. This
means that DFID India can contract an existing organisation to manage a programme of nongrant investments (e.g. debt or equity) to the private sector and charge a management fee for this
work where appropriate, without going through an OJEU process.
For technical assistance (£2 million):
118.
i)
ii)
DFID will procure grant-based services through two main arrangements:
Utilising the global DFID Framework Agreement for consultancy services (PEAKS) for
urgent due diligence work to assure DFID that its capital will not be exposed to
institutional or project-level risks on the environmental, social or governance front.
PEAKS was sourced competitively through a full OJEU process.
A direct commercial procurement exercise through the OJEU procedure or through the
existing framework agreement to select a management consultancy firm or consortium of
firms to manage the technical assistance programme during implementation. This firm will
be tasked with:
(a) developing and implementing a monitoring and evaluation programme;
(b) building partner capacity at the institutional and project level;
(c) conducting project level due diligence / independent assessments for DFID where
appropriate; and
(d) identifying and fostering innovations.
B. How does the intervention design use competition to drive commercial advantage
for DFID?
119. For returnable capital the proposed allocation of capital across partners and instruments
within an Infrastructure Sector Approach has been shaped by the recently completed partner
assessment exercise that explicitly sought to maximise VFM and development additionality.
120. DFID’s partnership assessment exercise has mirrored the key characteristics of a limited
competitive procurement process, a description of which is given below:


Potential partners submitted proposals to DFID within a fixed period, following an invitation
issued on the same day to all partners. The invitation included terms of reference (including
details of criteria to be used to assess quality of bids) and a standard proposal format.
Proposals were assessed against pre-agreed and weighted criteria.
Recommendations on preferred partners were made only after a pre-agreed deadline had
27

passed. This limited the risks of DFID giving unfair advantage to early mover-type partners.
The exercise confirmed IDFC as a strong partner with whom the potential to deliver a debtbased programme was high.
Final confirmation (signing of contracts) has yet to happen. This will only happen subject to
successful negotiation between DFID and IDFC on a range of key parameters (including
development returns; commercial returns etc.). Final confirmation will also be subject to
comprehensive and independent due diligence assessments of each preferred partner on
environmental, social and governance safeguards.
121. IDFC will be expected to ensure all projects adhere to the minimum environmental, social and
governance standards set by DFID India. The partnership proposal exercise demonstrated
confidence in IDFC’s own approach towards achieving VFM, including through its selection of
investment deals at both the pipeline and final stages (see Management Case).
122. To get the best value for money, results and impact, the contract(s) for managing technical
cooperation grant funds will be output focussed with payments linked to achievement of agreed
outputs and milestones. The supplier will be asked to provide details of methods proposed in their
proposal which would demonstrate what they intend to achieve, how and by when.
C. How do we expect the market place will respond to this opportunity?
123. Potential partners in the sector have already demonstrated a strong interest in participating in
this initiative by either submitting proposals during the proposal assessment exercise or showing
keen on-going high-level interest (Board of Directors). This has created an element of competition
amongst partners for DFID capital with more plausible partnership options available (up to five)
than that that could be accommodated in our Infrastructure Sector Approach (up to three).
124. Returnable capital: This programme is essentially about strengthening the market for private
sector activity in infrastructure in the eight poorest states of India. Successful projects supported
with DFID funds will lead to the direct provision of services for beneficiary populations. Successful
projects will also demonstrate the viability of infrastructure business models in states and subsectors which have remained under-invested due to high risk perceptions. Projects backed by
IDFC would enable additional private capital into these projects and sub sectors within the eight
low income states.
125. The total allocation for the grant component will be up to £2 million, and we expect high levels
of interest for this opportunity from both domestic as well as international firms, not least because
of the strong PPP activity in India in the last 8-10 years and the expectations of national level
progress for PPPs over the next five years. A competitive bidding process should give important
feedback to DFID about the proposed components within the programme and opportunities for
improving further and getting early progress. We expect the bidding process to provide DFID with
a strong pool of national (Indian) and international consultants.
D. What are the key cost elements that affect overall price? How is value added and
how will we measure and improve this?
126. The Management Case sets out the project governance arrangements which will ensure risk
is carefully managed and DFID resources are not exposed to unmanageable levels of commercial
risk.
127. IDFC is a well-established leader in the sector, with the necessary expertise to manage the
risk associated with capital investments. IDFC has robust management structures and project
appraisal processes that carefully assess the viability of projects in order to make sound
investment decisions. The programme logframe will be a key mechanism to assess project
28
progress. An output-based contract, linked with payments (or disbursements) to
milestones/outputs will be agreed with IDFC annually and progress will be measured and
monitored every month. Short narrative reports detailing progress against the work plan along
with details of actual and forecasted expenditure will be produced at least quarterly. This will
enable the Infrastructure Task Team to be fully up to speed with developments including early
sight of risks and other issues. Annual review reports, responding to the logframe and project
document, will be produced in advance of the annual reviews.
128. For returnable capital through a line of credit the main cost-driver will be around the final cost
of DFID capital (balancing requirements for treatment of capital as ODA, with the need to ensure
value for money for DFID capital without creating any market distortions). This can be broken
down across the following:





Exchange rate hedge as part of financing projects in rupee terms
Moratorium on payments back to DFID
Tenor of loan
Interest rates charged to partner (accounting for ODA-treatment requirements)
Risk profile of projects that might benefit from DFID support (ensuring that DFID
concessionality translates into support for less bankable projects in the poorest states)
129. Concessionality of DFID funds might also be translated into IDFC providing financial
commitments to key TA-related activities such as promoting Equator Principles or hosting major
events. No management fee is expected to be paid by DFID to IDFC.
130.


For technical assistance, the main costs will be;
Service provider management fee
Cost of services
131. Key cost drivers will be around the cost of services delivered by identified service providers,
and the prices of related goods such as travel and transport. The project will ensure best value for
money by adopt principles of engagement that ensure results (See ‘Measures to achieve VfM’
above).
E. What is the intended Procurement Process to support contract award?
132. For returnable capital, DFID India has conducted a competitive partnership proposal exercise
to identify preferred partners. Details are described in Section B of this Case.
133. For technical assistance, competitive procurement procedures (OJEU) or an existing
Framework Agreement will be adopted for the implementation phase. For urgent preimplementation work, a call down contract will be used based on DFID procurement guidelines.
DFID India will benefit from the competitive process managed by Procurement Group, including
negotiating competitive costs of services with the winning consortium.
F. How will contract & supplier performance be managed through the life of the
intervention?
134. Returnable capital component: The final terms of the DFID contract with IDFC will define the
investment strategy and criteria applicable to every individual investment made by IDFC with
DFID funds. The investment criteria will set out issues like the objective of the investment,
sectoral preferences, geographic focus, size of investments, types of instruments. An credit
appraisal committee may be set up. DFID will not be actively involved in the financial/commercial
29
appraisal of each individual investment but will have veto powers for any intended investment that
does not comply with DFID’s intended objectives. Investments will be made within the first few
years of the programme and thereafter the partnership will focus will be on supporting completion
of infrastructure projects and managing returns back to DFID.
135. IDFC will be directly responsible for undertaking due diligence assessments, selecting
infrastructure projects/firms to finance and, where appropriate, providing smaller infrastructure
firms with the required managerial, technical and market inputs. Periodic statements of
performance of infrastructure projects, independent financial audits and financial performance of
DFID funds will be provided to DFID. While IDFC will be fully responsible to ensure compliance
against Environmental, Social and Governance (ESG) benchmarks of projects, DFID will conduct
independent audits to check adherence to standards as well as assess the impact on poor
people. These responsibilities will be written into the term sheet, which will provide clear guidance
on DFID monitoring requirements. Management Information Systems will be established for each
component of the project and these are expected to be audited on an annual basis by external
auditors.
136. For technical assistance, performance-based terms of reference (TORs) will be used as the
basis for the contract with the selected service provider. The service provider will be required to
produce a work-plan for the early inception period (6 – 9 months) of the programme, setting out
early activities against the results and outputs in the logframe with measurable indicators. This
will form the basis not only for management of the programme by the service provider but also for
performance based management of the service provider by DFID. Subsequently, the service
provider will submit and agree annual work-plans with DFID, including describing how key
deliverables stack up in support of key milestones in the programme logframe. The service
provider will be expected to submit reports at regular intervals (quarterly) providing summaries of
progress against the work-plan. Quarterly review meetings with the supplier will be held to track
progress of the TA component.
Indirect procurement:
A. Why is the proposed funding mechanism/form of arrangement the right one for
this intervention, with this development partner?
137. An investment arrangement with IDFC is likely to see DFID funds being used to indirectly
procure goods and services at the level of the project developer. Commercial incentives
associated with the developer’s business model and IDFC’s business model e.g. to maintain
economy and efficiency in allocation and use of resources and to manage their own
financial/commercial risks, are aligned with DFID’s own interests in VFM.
138. A line of credit arrangement with IDFC will enable DFID to test an innovative approach to
mobilising private investment for pro-poor sub-sectors in the poorest states. IDFC is judged to be
one of the strongest partners available to DFID and, as a leading Indian finance company, has
good networks and good access to investment opportunities: this will help the partnership move
rapidly from design to implementation.
B. Value for money through procurement
139. The key procurement issue for DFID is the level of assurance we will have about IDFC
selecting the right projects/developers to invest in. DFID will draw assurance from:
-
The arrangements DFID will put in place to develop and manage the performance of its contract
with IDFC (see Section F of this Case above);
30
-
-
The strength of IDFC’s institutional systems, including as judged by DFID’s own recent
partnership assessment exercise. For example, IDFC has a comprehensive enterprise risk
management framework that assesses the extent of risks (market, credit and operational risk) for
its aggregate credit portfolio. We will examine IDFC’s institutional readiness in more detail as
part of an institutional due diligence exercise and ahead of finalising the contract with IDFC.
DFID’s own role in the investment decisions to be taken by IDFC and DFID’s own independent
assessments of the environmental, social and governance aspects of individual projects.
Financial Case
A. What are the costs, how are they profiled and how will you ensure accurate
forecasting?
140. A total of up to £38 million will be allocated to the programme over the next five years (2013
– 2018). The summary budget is provided below:
Figures in £ million
Component
Year 1
(2013/14)
Returnable
Capital
or RC
Technical
Co-operation
(Grant)
Investing in 5
Infrastructure
Projects
TA – (i) build
capacity; (ii)
build pipeline
project; (iii)
bring about
innovation
and
(iv)
monitoring &
evaluation
etc;
TC
Year 2
(2014/2015)
Year 3
(2015/16)
Year 4
(2016/17)
Year 5
(2017/18)
RC
RC
RC
RC
TC
17
TC
TC
TOTAL
TC
36
14
2
0.5
0.5
0.5
0.25
0.25
141. While adequate funds are available in DFID India’s aid framework, following the approval of
DFID India’s Operational Plan 2011-15, annual disbursements will be agreed depending on
availability of DFID funds. Approval is sought for 5 years (with re-deployable funds returning to
DFID over a 12 -15 year timeframe), however, any funding beyond the Operational Plan period
will be subject to DFID India’s policy on aid post-2015 and will be reviewed prior to the close of
this parliamentary cycle in 2015.
B. How will it be funded: capital/programme/admin?
142. From the programme allocation of £38 million; up to £2 million will be provided from
programme resources and up to £36 million will be provided from programme capital in the form
31
of new returnable capital investment instruments.
143. The arrangements for this - including for ODA scoring and for DFID’s accounts – are still
being finalised. Following agreement these will be clearly detailed in the Memorandum of
Understanding (MOU) between DFID and its partners. A legal firm is being contracted to support
DFID India to ensure that the legal documentation and financial agreements are drafted to ensure
DFID’s access to detailed information needed to effectively monitor and evaluate the investment
portfolio.
144. Any capital assets procured under the TA support of this programme will be treated in
accordance with DFID procedures and declared on an annual basis. Should assets remain at the
end of the programme, an exit strategy will be agreed with DFID.
C. How will funds be paid out?
145. For returnable capital, a contract will be signed with IDFC Ltd. Funds will be paid out based
on legal and financing terms agreed with IDFC.
146. Partners will be funded in tranches, with funds invested as debt with returns (profit or loss) as
agreed with DFID. Details of MOUs and loan arrangements will be worked out jointly with IDFC.
At the end of the project funds will be returned to DFID or a fund nominated by DFID.
147. For technical assistance, an OJEU contract or a contract using the existing framework will be
signed between DFID and the appointed service provider to (a) develop and implement a
monitoring and evaluation programme (b) build private sector capacity and (c) undertake projectlevel due diligence or other forms of assessments identified by DFID.
148. For the TA contract, DFID will reimburse the service provider on satisfactory performance of
milestones achieved. Funding tranches will be agreed with the service provider based on the
terms of reference for the implementation phase and more specifically on the milestones for year
1. It is expected that funds will be reimbursed on a quarterly basis.
D. What is the assessment of financial risk and fraud?
149. The partnership assessment exercise conducted by DFID (detailed in Section B of the
Commercial Case and in the Strategic Case) has given us early assurance of the limited financial
or fraud risks associated with a partnership with IDFC. We judge that the financial or credit risk to
DFID is likely to be low given the solid credit ratings given to IDFC by reputable credit rating
agencies.
150. IDFC is a leading blue-chip company in India and as a publicly listed firm, it is required by law
to publish its accounts and undergo regular audits. Its Board Members comprise a selection of
leading professionals, including a senior member from the Ministry of Finance, Indian national
and international members.
151. Its commitment to robust corporate governance, including on managing financial risk and
fraud, is illustrated by the following: it has integrated risk management systems, a strong code of
conduct (with environmental, social and governance issues or ESG embedded in it), a
commitment to exploring adoption of international ESG benchmarks (Equator Principles), an
established whistle blower policy, a disclosure code and fair practices code. IDFC’s historical
relationship with IFC (equity and debt) and CDC (equity) has enabled it to strengthen its systems,
particularly on the ESG front.
152. DFID carried out a rapid anti-corruption and counter fraud assessment (ACCF) in September
2012 of a selection of its current and proposed programmes in India including the proposed
32
partnership with IDFC, as part of the process to develop its own Anti-Corruption and Counter
Fraud Strategy. The assessment judged that while the risks were normal for the sector, the
following safeguards for DFID’s capital would apply:
- DFID’s due diligence assessments at the institutional (IDFC) and project (developer) level. The
due diligence will include thorough assessments of the financial management capability of IDFC
and the borrower/developers including counter-fraud capability. DFID will also carry out site
visits and spot checks.
- Application and monitoring of DFID India’s ESG framework: DFID India’s ESG framework will
be used to assess compliance by infrastructure projects and their promoters to a minimum
benchmark of standards, including on the business integrity and financial risk front. Stretching
targets will be established and support provided to encourage stronger compliance, closer to
international standards.
- DFID contract with IDFC and, possibly those between the IDFC and its borrowers/developers to
include benchmarks on financial management, fiduciary risks, corporate governance and
business ethics.
E. How will expenditure be monitored, reported, and accounted for?
153. For returnable capital a detailed annual work plan based on partners’ investment plans will be
agreed with partners. Quarterly progress reports will be submitted, accompanied by a joint review
to assess the progress. More frequent reviews may be required in the critical early months of the
programme.
154. Utilisation certificates for the earlier tranches of DFID funds will be a pre-requisite ahead of
DFID making further financial disbursements. Programme partners will undertake an external
audit of project funds on an annual basis. An annual audited statement of accounts will be
submitted to DFID no later than four months after the end of each financial year.
155. For technical assistance, short narrative reports detailing progress against the work plan
along with details of actual and forecasted expenditure will be produced quarterly. At the start of
each financial year, detailed annual budgets against milestones will be agreed - this will form the
basis of monitoring and reporting for the year.
33
Management Case
A. What are the Management Arrangements for implementing the intervention?
DFID India’s Infrastructure Task Team
156. DFID India’s Infrastructure Task Team will hold responsibility for managing the relationship with
IDFC, TA contractors and other programme stakeholders (e.g. national and state-level government
representatives) important for the effective delivery, monitoring and evaluation of the programme’s
objectives. The Task Team is composed of DFID India’s Senior Infrastructure Adviser,
Infrastructure Finance Adviser, Economics Adviser and Project Officer, with support from Social
Development, Governance and Climate Change Advisers. It will be the Task Team’s responsibility
to ensure that the allocation of programme funds across specific infrastructure projects maximises
demonstration and development additionality, as well as maximising VFM.
DFID interaction with IDFC
157. The IDFC partnership will be underpinned by a contract signed up by DFID and IDFC. The
contract will set out the detailed legal and financial terms of the partnership, define roles and
responsibilities, obligations and relative legal positions.
158. A term sheet will set out the material terms and conditions of the relationship. This will include
the requirements that need to be fulfilled for an investment to be eligible for DFID capital. The
contract will set out that any projects considered for DFID capital will be referred to DFID for review
at a minimum of two points along the IDFC project approval pathway:
o
Firstly, details of projects in the early stage of development should be referred to the Task
Team for consideration. The Task Team will make an early assessment of whether or not the
project meets DFID funding criteria.
o
Secondly, once IDFC has assessed the commercial viability, it will be contractually obliged to
refer any project considered eligible for DFID capital to the Task Team for final approval.
159. Flowchart charting decision flow for IDFC’s lending business and where DFID expects to
influence decisions associated with its own capital
DFID engagement at
project pipeline stage
Project opportunities identified through staff networks.
Environmental screening of promising projects conducted.
Deal Selection Committee decides which projects
to move forward.
DFID decision on
financing specific
projects
Head of Credit (who is also Chief Risk Officer)
recommends projects for IDFC investment
Decision Board (Chief Risk Officer, Chief
Financial Officer, MD/CEO and Head of Legal)
make recommendation to next and final stage
Credit Committee, chaired by Chairman of IDFC, makes
final decision on all projects valued at £50 million or below.
34
Detailed IDFC due diligence
conducted of projects
covering commercial,
technical, political and
environmental aspects
Management of Funds
160. DFID will extend a line of credit at ODA-compliant rates of interest and other terms for project
debt financing to IDFC, namely on development and demonstration additionality requirements.
IDFC will hold responsibility for investment decisions and bear the credit risk i.e. if a developer
defaults on a loan financed with DFID funds, IDFC will still be required to pay back the loan
(principal) and interest to DFID.
161. DFID will not influence IDFC’s decisions or assessments about the commercial viability of
projects. Projects will only be considered eligible for DFID funding once IDFC has completed due
diligence assessments of the projects. Once a decision by DFID has been taken to fund specific
projects, DFID funds will be released by IDFC in a phased manner as individual or sets of
infrastructure projects are approved.
162. IDFC will only disburse funds to projects after its Credit Committee has made a decision and
after loan documents have been signed by the project developers. The first disbursement by IDFC
must be signed off by a number of key personnel, including the Environmental Officer. On an
average, between10-15 disbursements are made per project over a 3–5 year period. For all
projects with high environmental impacts (Category A projects and high-impact Category B
projects), annual site visits are conducted by specialist IDFC personnel.
Technical assistance
163. The technical assistance component of the project will be supervised by the Infrastructure Task
Team and be divided into two stages:
 Firstly; pre-implementation technical assistance to undertake critical preparatory work to ensure
the pace of the programme remains on track, particularly in the first year of implementation:
i)
Conducting a pre-investment due diligence assessments of proposed partners to evaluate
the appropriateness of the agency to effectively support DFID India’s infrastructure
objectives.
ii) Reviewing the robustness of the due diligence process followed by selected partners for
their projects (sectors/sub-sectors), especially with regard to environmental, social and
governance (ESG) norms. Following this, to identify, plan and begin to address the key
capacity constraints (systems, staff; etc) in DFID’s partners on ESG appraisal issues.
iii) Ensuring that projects benefitting from DFID support undergo rigorous environmental, social
and governance assessments by conducting independent appraisals (including by visiting
project sites for up to 12 projects by the technical assistance service provider and
Infrastructure Task Team members).
164. A professional consultant will be contracted to carry out the first stage of the technical
assistance component. DFID’s new global Climate, Environment, Infrastructure and Livelihoods
competitively-agreed Framework Agreement will be used to identify, manage and quality assure
organisations and individuals with appropriate technical expertise. The contracted organisation will
carry out an urgent set of tasks including conducting environmental, social and governance due
diligence of actual projects for co-financing in the first year of the programme. Their expertise will
also be used to help DFID conduct due diligence assessments of partner organisations.

Secondly; the full implementation technical assistance programme will aim to:
i)
Develop and deliver a monitoring and evaluation programme at the project and portfolio
level;
ii) Take forward work started during pre-implementation technical assistance on ESG
standards; and support compliance of partner organisations with those standards.
iii) Drive innovation in infrastructure development in the poorest states by conducting pilots
using new financial, contractual and technological approaches.
35
165. The main body of the TA component will be carried out by expert consultants selected through a
competitive tender process compliant with OJEU standards. The selected organisation will continue
to work with partners on ESG standards as well as take forward new tasks highlighted above. The
expert consultants will be supervised on a day to day basis by the Infrastructure Task Team. They
will be accountable to DFID for delivery of results against the programme document.
166. The consultants will have the financial delegation required to utilise DFID funds where
appropriate and will have the powers to contract, hire staff and manage funds and accounts. They
will drive implementation of the TA component, address routine technical and operational
management issues, ensure coherence across components and track progress across TA-related
outputs.
B. What are the risks and how these will be managed?
167. The programme is considered to be medium risk and high impact. The key risks are highlighted
below:
Infrastructure Partnership Programme risks and mitigation measures
#
Risk
Likelihood /
Impact
Mitigation
PROJECT RISKS
1
Lack of pipeline of DFID will facilitate PPPs in our chosen subsectors Med / High
bankable projects
by leveraging our relationships with the state
governments in our three partner states.
Existing DFID TA-based programmes on growth
and governance helping to improve investment
climate in poorest states.
2
DFID finance fails to Assessments of project viability will be carried out Low / Med
crowd in investors
by IDFC whose wider institutional incentives are
independent of DFID’s. IDFC will bring expert
knowledge and skills in assessing projects and
sourcing financiers other than DFID. Projects will
be run on a co-investment basis.
TA to support developers to make projects more
financially viable.
3
DFID investments fail This is a new and innovative way of undertaking Med / Med
to make a financial development that carries with it the risk of our
return.
financial returns being lower than that from
commercial investments. However, there is
potential for significant developmental gains.
Debt invested through IDFC can be expected to be
returned to DFID with interest because IDFC will
take on the project’s credit risk. IDFC is reputable
and has long standing experience in the
infrastructure financing sector along with a good
36
credit rating.
DFID’s investment policy, as agreed with IDFC,
must clearly articulate the level of risk acceptable,
in order to guide partners in the choice of
investments.
4
Investments fail to The project will work in the poorest states and Low / High
have pro-poor impact specifically target infrastructure sub-sectors that
are pro-poor.
Our ESG framework will also help in improving pro
poor benefits, especially with its social
development indicators.
IDFC has expertise in managing risk and identifying
projects that are likely to deliver financial return. By
holding veto rights over how DFID capital is
invested, we can ensure that only pro-poor subsectors with potential for real development impact
are financed with DFID capital.
PARTNER RISKS
5
Lack of transparency
or
corruption
in
decision
making
processes at project
level
DFID capital will not be used to support projects or Med / Med
organisations we have concerns about, or which do
not conform to our basic ESG framework.
Contractual agreements will include strict rules
about openness in decision making processes.
Technical assistance to support organisations to
promote good business practices and improve
standards of governance.
6
Partners
fail
to
adhere to fiduciary,
social
and
environmental
safeguards
on
investments,
adversely impacting
DFID’s reputation.
Working with partners to promote adherence to Low / High
EQUATOR principles. Environmental, Social and
Governmental assessment framework principles to
feed into project selection. Technical assistance
component to work with partners on the
implementation of ESG principles. DFID will also
hold veto right over which projects are financed
with DFID capital.
ECONOMIC RISKS
Indian
economic
position
makes
project
unfeasible
(interest
rates,
growth
slowdown,
taxation policy).
7
Economic fundamentals reasonably strong in India. Low / High
Policy shift that deprioritises infrastructure is
unlikely even in a worsening economic
environment.
In a worsening economic climate, DFID capital may
become even more attractive for financiers and
promoters.
Currency instability Hedging will mitigate losses caused by relative Medium / Low
affects
financial currency value fluctuations.
viability of project.
37
POLICY RISKS
8
Policy environment
restricts
implementation of
projects.
Existing DFID TA-based programmes on growth
and governance helping to improve investment
climate in poorest states.
Med / Low
Within the wider DFID India Infrastructure Sector
Approach, a dedicated TA programme is being
scoped to consider how best to support the
investment climate for infrastructure investments.
9
Political will turns
against the use of
user fees.
Existing DFID TA-based programmes on growth
and governance helping to improve investment
climate in poorest states.
Low / Med
Within the wider DFID India Infrastructure Sector
Approach, a dedicated TA programme is being
scoped to consider how best to support the
investment climate for infrastructure investments
ENVIRONMENTAL RISKS
10
Climate risks or
disasters adversely
affect investments
and/or erode
programme impact.
ESG assessments will look at the risk of Low / Med
environmental and other disasters when assessing
the viability of the project.
C. What conditions apply (for financial aid only)?
168.
Not applicable as the programme does not involve financial aid to government.
D. How will progress and results be monitored, measured and evaluated?
169. Progress will be measured against a results-based M&E Framework designed by DFID India
and in consultation with external infrastructure finance and delivery specialists. The framework will
capture results associated with both commercial and development returns. Details of quarterly
progress will be submitted to the Programme Advisory Board. In addition:
Input to Output level
170. A detailed MIS system will be put in place to track the status and contribution of individual
projects. In addition, regular monitoring of the projects and partner institutions will be carried out to
ensure adherence to the minimum benchmarks of the ESG framework as well as to monitor
progress against stretching ESG targets.
Output to Outcome level
171. Annual and mid-year reviews will monitor progress and follow-up against logframe targets and
milestones (comprising a selection of the results in the results framework), and will be conducted
where possible with independent parties.
Outcome to Impact level
172. Annual and mid-year reviews will monitor progress. The programme will also identify within the
38
first 9 months the priority impact evaluation and research priorities to run alongside (and embedded
in) the core programme.
173. An early priority will be to conduct economic appraisal exercises, alongside routine due
diligence exercises, for a selection of projects. A selection (or all) of these projects will then be
assessed for impact. In this way, useful new knowledge about projected and actual impacts, as well
as useful new knowledge about implementing projects in under-invested sub-sectors using
returnable capital will be generated.
174. Subject to resources being available within the TA component, additional impact evaluation
studies might include topics such as the role of infrastructure in supporting inclusive growth in
specific states; and the benefits (commercial and developmental) and costs of applying global
rather than national benchmarks for ESG in specific infrastructure projects to judge where the
returns might be greatest.
Lograme
Quest No of logframe for this intervention:
39
ANNEX 1: CLIMATE AND ENVIRONMENT SENSITIVITY ANALYSIS FOR OPTION 1
Negative impacts:
Are the objectives of the
project likely to be at risk
from;
Climate change: Risks to the focus states from climatic changes are largely
known. This may pose a risk to project objectives, as
 Enhanced frequency of droughts (as projected particularly for Rajasthan,
parts of UP and MP, Orissa) will negatively affect operations and viability of
businesses financed under the initiative. For example, droughts will reduce
availability of biomass and water that are inputs for energy generation,
agricultural production will decline, leaving less for utilisation of the
agricultural infrastructure being created etc.

Is the proposed
intervention likely to
contribute to:
Enhanced frequency and intensity of floods, as projected particularly for
Bihar, UP, MP, Chattisgarh and Orissa will pose a serious damage to the
physical existence to the infrastructure like roads, urban services, power
plants etc.
However, if designed carefully the project objectives could still be achieved even
if the projected climatic changes come true.
Environmental degradation: A large area of the project states is under one or
the other form of serious environmental degradation, such as water depletion, soil
alkalinity, land degradation etc. However, if adequate practices are adopted from
the design stages itself, most of these issues can be addressed for the specific
projects.
Climate change: Some of the focus areas of the intervention such as clean
energy, solid waste management will actually reduce/avoid GHG emissions. On
the other hand, other infrastructure initiatives such as agricultural infrastructure,
roads, other urban services will lead to GHG emissions and hence contribute to
climate change. Given the necessity of this infrastructure to address poverty, a
prudent strategy will be that adequate mechanisms are put in place to ensure that
this infrastructure is as low carbon as possible.
Environmental degradation: As stated in the Appraisal Case, infrastructure
projects in each of the sectors will carry their own environmental risks. For
example, production of biomass for power generation, if not managed carefully,
can be at unsustainable rates, ecosystems can be damaged, large amounts of
water can be consumed, and net greenhouse emissions may occur. Similarly,
solid waste management through landfills can pollute the ground water and lead
to methane emissions. Agricultural cold storage facilities are often reliant on
diesel based power, leading to GHG emissions. Road construction poses known
risks such as clearing of vegetation, soil erosion, localized flooding from siltation
of drainage canals and waterways etc.
The programme will consider putting in place mechanisms whereby: i)
Infrastructure projects comply with the environmental safeguards ii) Preference is
given to projects that ensure environmental sustainability.
Increased vulnerability of communities to climate change / environmental
degradation and shocks: This is not evident apriori.
Positive impacts:
Could the outcomes of
the intervention be
enhanced by:
Could the proposed
Improved management of natural resources: Longer term sustainability of
many of the infrastructure projects financed as part of the programme will be
critically dependent on good management of natural resources. For example,
evidence has suggested that acceptability of solid waste management projects is
often determined by their impact on surface / groundwater resources, odour
generated, utility of material recycled etc. Similarly, for biomass power generation
projects, fuel supply is assured only when biomass is harvested sustainably,
water resources are not exhausted/polluted etc. It is thus important that the
financial institutions undertaking the due diligence for financing the identified
projects strictly adhere to application of best practices in environmental
management.
Tackle climate change: the intervention certainly provides a very good
40
intervention help:
opportunity to support low carbon pro-poor development. Consideration needs to
be given to two aspects in the detailed intervention design:
Maximising opportunities for low carbon infrastructure: As mentioned above,
some of the focus areas such as clean energy, solid waste management as part
of the basic urban services etc. do lead to direct emission reductions. This
intervention can also encourage the other infrastructure projects to be
designed/operated in a manner that is low carbon in construction, energy use,
etc. For this purpose, mechanisms must be built in to give preference to projects
that adopt low carbon practices over others that are more traditional in
design/operations
Infrastructure to be designed to withstand extreme events and reduce
vulnerability: Since the project states are projected to be prone to more extreme
events, this intervention must actively encourage consideration of climatic
changes in the infrastructure design so that such infrastructure is not destroyed or
rendered inoperative in the event of an extreme event like flood or drought.
Experiences generated from these projects will also be of great use both
nationally and internationally.
Improve environmental management: The intervention will help improve
environmental management, since it will potentially support projects on solid
waste management, clean energy generation etc. To tap the full potential in this
intervention for improved environmental management, it is recommended that (a)
the partner Financial institutions are encouraged to adopt best practices in
sustainable financing like the Equator Principles or UNEP Financing Initiative and
(b) adequate environmental safeguards must be built into each of the projects so
that sustainable levels of resource use or adequate treatment of pollutant
discharge are ensured.
Reduce vulnerability and / or build resilience and adaptive capacity to
climate change / environmental degradation and shocks: It is well
documented that access to physical capital like markets, energy and agricultural
infrastructure play a major role in improving people’s incomes, enabling asset
safety, enhancing access to banking facilities, credit and insurance mechanisms
etc. This intervention will therefore in any case be useful in improving people’s
adaptive capacity. However, it needs to be ensured that the infrastructure is
designed in a manner that it does not lead to deprivation from these safety nets in
case of an event like flood.
41
ANNEX 2: CLIMATE AND ENVIRONMENT CHECKLIST
Impact of Climate Change
on Intervention
Positive
Opportunity for economic
growth through
development and
dissemination of
technologies
Y/
N
Detail
Y
Climate Change considerations have
triggered several national and state level
initiatives to promote technologies like
renewable energy, less material intensity in
construction etc. At the same time, many
financial players have also earmarked funds
for investments in low carbon areas. The
Infrastructure Debt Partnership Programme,
may benefit from this momentum and may be
able to leverage significant private capital in
infrastructure projects that deploy cutting edge
low carbon technologies and lead to economic
growth
Opportunity for job creation
Y
Increased revenue
generating opportunities
Opportunity for new
agriculture and livelihood
options
Negative
In a climate sensitive area?
Measure


Technical Assistance
to states may also be
focussed on support
in creating enabling
conditions for private
sector investment for
low carbon
infrastructure
Appropriate
instruments for
facilitating enhanced
investments in areas
such as clean energy
to be identified.
No specific additional
measure required.
Y
Climate change may not provide job-creation
opportunities directly. However, low carbon
infrastructure such as clean energy
generation, solid waste management projects
etc. will lead to job creation directly and
indirectly.
Not applicable
N
Not applicable
No specific measure required
Y
Risks to the focus states from climatic
changes are largely known. This may pose a
risk to project objectives, as
 Enhanced frequency of droughts (as
projected particularly for Rajasthan, parts
of UP and MP, Orissa) will negatively
affect operations and viability of
businesses financed under the initiative.
For example, droughts will reduce
availability of biomass and water that are
inputs for energy generation, agricultural
production will decline, leaving less for
utilisation of the agricultural infrastructure
being created etc.


Enhanced frequency and intensity of
floods, as projected particularly for Bihar,
UP, MP, Chattisgarh and Orissa will pose
a serious damage to the physical
existence to the infrastructure like roads,
urban services, power plants etc.
42


Partner financial
institutions must be
encouraged to
incorporate climate
change considerations in
their investment criteria
Training modules on how
to incorporate climate
change aspects in
specific infrastructure
design and operation may
be developed and
trainings imparted.
This programme must
generate strong evidence
on how incorporation of
climate change
considerations leads to
modifications in
infrastructure designs,
what are the changes in
the capital and
operational expenditures
etc. This will be very
useful for infrastructure
projects within India and
also for estimates for
adaptation financing
through the global climate
In an area subject to
frequent climatic shocks /
variability
(floods/droughts/temperatur
e)
Y
In an area where climate
change could lead to
conflict
Y
Community has poor
capacity to deal with or
adapt to climate change or
shocks
Y
3
All the project states are subject to frequent
climatic shocks. Western and South western
parts of Uttar Pradesh and northern and
western parts of Madhya Pradesh have been
receiving lower rainfall in the last decade or
so, causing drought situations. Changes in
flood patterns have been witnessed in eastern
Uttar Pradesh and Bihar. There is now a
greater intensity of flash floods in UP, with
even small rivers causing extensive damage.
Increasing instances of river flooding in Bihar
are also being linked to climatic changes.
Cropping patterns are changing and pulses
(once a major crop in the area and a major
source of protein) are not grown due to longer
periods of water logging, which disrupts the
whole crop cycle and production, even in the
rabi season, is severely affected.
Trends in the last two decades have shown
Orissa is already facing the impacts of climate
change. Out of average 1500 mm rainfall in
the state, 500 mm to 700 mm rainfall is now
occurring within a span of 3-4 days (as
against 70 rainy days on an average), which
is causing severe flood and drought in
subsequent days. within last 18 years
(Between 1990 to 2008), Orissa has
experienced 12 years of flood, 5 years of
drought, one Super Cyclone and many
depressions and cyclones
So far, it is not expected that climate change
could be a major driver for any conflict in the
project states. However, many parts of the
project states are already conflict ridden due
to the Naxalite-Maoist insurgency. 54 of
India’s 60 insurgency affected districts fall in
the states of Madhya Pradesh, Bihar, Orissa,
Jharkhand and Chattisgarh. While the
insurgency is largely due to lack of local
people's access to forest land and produce
and the distribution of benefits from mining
and hydro power developments, extreme
events enhanced by climate change may lead
to further deprivation and enhancement of
conflict. It is not clear how this may affect the
effectiveness of the intervention, since it is
quite likely that most of the specific
infrastructure projects supported under the
initiative will be in areas that are not conflict
ridden.
Districts in all the eight project states have
been identified as being amongst the highest
in India in terms of social vulnerability, in a
study which examined exposure to the effects
of climate change and economic
globalisation3. A key negative effect that can
be expected is extreme events like floods,
cyclones and droughts may reduce
TERI 2003, An Approach to assessing vulnerability and coping strategies
43
agreements
Same as above
Financial Institutions often
already take such issues into
account in their investment
decisions. The Environmental
and Social Framework
agreed with the partner
Financial Institutions must
agree of mechanisms to
determine that specific
projects should not in any
way enhance the conflicts or
strategies are built in the
project design to mitigate the
conflict risks.
No specific additional
measure required
agricultural production, putting in danger
viability of agricultural enterprises and assets
supported under this programme.
Programme dependant on
specific climatic condition
(agriculture, aquaculture)
Climate sensitive policies /
laws / regulations result in
social / development
impacts
N
Not Applicable
Not Applicable
N
All project states are are formulating state
level action plans on climate change.
Additionally, activities under different missions
of National Action Plan on Climate Change
are underway. However, no negative impacts
on social development as a result of these are
foreseen
No specific measure required
44
ANNEX 3: INSTITUTIONAL ASSESSMENT OF PARTNERS OPERATING IN MORE THAN
ONE INFRASTRUCTURE SUB-SECTOR.
SBI is the largest and the oldest commercial bank in India. It is owned by the Government of
India (GoI). It has the largest network of branches extending into the frontier districts and
villages across India and is the preeminent state lending institution in the eight low income
states. SBI has 73.2% stake held by the Government of India. SBI has 100% ownership of
SBI Capital Markets Ltd. which in turn has 100% ownership of SBI Cap Ventures Ltd (SVL),
the proposed financial intermediary for DFID India’s infrastructure work on the equity side. SBI
is India’s leading domestic lender, constituted under the State Bank of India Act 1955 by the
Parliament of India to address the financial and banking needs of Indian citizens, corporates
and to be an implementation partner on the Government of India’s reform and financial
inclusion agenda. In spite of its vast financial resources, it is constraint by the regulatory
limitations applicable to banks (shorter loan tenors than the need; considerable bank funds
being blocked for other purposes under the central bank regulations).
IDFC and IIFCL are non-banking finance companies and are especially designed to meet
some of the regulatory limitations facing the infrastructure sector. Whereas IIFCL is wholly
owned by GoI, IDFC has significant GoI stake (approximately 37%). IIFCL was set up in 2006
to catalyse long term debt for PPP infrastructure projects. IDFC, established in 1997, has
longer experience and is equipped with a wider mandate and choice of financial instruments.
IDFC Ltd. is seen as an institution capable of engaging in innovative financing for
infrastructure and helping other institutions raise funds for infrastructure. It can support
infrastructure projects in critical areas, including through provision of equity, which is not easily
available to such projects. It works closely with government entities and regulators to advise
them on formulating policy and regulatory frameworks that support private investment and
public-private partnerships in infrastructure development. IDFC’s other strengths include its
integrated risk management systems, strong code of conduct (ESG embedded in it),
commitment to exploring adoption of Equator Principles and established whistle blower policy
and fair practices code. IDFC has received lines of credit from IFC in the recent past and its
third Private Equity Fund for infrastructure projects has benefited from IFC and CDC
investments.
PIDG, a multi donor organisation, was set up in 2002 to overcome market and institutional
failures constraining private sector participation in infrastructure development in developing
countries. Its mandate being so close to the project objectives distinguishes it among the
partners being considered under this project. Two recent reviews of its performance – DFID’s
Multilateral Aid Review (MAR) of October 2010 and Australian MAR (March 2012) – have
rated its focus on poor countries; organisational capabilities; financial resources management;
cost and value consciousness; delivery of results; and climate change and environmental
sustainability as ‘strong’ or ‘very strong’. The DFID MAR assessed the PIDG performance on
transparency and accountability as ‘satisfactory’ (score 2 on a scale of 1-4). The more recent
Australian MAR rated PIDG against this criterion as strong. However, these assessments
have stressed the need to strengthen transparency at the level of PIDG’s business partners
and to tighten some aspects of the accountability chain from donors to the PIDG Programme
Management Unit to Facility Board to Facility Management. PIDG currently has limited scale
in India and is expanding coverage across low income states and pro-poor sub-sectors
identified for investment by DFID India’s Infrastructure programme.
.
45
ANNEX 4: CONCESSIONALITY OF DFID CAPITAL AND DRAFT TERMS OF DEBT
FINANCING BY DFID
Concessionality
DFID proposes to provide concessional funds to IDFC in order to incentivise IDFC to fund
projects in difficult sub-sectors (e.g. agricultural storage and logistics, off-grid power, transport
and core urban services) in India’s eight low income states. These are sub-sectors and
geographies where mainstream capital is currently not flowing because of a variety of market
failures outlined in the business case.
In determining the degree of concessionality, ODA-compliance (as determined by OECD-DAC
guidance) of DFID capital is a key factor. The DAC model notes that for loans, the collective
impact of interest rate, tenor, grace period must be equivalent to the loan having a grant
element of 25% of total capital for it to be ODA-compliant. The task team has solicited views
from FCPD to confirm these terms comply with DAC guidelines. The loan agreement with
IDFC Ltd. will only be signed after receiving confirmation from FCPD that the pricing of the
loan and the borrower (IDFC) conform to ODA requirements4.
The table below compares loan terms of developmental and commercial organisations
operating in India. Since DFID returnable capital programmes are of tenors ranging from 12 –
15 years, unlike other development agencies such as the World Bank and KfW which lend for
up to 30 years, the interest rate charged by DFID needs to be kept relatively low (between 1 3% per annum in pound sterling terms) to qualify as ODA. With IDFC likely to bear the cost of
currency hedging (because DFID systems do not currently have the bandwidth to manage this
risk e.g. administering currency swaps), the effective rates translate to 7-9% per annum in
rupee terms, which is close to commercial rates in the market, and comparable to Reserve
Bank of India’s priority lending rates (LIBOR + 250bps) currently translating to around 9-9.5%
in rupee terms.
Rate of Interest Benchmarks
Organisation
RoI (%)
Multilateral
Foreign Currency
World Bank (IDA)
0-2.80%
World Bank (IBRD)
LIBOR+ (0.28%-1.05%)
IFC
3-4% over IFCs cost of funds
ADB
LIBOR+ (0.33%-1.4%)
GoI Institution
INR
IREDA
11-13.70%
NHB
Minimum 10%
HUDCO
12-16.5%
PFC
12-14%
NSDC
6%
SIDBI
12.5-16.5%
Commercial
IDFC
8 to 12%
SBI
8 to 12%
IIFCL
8 to 12%
LIBOR refers to 6 month USD LIBOR
Y = Yes, N = No
4
Tenor (yrs)
Guarantee
25-40
7-20
Upto 20
upto 25
Y
Y
N
Y
Upto 10
Upto 15
Upto 15
Upto 10
Upto 10
Upto 5
N
N
N
N
N
N
Upto 10
Upto 10
Upto 10
N
N
N
DFID will need to seek HMT approval for use of Non Grant Financial Instruments. We will do this via FCPD..
46
The information presented shows that multilateral organisations even after allowing for foreign
currency hedging cost, lend at rates just under commercial rates or borrowing rates of
Government of India institutions.
While a partner like IDFC is unlikely to access massively cheaper capital through DFID, the
tenor of DFID capital (12-15 years) is much more attractive than tenors routinely available in
the market (3-5 years).
To the extent there is an element of concessionality to DFID’s capital, DFID India expects the
concessionality to incentivise IDFC to extend its investment activities in projects perceived to
be more risky and/or less profitable. The concessionality element is expected to cover the
additional development outcomes that the programme expects to deliver and meet the cost of
assuming the additional risk associated with achieving those outcomes.
Secondly, the final cost of capital in rupee terms (up to 9%) is not substantially lower than the
range of costs in the market (between 9% and 12%). The total volume provided by DFID is
also relatively low when compared to the wider financing volumes in India’s infrastructure
sectors, especially for large-scale projects like airports and underground rail.
We therefore judge that the risk of market distortion or ‘crowding out’ capital is low.
Draft standard terms for debt financing by DFID is presented below:

Lender:
DFID

Borrower (partner)
IDFC

Line of Credit (Amount)
£36 million

Rate of Interest:
1-3%5 (payable annually) on £36 million / amount drawn

Principal Drawdown:
Last draw down by March 31, 2015.

Quarterly/annual drawdowns on the basis of certified statements evidencing onlending as per investment policy and other terms agreed

Principal Repayments:
Moratorium up to 3 years; till March 31, 2016.
Repayments from April 30, 2016 - March 31, 202x (to be agreed with the Partner)

Securities/Collaterals6 :

Foreign Exchange Risk:
Partner to bear risks/cost of sovereign currency
fluctuations during the tenor of instrument

Return of Capital:
Any repayments/prepayments of on-lending to be
returned to DFID (or redeployed into another round of on-lending with the prior
agreement of DFID-India)
None proposed
Other Standard Clauses
Agreements with partner (e.g. IDFC) shall include investment policy details including the
following elements:
5
Based on DAC-ODA model, to be negotiated with the partner
Securities/collateral maybe proposed in case of a weak/un-rated partner (although not currently envisaged
in the case for IDFC partnership)
6
47





Use of Proceeds
Investment Criteria (sector, geography, compliance with DFID’s ESG framework,
maximum exposure per investment/borrower by Partner of INR____(to avoid
concentration of investments by state, project or borrower), other criteria
Deliverables/Results
Governance Arrangements (Project Management Unit at the Partner, DFID’s role in
investment decisions, Monitoring & Evaluation, Reporting Requirements (Operational,
Financial, Progress related) etc.):
Others (Performance Incentives, Affirmative Covenants, Site Visits, Project size
reduction or Termination, Confidentiality etc.)
48
ANNEX 5: LOG-FRAME
49
REFERENCES
i
Social Appraisal: Benefits of women are mutli-fold: increased safety & security through better roads & street lighting
and increases women’s mobility to access basic services; access to energy improves safety & security, education of
children and opportunity for women to engage in productive work/home-based work; water collection although not
targeted will reduce women’s time spent in water collection and improve overall health of the family; women and girls
access to toilets has direct health benefits given cultural concerns in terms of privacy
ii
World Bank, (2010) ‘The World Bank Annual Report 2010
WEF Global Competitiveness Survey 2010-11
iv
World Bank (2011) World Development Indicators
v
Source: pppinindiadatabase.com
vi
Census 2011
vii
IFAD (2011) Non Farm Opportunities for Smallholder Agriculture, V.Mahajan & Gupta, R.K.
viii
ADB (2005) Assessing the Impact of Transport and Energy Infrastructure on Poverty Reduction
ix
“Agriculture Warehousing in India – Data, Statistics and Opportunities”, Credit Analysis & Research Ltd. July 2011
x
What explains the gender disparities in economic participation in India? Ghani E., S.D. O’Connell and W. Kerr, August
2012.
xi Social Appraisal: Benefits of women are mutli-fold: increased safety & security through better roads & street lighting
and increases women’s mobility to access basic services; access to energy improves safety & security, education of
children and opportunity for women to engage in productive work/home-based work; water collection although not
targeted will reduce women’s time spent in water collection and improve overall health of the family; women and girls
access to toilets has direct health benefits given cultural concerns in terms of privacy
iii
xii
See DFID (2002) Making Connections: Infrastructure for Poverty Reduction
See World Bank (2008) ‘Accelerating Growth and Development in the Lagging Regions of India’ and World Bank
(2009) The Investment Climate in 16 Indian states
xiv
World Bank (2012) More and Better Jobs in South Asia
xv
Pravakar Sahoo & Ranjan Kumar Dash (2009): Infrastructure development and
economic growth in India, Journal of the Asia Pacific Economy, 14:4, 351-365
xvi
There is a long literature on the issue following on from Paul Samuelson’s seminal 1954 paper.Paul A. Samuelson
(1954). "The Pure Theory of Public Expenditure". Review of Economics and Statistics (The MIT Press) 36 (4): 387–389
xvii
World Bank (1994) World Development Report-Infrastructure for Development
xiii
xxi
xxii
Fan, S, P. Hazell, and S. Thorat (2000). Government Spending, Growth and Poverty in Rural India.
Sonalde Desai (2011) Public Capital and Infrastructure: Reflections from the Indian Perspective. NCAER
xxiv
World Bank (2009) The Investment Climate in 16 Indian states
xxvi
IDS and Engineers Against Poverty, “Development Finance Institutions and Infrastructure: A Systematic Review of
Evidence for Development Additionality” 2011
xxvii
Institutional and Political Appraisal: Bankable infrastructure projects generally remain in short supply. This reflects low capacities, particularly in
the central and state level PPP cells (more so in the poorest states), to design such projects. India has huge savings (35% of the GDP U$ 1.3
Trillion=US$ 450 Billion) and two-thirds of these are available with the commercial banks and insurance companies. But regulatory barriers restrict
the flow of such funds to infrastructure sector. Available bank funding has much shorter tenors (10-15 years) than the actual need of the sector (2025 years). Bond market is shallow and underdeveloped. Supply of funds through the ECB (external commercial borrowings) route is also controlled
(sector-wise) by RBI.
Implementation challengesxxvii include: lack of co-ordination between centre and states; time consuming government clearances and land acquisition
procedures; weak contract enforceability and disputes resolution; inadequate to ineffective regulation in some sectors; taxation and exit issues,
particularly for foreign investors; and instances of lack of transparency in bidding process. Although government interest in infrastructure across the
political spectrum has grown in recent decades, political will to charge appropriate user fees for mass consumption services like water and electricity
remains weakxxvii. Although growing incomes in a rapidly growing economy are creating public attitude that supports payment of user charges, this
50
and the overall environment for financing of infrastructure projects may be affected by the current climate of global and national level economic
slow-down. However, political pressures generated by the economic slow- down are forcing the government to seriously work on pending
institutional reforms. GoI has recently announced some rule relaxations to encourage infrastructure financing. The planning commission is now
monitoring progress on major infrastructure projects on a monthly basis.
xxviii
IFAD (2011) Non Farm Opportunities for Smallholder Agriculture, V.Mahajan & Gupta, R.K.
ADB (2005) Assessing the Impact of Transport and Energy Infrastructure on Poverty Reduction
xxx
What explains the gender disparities in economic participation in India? Ghani E., S.D. O’Connell and W. Kerr,
August 2012.
xxxi Social Appraisal: Benefits of women are mutli-fold: increased safety & security through better roads & street
lighting and increases women’s mobility to access basic services; access to energy improves safety & security,
education of children and opportunity for women to engage in productive work/home-based work; water collection
although not targeted will reduce women’s time spent in water collection and improve overall health of the family;
women and girls access to toilets has direct health benefits given cultural concerns in terms of privacy
xxix
xxxii
“Agriculture Warehousing in India – Data, Statistics and Opportunities”, Credit Analysis & Research Ltd. July 2011
World Bank (2006) Infrastructure at the crossroads: lessons from 20 years of World Bank experience
xxxiv
National Bank for Agriculture and Rural Development (NABARD) Agricultural Engineering Model Bankable
Projects.http://www.nabard.org/modelbankprojects/agriculturalengineering.asp
xxxiii
xxxv
Government of India, Planning Commission (2003) Estimation Loss of Horticulture Produce due to Non-availability
ofPost Harvest& Food Processing Facilities in Bihar & UP
xxxvi
National Horticultural Board (2011) Indian Horticultural Database
xxxvii
ADB (2005) Assessing the Impact of Transport and Energy Infrastructure on Poverty Reduction
xxxviii
World Bank (2009) Project Appraisal Document for proposed WB support to IIFCL
xxxix
Planning Commission (2010) Evaluation Study on Rural Roads Component of Bharat Nirman
xl
Kadiyali et al (2006) Cost-Benefit Analysis Of Rural Roads Incorporating Social Benefits. Working Paper No. 523. Indian
Road Congress
xli
Government of India (2006) Working Group on Rural Roads in the 11th Five Year Plan.Final Report. Ministry of Rural
Development
xlii
World Bank (2010) Project Appraisal Document for proposed WB support to PMGSY
xliii
WSP (2011) The Economic Impacts of Inadequate Sanitation in India
xliv
World Bank (2004) Project Appraisal Document for proposed WB support to Karnataka urban water sector
improvement project
xlv
DFID (2012) PIDG Business Case. “PIDG facilities supported by DFID have catalysed $30 of private investment for each
$1 of donor funding”
51