Public Private Partnership (PPP) means an arrangement between a Government/ Government owned entity and a private sector entity, for the providing public assets and/ or public services, through investments being made and/ or facility management being undertaken by the private sector entity, for a specified period of time, with a defined allocation of risk between private sector and the Government.

Private sector entity should be chosen on the basis of open competitive bidding, and will receive payments that are linked to specified and pre-determined performance standards, measurable by the Government or its representative entity.

Public-private partnerships (PPPs) can take a wide range of forms varying in the degree of purpose, involvement of the private entity, legal structure and risk sharing. The PPP framework is generally crystallized in a contract or agreement to outline the responsibilities of each party and clearly allocate risk. The broad contractual forms, as covered by extant policy include, but not limited to the following:

• Build Own Operate (BOO):
  This is a type of PPP project model in which a private organization builds, owns and operates a project or structure with some incentive from the government. Although the government does not provide direct funding in this model, it may offer other financial incentives such as tax-exempt status. The developer owns and operates the facility independently.
• Build Own Operate Transfer (BOOT):
  In this type of PPP model the developer designs and builds a complete project or a facility at little or no cost to the government, owns and operates the facility as a business for a specified period (usually 10 to 30 years), after which transfers it to the government at a previously agreed-upon or market-price.
• Design Build Finance Operate and Transfer (DBFOT):
  In this type of PPP mode, the project is developed by the concessionaire on Design, Build, Finance, Operate and Transfer concession framework. In consideration for performing its obligations under the agreement, the private sector party may be paid by the Government agency or from fees collected from the project’s end users. The project is transferred back to the Government at the end of the concession duration.
• Build Own Operate Share Transfer (BOOST):
  This is a type of PPP model, in which a concessionaire is authorized to finance, construct, own operate and maintain, share a part of the revenue and transfer the infrastructure facility at the end of the period. The concessionaire is allowed to recover its total investment, operating and maintenance costs plus a reasonable return thereon by collecting tolls, fees, rentals or other charges from facility users.
• Lease Develop Operate Transfer (LDOT):
  In this type of PPP arrangement, assets are leased out to the private sector under specific terms, to operate and maintain the asset for the term of the concession period, after which the assets are transferred to the authority.

Urban infrastructure project financing typically includes the following key financial covenants to ensure repayment capacity and financial discipline:

• Debt Service Coverage Ratio (DSCR):
  Measures the project’s ability to service its debt from operating cash flows. It is calculated as net operating income divided by debt servicing obligations. A DSCR above 1 indicates sufficient repayment capacity. Lenders typically require a minimum DSCR of 1.2x or higher.
• Fixed Service Coverage Ratio (FSCR):
  Evaluates the ability to meet all fixed financial obligations, including debt servicing, lease payments, and other fixed charges. It provides a broader assessment of financial sustainability beyond just debt.
• Debt-Equity Ratio:
  Indicates the proportion of debt to equity in the project’s capital structure. It helps ensure that the project is not overly leveraged. Typical norms in urban infrastructure projects range from 70:30 to 80:20 (Debt: Equity).
• Loan Life Coverage Ratio (LLCR):
  Measures the present value of cash flows available for debt servicing over the loan tenure compared to the outstanding debt. It reflects long-term repayment capacity, with lenders typically expecting LLCR above 1.3 – 1.5.

These covenants are critical for lenders to assess project viability, manage risk, and monitor financial performance throughout the project lifecycle.

Project cost refers to the total expenditure required to plan, develop, construct, commission, and make an infrastructure project operational. It represents the complete financial outlay incurred from the initial stage of the project until commercial operation.

Typically, project cost includes the following components:

• Land Cost:
  Cost of acquisition of land, rehabilitation and resettlement expenses, registration charges, and site development expenses.
• Construction Cost:
  Expenses related to civil works, buildings, roads, utilities, and other physical infrastructure development.
• Plant and Machinery/Equipment Cost:
  Cost of procurement, transportation, installation, and testing of machinery and equipment required for the project.
• Pre-operative Expenses:
  Expenditures incurred before commencement of operations such as feasibility studies, consultancy fees, legal charges, administrative expenses, salaries, and project management costs.
• Financing Cost:
  Interest during construction (IDC), loan processing fees, bank charges, and other financing-related expenses incurred during the implementation period.
• Contingency Provision:
  Reserve amount kept to meet unforeseen expenses, escalation in prices, design changes, or implementation delays.
• Environmental and Statutory Compliance Costs:
  Expenses related to environmental clearances, licenses, permits, safety measures, and regulatory approvals.
• Insurance and Taxes:
  Insurance premiums during construction and applicable duties, taxes, and levies.
• Operation & Maintenance Setup Costs:
  Initial expenses required for commissioning and preparing the project for operational readiness.

Thus, project cost represents the aggregate of all capital and pre-operational expenditures necessary to successfully implement and commission a project.