Options for Mobilizing internal and External Resources

 Revenue Increases
Rationalized user charges & offering an enhanced service range ought to
be viewed as the major source of finance & pricing done accordingly.
Value added services cold also bring in more revenues than costs
incurred.
Important concept in proactively increasing revenues is the identification
of secondary users and appropriately charging them for service provided.
 Expenditure Decreases
Reducing operating costs & improving asset utilization would be the
relevant strategies.

Options for Mobilizing External Resources
 Suppliers, users & other interest stakeholders
Infrastructure financing can often be provided by suppliers & other
interested stakeholders including users.
It is in this context that …
1. The extent of risk sharing between such stakeholders & the
government.
2. The relative efficiency of ownership & operations in the long run.
There are broadly three schemes that take care of this.
1) BOO Build, Own, Operate
2) BOT Build, Operate, Transfer
3) BOLT Build, Own, Lease, Transfer
BOO – Build, Own, Operate
The relative efficiency of the stakeholder is viewed as being better than
the government at all times.
BOT – Build, Operate, Transfer
The relative efficiency of the stakeholder is viewed as being better than
the government in the short run & the reverse in the long run.
In this scheme the "Operate" phase is usually provided to ensure
collection of user charges at higher than normal rates so that the
investment is recovered before the "transfer".
Example _ The Konkan Railway Corporation
BOLT – Build, Own, Lease, Transfer
The relative efficiency of the stakeholder is viewed as being less than the
government at all times.
The risk is entirely borne by the government, since a minimum return on
investment for stakeholder is provided for by appropriate lease charges.
Once the investment is recovered, the ownership is transferred to the
government.
Example _ The "Own your Wagon"
 States
The new role of the state in an environment of increased investment in
infrastructure would be to …
1. "Commercialize / Corporatise" existing infrastructure and services to
ensure optimization of revenues, costs & asset utilization.
2. Judiciously identify stakeholders for infrastructure investments &
facilitate such investments through appropriate risk sharing /
subsidization schemes.
 Financial Institutions
The role of special instructions which can…
1. Understand the nature of infrastructure projects.
2. Bridge the gap between sources of capital & canalizing investments
into infrastructure becomes crucial.
Two institutions which have been successful along these lines, especially
in transport infrastructure financing.
1. SCICI – Shipping Credit & Investment Company of India Limited –
December 1986
2. IL&FS – Infrastructure Leasing & Financial Services Limited – The
Last quarter of 1987
 Foreign Investors
Due to the general climate of liberalization & the higher interest & dividend
rates available in India, this source is becoming increasingly significant.
Great Eastern Shipping Company, SCICI and IL&FS.
There is apparently interest for investment in the road and port sectors.
 Individual Investors
Equity & bond financing for infrastructure can be obtained by the state
from individual investors at commercial costs.
In the case of financial institutions, the confidence of such investors needs
to be developed.