Market Intelligence- Project Finance In India

Clarus Law Associates


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Clarus Law Associates was established in 2007. We are dedicated to professional excellence, personal and high-quality support and effective solution-oriented legal services. Our main practice areas are: Energy, Projects and Project Finance: Urban Infrastructure, Complex Project Disputes, Investment and Trade Law Advice, Projects and Project Finance: Transportation, Real Estate Development: SEZs, FTWZs, Corporate Transactions, Policy and Legislative Review, International Dispute Resolution.
Piyush Joshi has multi-sectoral experience in both project development and project financing transactions. He has advised on the development, financing, operations and maintenance of projects
India Finance and Banking
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Piyush Joshi has multi-sectoral experience in both project development and project financing transactions. He has advised on the development, financing, operations and maintenance of projects in the energy sector (power, renewable energy, natural gas sectors), urban infrastructure sector (urban planning, township development, urban transport, metro railway networks, tramways, bus rapid transit, regional railways networks, urban mobility), and environment infrastructure sector (municipal solid waste projects, landfill development, landfill capping and landfill reclamation projects). Piyush also specialises in providing strategy and approach for addressing complex project disputes. He has authored the book Law Relating to Infrastructure Projects (LexisNexis – Butterworths).

RV Anuradha heads the team on international trade and investment, and climate change, and has advised on the development and financing of environment infrastructure projects and agreements for sale of carbon emission reductions generated from such projects. She advises both government and private sector clients on legal issues arising from India's engagement at the World Trade Organization and other trade and investment agreements, including on international trade and investment disputes.

Sumiti Yadava focuses on project development and project financing transactions, and general corporate law. She blends her knowledge of corporate law with sector specific laws, to enable effective structuring of project transactions and investments in the infrastructure sector. Sumiti has extensive experience in the natural gas sector, urban infrastructure sector and the environment infrastructure sector, including on disputes arising in these sectors.

1 What have been the trends over the past year or so in terms of deal activity in the project finance sector in your jurisdiction?

'Project financing', in terms of 'non-recourse' project financing as prevalent in more evolved markets, does not exist in India. This is because the regulatory requirements governing lending require promoter guarantees and undertakings, as well as other recourse outside of the relevant project. As a result, there is no complete reliance on project and project revenues, and the term 'project financing' in India has morphed to refer to any form of financing of infrastructure projects generally. Furthermore, financing of infrastructure projects is primarily undertaken by banks, which are public sector undertakings (PSUs), controlled by either the government of India or state governments.

The 2020 Union Budget (2020 Budget) has sought to create higher incentives for investments in the infrastructure sector by creating a framework for 100 per cent tax exemption for sovereign wealth funds of foreign governments in respect of their interest, dividend and capital gains income from investments made in infrastructure, on the condition that such funds are invested for a minimum period of three years.

The 2020 Budget has also announced a National Infrastructure Pipeline that intends to comprise of over 6,500 infrastructure projects to boost infrastructure development. The details of these projects are awaited and are expected to be disclosed in the near future.

In an acknowledgement of the increasing importance of natural gas in the Indian Energy basket, the 2020 Budget has announced that the national gas grid will be expanded from 16,200 kilometres to 27,000 kilometres and a national level natural gas exchange will be developed.

Another important element of the 2020 Budget was the announcement of future public–private partnership (PPP) expansion of Indian railways to enable expansion of freight transportation and the development of a national cold supply chain for perishables such as meat, milk and fish and equipping freight trains with refrigerated coaches.

The 2020 Budget also prioritised inland waterways for development to enable economic development along rivers.

However, because of the inherent risks in investing in India, the general trend has been for project developers predominantly taking on the role of executing projects as contractors or sub-contractors, where there is revenue certainty and a buffer from the risks to which infrastructure development is exposed to in India. Strategies for mitigating legal risks has always been a core function of a project finance lawyer. This has been gaining higher significance in India in view of 'public interest litigation' (PILs) against infrastructure projects. Judicial rulings resulting from PILs may lead to uncertainty of enforcement of long-term contracts. As a result, a project finance lawyer in India needs to be adept at developing strategies for handling dispute resolution scenarios and advising on long-term risk mitigation measures.

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Originally published June 29, 2020.

Originally published by Lexology- Market Intelligence- Project Finance in India

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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