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The availability of infrastructure facilities is imperative for the overall development of any
country. Today, there is a need to focus on enhancing the quantity as well as improving the quality of
infrastructure services provided in India.
Roads constitute an important part of infrastructure of a country. India has the third largest
road network in the world. But the growth of road network has not kept pace with the growth of road
traffic. The percentage growth of road traffic from the year 1991 to 1995 has been about 42%,
whereas the percentage growth of road length has been only 8.7%. This has led to severe congestion
on the roads. Also, there is a need to improve and maintain the road network. Due to funds
constraints, the government is assigning several projects on a Build-Operate-Transfer (BOT) basis.
BOT is a type of project financing. This article discusses features of project finance and BOT
projects.
PROJECT FINANCE
SALIENT FEATURES OF PROJECT FINANCE
The salient features of project finance are as follows:
1. The lenders finance the project looking at the creditworthiness of the project, not the
creditworthiness of the borrowing party. The repayment of the loans is made from the
earnings of the project.
2. Project financing is also known as “limited recourse” financing as the borrower has a limited
liability. The security taken by the lenders is largely confined to the project assets.