Policy Update
Nayanshi Jain
Introduction
India’s Infrastructure Ambition and the Role of PPPs
India’s infrastructure requirements are expanding rapidly, making private investment an important complement to public spending. The National Infrastructure Pipeline (NIP) envisaged investments of about ₹111 lakh crore between FY2020 and FY2025, underscoring the scale of financing required. Public-Private Partnerships (PPPs) can help bridge this requirement by combining public oversight with private capital and expertise. However, India’s experience also shows that attracting private investment depends on having projects that are technically feasible, financially viable and appropriately structured. The challenge, therefore, is not merely a capital deficit, but a deficit of bankable projects.
The Missing Link: From Infrastructure Idea to Bankable Project
A project does not become investment-ready simply because it is economically desirable. Demand assessments, feasibility studies, financial modelling, environmental and legal assessments, and appropriate risk allocation are necessary before a PPP can reach the market. These activities can be costly and require specialised expertise that many public agencies, particularly at the State level, may not possess in-house. Weak preparation can result in poor bidder interest, delays, renegotiations and difficulties in achieving financial closure. Project preparation is therefore an upstream determinant of PPP success
IIPDF as a Public Intervention in the PPP Pipeline
The India Infrastructure Project Development Fund (IIPDF) was established in 2007 with an initial ₹100 crore corpus to support the development of bankable PPP projects. It was revamped in 2022 as a Central Sector Scheme with an outlay of ₹150 crore for FY2022-25, providing assistance of up to ₹5 crore per proposal for project-development and transaction-advisory services.
IIPDF addresses a specific gap in the PPP ecosystem: financing the work required before private capital can enter a project. Its effectiveness should therefore be assessed not merely by funds sanctioned or projects approved, but by whether supported projects progress towards bidding, financial closure and infrastructure delivery. The central question is whether IIPDF can convert project preparation into a stronger and more credible PPP pipeline.
Background
The Origins of IIPDF in 2007
The India Infrastructure Project Development Fund (IIPDF) emerged from the Union Budget 2007–08, which announced a ₹100 crore revolving fund to accelerate PPP project preparation. The objective was to support States and Central ministries in meeting project-development expenses, including the costs of consultants and Transaction Advisers (TAs). The original model was deliberately revolving: IIPDF would generally finance up to 75% of project-development expenditure, with the amount recovered from the successful bidder after completion of the bidding process.
Why Project Preparation Became a Policy Bottleneck
The rationale for IIPDF lay in the high transaction costs and limited project-development capacity faced by public authorities. PPPs require specialised financial, legal and technical expertise, while procuring Transaction Advisers can place a significant burden on sponsoring authorities. IIPDF was therefore designed to reduce this upfront cost and enable potentially viable projects to be taken to the market.
IIPDF within India’s PPP Architecture
IIPDF forms part of a broader PPP support architecture, but its function is distinct. PPPAC focuses on appraisal and approval of eligible Central PPP proposals, while the Viability Gap Funding (VGF) scheme supports projects that are economically desirable but commercially unviable. IIPDF operates earlier, financing the project-development and transaction costs required to prepare a potential PPP.
Thus, the three instruments address different stages of the PPP lifecycle:
IIPDF → Project preparation
PPPAC → Appraisal and approval
VGF → Viability support, where required
Why Was IIPDF Revamped in 2022?
The 2022 reform restructured IIPDF as a Central Sector Scheme, with a ₹150 crore outlay for 2022-23 to 2024-25, notified on 3 November 2022. Assistance was increased to a maximum of ₹5 crore per proposal, inclusive of taxes, primarily for consultants and Transaction Advisers.
The stated objective was to improve both the quality and quantity of bankable PPP projects while reducing the financial burden of project preparation on sponsoring authorities. The revamp therefore represented a shift from a relatively narrow revolving fund towards a broader instrument for strengthening the PPP project pipeline.
Functioning
Who Can Access IIPDF?
- Project Sponsoring Authorities (PSAs) are the primary beneficiaries of IIPDF support. These include Central Ministries/Departments, State Governments, PSUs, statutory authorities and other government-controlled entities.
- The broad eligibility is important because PPP preparation often requires expertise that is unevenly distributed across government agencies.
- IIPDF can support projects across infrastructure sectors covered under the Government’s relevant infrastructure/PPP framework.
IIPDF addresses not only a financial constraint but also an institutional-capacity gap, particularly for agencies that do not have specialised PPP teams.
What Does IIPDF Actually Finance?
IIPDF finances the preparatory architecture of a PPP, not the construction of the asset.
It can support:
- Feasibility studies – establishing technical and economic viability.
- Traffic and demand studies – testing whether projected usage and revenues are realistic.
- Financial structuring and modelling – determining project costs, revenues, returns and financing requirements.
- Environmental and social assessments – identifying regulatory and implementation risks.
- Legal due diligence- examining land, regulatory and contractual issues.
- Concession-agreement preparation – defining obligations, performance standards and risk allocation.
- Commercial assessments and capacity-to-pay studies – testing whether the proposed user charges and revenue model are realistic.
- Project grading and transaction advisory – assessing investor attractiveness and preparing the project for competitive bidding.
By financing these activities, IIPDF reduces the sunk cost and uncertainty faced by the public authority before approaching private investors.
The Transaction Adviser: Converting a Concept into a Transaction
The Transaction Adviser (TA) is the operational link between IIPDF assistance and an actual PPP transaction.
The TA typically helps the PSA to:
- Identify project structure → assess feasibility → develop financial model → allocate risks → draft concession documents → structure bidding → assist in selecting the private partner.
- This is particularly important because PPP contracts involve complex allocation of construction, demand, financing, regulatory and operational risks.
- A competent TA can therefore improve the project’s credibility with potential bidders and lenders.
- However, the effectiveness of IIPDF ultimately depends on the quality of advisory work and the PSA’s ability to use it, not simply on the amount of funding provided.
How Does the Funding Process Work?
The process can be presented simply:
1. Project identification
PSA identifies a potential PPP project.
2. Proposal to IIPDF
PSA submits the project-development proposal for assistance.
3. Approval
The proposal is examined by the IIPDF Approval Committee, chaired by the Secretary, DEA, with representation including NITI Aayog.
4. Appointment of consultants/TA
The PSA engages the required technical, financial and legal advisers.
5. Project development
Feasibility, financial modelling, risk allocation and concession documents are prepared.
6. PPP procurement
The prepared project is taken to the market for competitive bidding.
Performance
Scale of the Revamped IIPDF
The revamped IIPDF has generated a meaningful pipeline since its notification in November 2022. As of August 2026, 31 projects have received approval with ₹64.13 crore in funding, against the scheme’s ₹150 crore outlay for 2022–23 to 2024–25.
The numbers indicate considerable uptake, particularly from States, but also show that approved funding represents only about 43% of the scheme’s original allocation. This suggests that the availability of project-preparation finance is only one part of the PPP constraint; the ability of sponsoring authorities to develop sufficiently mature and viable proposals remains equally important.
From Approval to Project Progress
The project-level data provides a more cautious picture. Of the 31 approved projects, 22 are ongoing, 2 are completed and 7 have been withdrawn by the Project Sponsoring Authorities.
The high share of ongoing projects is not necessarily unexpected given that the revamped scheme was notified only in late 2022 and PPP preparation and procurement can take several years. However, the figures show that approval has not yet translated into widespread project completion.
The seven withdrawals should also be interpreted carefully. They cannot automatically be classified as failures, since projects may be withdrawn following changes in government priorities or reassessment of their suitability. But their presence highlights the need to understand where projects stop progressing and why.
The Pipeline-Conversion Problem
The more meaningful test of IIPDF is therefore not the number of projects approved, but their movement through the PPP lifecycle:
IIPDF approval → TA appointment → feasibility → project structuring → bidding → concession award → financial close → implementation.
The Government’s project database provides project-level status, but does not currently present a consolidated scheme-wide figure for bids launched, concessions awarded, financial closures achieved or private capital mobilised.
This is an important monitoring gap. If IIPDF is intended to improve the PPP pipeline, its performance should ultimately be measured by conversion into transactions and investment, rather than by advisory expenditure alone. The Government’s own 2026–27 outcome framework moves in this direction by identifying projects in which bids are floated as an outcome indicator, alongside project-preparation milestones such as TA appointment, feasibility reports and bid-document preparation.
Sectoral Reach: A Broader PPP Pipeline
IIPDF’s portfolio extends beyond conventional transport projects into energy, education, tourism, IT, water and sanitation, and social and commercial infrastructure. Projects include a 210 MW hydroelectric project in Mizoram, floating solar projects in Andhra Pradesh, a Centre for Fintech Excellence at IIM Mumbai, and tourism projects in the Andaman & Nicobar Islands.
The geographical spread is equally significant, with projects involving States and Union Territories including Andhra Pradesh, Punjab, Mizoram, Puducherry and the Andaman & Nicobar Islands.
IIPDF is also being used for PPP Cells and Project Management Units, indicating a potential shift from supporting individual transactions towards building institutional capacity. This could be a more durable contribution if such support enables States to develop PPPs repeatedly rather than depending entirely on external advisers.
What Does the Evidence Tell Us?
The evidence supports a qualified assessment.
Progress: 31 projects and ₹64.13 crore in approved funding indicate that the revamped IIPDF has created a significant project-preparation pipeline.
Limitation: With 22 projects ongoing, 2 completed and 7 withdrawn, evidence of conversion into completed PPP transactions remains limited.
Measurement gap: There is no consolidated scheme-level measure of financial closures, private capital mobilised or projects operationalised.
IIPDF has therefore strengthened the front end of India’s PPP pipeline, but it is too early to conclude that it has revived PPP delivery at scale. Its real test is whether projects prepared today translate into competitive bids, financial closures and operational infrastructure.
The Way Forward
Shift from Input-Based to Outcome-Based Monitoring
IIPDF’s performance should be assessed beyond the number of projects approved or funds sanctioned. The Government’s 2026-27 Outcome Budget already moves in this direction, identifying projects in which bids are floated as an outcome indicator, alongside TA appointments, feasibility reports and bid-document preparation as output indicators.
The framework should go further and track:
- projects reaching tender;
- concessions awarded;
- financial closures achieved;
- private investment mobilised;
- time taken from approval to bidding;
- projects becoming operational.
This would distinguish project preparation from actual PPP delivery.
Create a Public Project-Conversion Dashboard
A project-level dashboard should track every IIPDF-supported project through:
Approval → TA appointed → Feasibility → DPR/Bid documents → Tender → Award → Financial Close → Construction → Operation
The database should also record reasons for withdrawal or delay. This would make it possible to identify whether projects are getting stuck because of weak feasibility, land and regulatory issues, lack of bidders or financing constraints.
The existing IIPDF database already provides project-level information and can serve as the foundation for such a system.
Use IIPDF to Build State PPP Capacity
IIPDF should not become merely a mechanism for hiring consultants. Its support should increasingly strengthen State PPP Cells and Project Management Units, with trained officials, standardised toolkits and institutional knowledge retained within government.
This is consistent with the scheme’s existing use for establishing PPP Cells/PMUs, including in Jammu & Kashmir.
The objective should be to move from “consultant-dependent project preparation” to “institutionally embedded PPP capacity.”
Make Funding More Milestone-Based
Rather than treating project preparation as a single funding exercise, assistance could be released against measurable milestones:
Initial approval → feasibility completed → transaction structure finalised → bid documents prepared → tender launched.
A portion of support could be linked to successful progression between stages. This would create stronger incentives for PSAs and advisers to focus on project conversion rather than completion of consultancy assignments.
Make the ₹5 Crore Ceiling More Flexible
The revamped scheme provides assistance of up to ₹5 crore per proposal. A uniform ceiling, however, may not reflect the very different transaction costs of a relatively simple project and a complex, multisectoral PPP.
A better approach would be a tiered ceiling based on project complexity, with higher support permitted for projects requiring extensive technical, financial, environmental and legal structuring. This would improve value for money without automatically increasing support for every project.
Introduce a PPP Suitability Test Before Funding
Not every infrastructure project should be developed as a PPP. Before approving IIPDF assistance, PSAs should assess:
- economic and financial viability;
- realistic demand and revenue potential;
- affordability of user charges;
- appropriate allocation of project risks;
- likely private-sector appetite;
- land and regulatory readiness;
- value for money compared with conventional public procurement.
This would ensure that IIPDF is used to prepare projects that are genuinely suitable for PPPs, rather than spending public resources attempting to make fundamentally unsuitable projects bankable.
The next phase of IIPDF should therefore focus on conversion rather than volume. The objective should not simply be to prepare more PPP projects, but to ensure that a greater proportion of those projects reach competitive bidding, financial closure and implementation. This would turn IIPDF from a project-preparation support mechanism into a more effective instrument for mobilising private investment and delivering infrastructure.
References
Department of Economic Affairs, Ministry of Finance, Government of India. (2007). Budget speech 2007–2008. Government of India. https://www.indiabudget.gov.in/budget_archive/ub2007-08/bs/speecha.htm
Department of Economic Affairs, Ministry of Finance, Government of India. (2022). Guidelines for India Infrastructure Project Development Fund (IIPDF) Scheme. Government of India. https://www.pppinindia.gov.in/guidelines_for_iipdf
Department of Economic Affairs, Ministry of Finance, Government of India. (2026). India Infrastructure Project Development Fund Scheme. Government of India. https://dea.gov.in/schemes-services/india-infrastructure-project-development-fund-scheme
Department of Economic Affairs, Ministry of Finance, Government of India. (2026). Output Outcome Monitoring Framework of Ministry of Finance 2026–2027. Government of India. https://dea.gov.in/index.php/reports-outcome-budget
Department of Economic Affairs, Ministry of Finance, Government of India. (2020). Guidelines for financial support to public private partnerships in infrastructure: Viability Gap Funding Scheme. Government of India. https://dea.gov.in/files/guidelines_documents/Scan_Revamped_VGF_Guidelines_alongwith_all_Annexures.pdf
Department of Economic Affairs, Ministry of Finance, Government of India. (2026). Public Private Partnership Appraisal Committee (PPPAC). Public Private Partnerships in India. https://www.pppinindia.gov.in/pppac
Department of Economic Affairs, Ministry of Finance, Government of India. (2026). IIPDF projects list. Public Private Partnerships in India. https://www.pppinindia.gov.in/iipdf_projects
Department of Economic Affairs, Ministry of Finance, Government of India. (2026). IIPDF summary. Public Private Partnerships in India. https://www.pppinindia.gov.in/iipdf_projects_summary
Ministry of Finance, Government of India. (2022). Economic Survey 2021–2022. Government of India. https://www.indiabudget.gov.in/economicsurvey/ebook_es2022/
Ministry of Finance, Government of India. (2023). Economic Survey 2022–2023. Government of India. https://www.indiabudget.gov.in/budget2023-24/economicsurvey/
Ministry of Finance, Government of India. (2026). Economic Survey 2025–2026. Government of India. https://www.indiabudget.gov.in/economicsurvey/
About the Contributor
Nayanshi is a Research and Editorial Intern at IMPRI and a student of Economics and Political Science at St. Stephen’s College, Delhi. Her research interests lie in international political economy, monetary and financial systems, public policy, developmental economics, welfare economics, behavioural economics and sustainable development.
Reviewers
Divya Natarajan and Nivedya Murali
Disclaimer:
All views expressed in the article belong solely to the author and not necessarily to the organisation.
Acknowledgement
The author extends her sincerest gratitude to the IMPRI team for their expert guidance and constructive feedback throughout the process.
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