Debroy panel to soon submit infrastructure financing report

In 2023, the finance ministry formed the committee led by the late economist Bibek Debroy to assess infrastructure parameters and develop a financing framework. The panel conducted extensive stakeholder consultations before finalizing its recommendations, one of the two people cited above said on the condition of anonymity.

The committee has already submitted the first part of its report, and the second part is due to be submitted shortly. While the first part suggested new definitions and expanded the list of activities qualifying as infrastructure, the second part will craft a framework for public and private infrastructure financing. Some of the committee's views have already found their way into the Union budget for FY26, presented in the parliament on 1 February.

"The financing framework suggested by the Debroy committee will provide a yardstick for central ministries and state governments preparing infrastructure financing road maps, which are expected to take shape over the next two to three years," one of the two people mentioned above said, requesting anonymity. "As these road maps evolve, a clear framework will help attract private investment and streamline funding mechanisms across central and state initiatives," the person added.

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A spokesperson for the finance ministry did not respond to emailed queries.

The recommendations

Infrastructure investments in India made by sovereign wealth funds are tax-free, a status the latest budget extended for five years till 2030. The Debroy committee may propose to extend the same status for more categories for foreign funds including pension funds, the people said.

A second recommendation would be to promote financing through corporate bonds. The latest budget has already proposed to allow the National Bank for Financing Infrastructure & Development (NaBFID) to set up a partial credit enhancement facility for infrastructure corporate bonds.

Financing infrastructure, particularly large-scale and privately operated projects, remains challenging due to long gestation periods and hurdles like land acquisition disputes and litigation. According to the World Bank, India will need to invest $840 billion between 2022 and 2037—or an average of $55 billion every year—in urban infrastructure to meet the needs of its fast-growing urban population. It said that private financing covers just 5% of city infrastructure needs India needs, leaving a significant funding gap. With annual government investments in urban infrastructure peaking at $16 billion in 2018, attracting private capital will be crucial to bridging this shortfall.

Apart from announcing a series of projects, the Union budget also asked infrastructure ministries to craft a three-year pipeline of PPP projects. The Debroy committee is expected to elaborate on infrastructure financing in PPP mode. The panel was expected to release a framework by September and its recommendations by 2024-end.

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"The committee is examining financing strategies across sectors such as roads, railways, and ports, assessing the optimal approach for both public and private investment," the person mentioned above added, requesting anonymity.

The budget announcements to allocate funds to develop the top 50 tourist destinations along with state governments and plans to add ships above a specified size to the infrastructure harmonized master list (HML) take cues from the Debroy panel's views, the person cited above added. HML is a list of infrastructure sub-sectors updated by the Centre to guide agencies that support and invest in infrastructure.

Budget push

The Union budget mentioned financing structures such as the ₹25,000 crore Maritime Development Fund (MDF). The committee will propose to create more such niche funds, the people cited above said. While the mandate of MDF is expected to expand beyond debt and equity support for infrastructure projects to include credit enhancement, the Debroy panel will also recommend developing similar models to address the sector’s growing funding needs, the second person mentioned above added.

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"Additionally, banks—currently reviewing a Reserve Bank of India draft proposal that mandates higher provisioning for infrastructure loans, particularly during the construction phase—may be encouraged to offer long-term loans with flexible repayment options to support specific infrastructure developers," the second person added.

Infrastructure development has been a key focus of the Bharatiya Janata Party (BJP) government led by Prime Minister Narendra Modi. The budget for 2025-26 earmarked ₹11.21 trillion for the infrastructure sector.

"The sustainability of urban road infrastructure necessitates full cost recovery; transparent, targeted and measurable subsidy if necessary; cost savings through energy efficiency, reduction of leakages, manpower rationalization; and full autonomy to local bodies to determine realistic tariffs," said Manoranjan Sharma, chief economist at Infomerics Ratings and a former chief economist at Canara Bank.

"While financing was always beset with difficulties, the resource crunch has exacerbated in recent years. There is a compelling need for determination of tariffs on the basis of competitive bidding, mitigation of fuel supply risk, easy assignability in case of debt service default by the original licensee and a revenue-sharing arrangement to protect against the downside of market risk," he added.

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Finance minister Nirmala Sitharaman, in her budget speech last July, had said the government will look at a market-based financing framework to address infra-funding challenges.

The central government has also proposed to promote viability gap funding to encourage higher private participation and optimize working capital requirements, while also steadily increasing the corpus for long-term interest-free loans for state infrastructure.