Despite the government’s push on infrastructure financing, private participation has remained muted. In an interaction with Pushpita Dey, Palash Srivastava, Managing Director of India Infrastructure Finance Company Limited (IIFCL), discusses expectations from Budget 2026, the ₹17 lakh crore PPP pipeline, and the constraints holding back private investment. Excerpts:
What are your expectations from Budget 2026 in terms of infrastructure financing?
From an infrastructure-financing standpoint, Budget 2026 is expected to focus on widening the financing universe and strengthening execution-oriented mechanisms. One key expectation is the expansion of the harmonised list of infrastructure to include emerging sectors such as space and aerospace infrastructure, aircraft, and select biofuel segments. This would improve access to long-term capital for these sectors.
There is also an expectation that enabling measures announced earlier—such as the Urban Challenge Fund, the Maritime Development Fund, and initiatives related to critical minerals—will be operationalised, along with incentives to crowd in private investment.
Urban infrastructure financing is another priority area. The Budget could facilitate greater resource mobilisation by urban local bodies and improve funding flows into urban infrastructure. Additionally, there is an expectation that states will be provided greater fiscal and financing flexibility. Current FRBM constraints limit their ability to support projects through mechanisms such as viability gap funding (VGF) and hybrid annuity models (HAM).
The Finance Ministry has announced plans for ₹17 lakh crore worth of PPP infrastructure projects. Which sectors and regions are likely to be prioritised?
According to data released by the Department of Economic Affairs, transport and logistics dominate the ₹17 lakh crore PPP pipeline, both in terms of project numbers and value across all three years. This signals a continued policy focus on mobility, connectivity, and supply-chain efficiency.
Energy—particularly renewable energy—follows closely, along with water and sanitation, reflecting the government’s emphasis on essential and climate-aligned infrastructure. While roads and power remain core sectors, the current pipeline shows greater diversification, with increased representation from ports, shipping, inland waterways, and airports. There is also early traction in electric mobility and bio-energy.
Regionally, the projects—identified jointly with central ministries and state governments—are aligned with national priorities. Andhra Pradesh features prominently, driven largely by renewable energy and power projects, along with roads and ports. Tamil Nadu, Madhya Pradesh, and Uttar Pradesh also have a strong and diversified project presence.
Overall, the pipeline reflects a more mature and broadened PPP approach, combining scale with sectoral and geographic diversification.
Why has private investment in infrastructure not picked up meaningfully?
Private participation in Indian infrastructure is actually quite mature, and India remains one of the more experienced PPP markets globally. However, the composition of infrastructure financing has shifted over the years, which partly explains why private investment has not grown at the same pace as overall infrastructure spending.
Many current delivery models, such as the Hybrid Annuity Model, involve a significant upfront public-sector contribution, with the government funding around 40% of project costs—and even higher in some sectors. As a result, while overall infrastructure funding has expanded rapidly over the last decade, the relative share of private capital has not increased proportionately.
Earlier BOT–PPP models relied more heavily on VGF, where bids—within a 40% cap—typically came in at around 20–25%. This implied greater private risk-taking and a lower fiscal outlay per project. Over time, the shift towards more risk-mitigated models has improved execution but reduced the space for pure private capital.
Going forward, reviving private investment will require moving into new and downstream opportunities, especially in mature sectors like roads, where incremental projects risk competing with existing networks. There is also a need to catalyse private interest in newer and more innovative segments rather than relying solely on traditional assets.
Private investment has not stalled—but the risk-sharing framework and sector maturity have changed. Future growth will depend on better project structuring, innovation, and deeper capital-market participation.
Where do you see the biggest bottlenecks—land, regulatory clearances, credit availability, or risk perception?
The most significant bottleneck today is risk perception. Infrastructure investment decisions are heavily influenced by past experiences. Even when actual bottlenecks may no longer exist, the perception of execution risk—arising from earlier delays in land acquisition, prolonged approvals, or slow dispute resolution—continues to deter private capital.
While ease of doing business in infrastructure has improved materially, investor confidence depends on consistency in outcomes, not just policy intent. Developers, lenders, and equity investors look for predictable behaviour across concessioning authorities, public-sector entities, and regulators. Changing this perception will require sustained and demonstrable implementation—timely clearances, adherence to contractual frameworks, and faster dispute resolution. Over time, consistent execution across projects and sectors will help rebuild confidence and improve the efficiency of infrastructure financing.