E-Government Project Financing

Various project financing options are present for e-Governance projects and as per the nature of the project, appropriate financing is to be selected. The various financing types are

• Public Finance – In it, government sponsors the project through budgetary sources or loans and the project is implemented through an execution contract with the private partner. This is a conventional process of project implementations by the government where payments are made to the private partner based on the quality of the services given.
• Private Finance – In it, the project is financed by a private body through equity and debt and the revenue is generated for the private body through the user charges or other payments by the government. Two important terms are involved in it,
  • Concession: The agreement between government and the private partner stipulating rights and responsibilities for the use of public assets.
  • Concessionaire: The private partner with whom the government enters into concession agreement.
• Project Finance – In it, the project assets and its potential future earnings finance the project. Usually a Special Purpose Vehicle (SPV) is created which is legally independent and Debt financing is the primary source of funding for such projects. The risks are shared by participation of multiple complementing partners in the SPV and the concession agreement is signed with the SPV or the Project Company so formed for the project.