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Andhra, IL&FS in tie-up for project development

Our Correspondent in Hyderabad

The state-owned Andhra Pradesh Industrial Infrastructure Corporation and the Infrastructure Leasing and Financial Services, an investment banking institution, have entered into an agreement on Tuesday for developing an institutional framework for "Project Development and Promotion Partnership" or PDPP.

The memorandum of agreement was signed by APIIC chairman and managing director Rentala Chandrasekhar and IL&FS vice-chairman and managing director Ravi Parthasarthy in the presence of Chief Minister Nara Chandrababu Naidu at the Secretariat in Hyderabad.

Naidu said that the AP government has been actively promoting private investment in a number of infrastructure sectors to supplement government investment. Towards this end, the state government is developing core competencies in the area of project development.

Consequently, as an infrastructure creating arm of the state government, the APIIC promoted a Projects Wing and consciously undertook capacity building in the area of project development. "Keeping in view its emerging role, the APIIC intends to further develop and strengthen the existing framework by inviting leading infrastructure development organisations and financial institutions to collaborate with it to make projects happen in a public-private partnership mode in the state," he explained.

As a partner in PDPP, the IL&FS will contribute technical, managerial and financial resources to help the APIIC undertake project development work.

This will be the starting point to develop projects in a public-private partnership mode. The India Project Development Fund of IL&FS will be accessed through PDPP for development of projects. In addition, AP Infrastructure Initiative Fund will also be accessed for project development.

The PDPP will help develop projects in a public-private partnership mode for departments such as industries and commerce, transport, roads and buildings, municipal administration and urban development, tourism and energy.

The IL&FS is an investment banking institution promoted by HDFC, UTI, Central Bank of India, IFC (Washington), ORIX (Japan), CCF (France), with the objective of developing projects in the infrastructure sector on a commercial basis.

According to Parthasarthy, the IL&FS is in a position to advise, develop projects, identify prospective promoters, undertake mobilisation of financial resources from both domestic financial institutions and multilateral agencies and join as co-promoter in specific projects.

Chandrasekhar explained the objectives envisaged under the PDPP. The PDPP will identify projects in consultation with various government departments in the area of infrastructure that are suitable for public-private partnership. It will mobilise the resources required for the projects. It will decide ways and means to fund the costs of project development and implementation.

The PDPP will seek funds from appropriate sources wherever necessary, such as APIIF, other state/national level project development funds, multi-lateral and bilateral agencies for undertaking project development activities.

It will help structure projects to enable recovery of the investments made in such projects through innovative business and commercial practices such as commercial sale of real estate, the levy of user charges/fees/tolls and other development rights as appropriate under statutes applicable in Andhra Pradesh.

The PDPP will arrange the equity and debt to undertake the projects on a commercial format. It will arrange equity and debt contribution from the partners of the PDPP, domestic and foreign financial institutions, interested promoters, multilateral aid agencies and other lending agencies.

Among other things, the PDPP will endeavour to develop core competencies in functional areas of finance, technical, marketing, social and environmental assessment studies and other areas. It will proactively market the structured projects to potential investors both domestic and foreign at appropriate stages.

Business

Andhra Pradesh