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INDO-US PROGRAMME ON FINANCIAL INSTITUTIONS REFORMS AND EXPANSION
Debt Component (FIRE-D)

The Indo-USAID programme on Financial Institutions Reform and Expansion (FIRE (D) for developing a long-term debt market for viable urban infrastructure projects was launched in 1994. The programme envisages development of a viable urban infrastructure finance system that could support development of debt market in India by using the Urban and Environmental Credit Guaranty Funds (earlier known as Housing Guaranty Funds) for contemplating the issuing of debt instruments to finance urban infrastructure projects. The mission of FIRE (D) programme is to institutionalize the delivery of commercially viable urban environmental infrastructure services to urban residents with particular focus on the urban poor.

The programme partners include

Besides providing Technical Assistance, The USAID also facilitates access of Urban and Environmental Credit Guaranty Funds for a period of 30 years to develop an urban infrastructure finance system. HUDCO and IL&FS act as the financial intermediaries to channel the funds along with a matching amount of locally raised funds to municipalities or private sector entities to finance selected commercially viable urban infrastructure projects relating to water supply, sewerage, solid waste management and area development.

FIRE (D) kick-started and demonstrated novel ways of financing urban infrastructure in India. It advocates concepts such as commercial viability of urban infrastructure projects, financing by accessing the debt market, credit rating of municipal and urban infrastructure entities, and private participation for the provision of urban infrastructure projects. Initiatives have been taken to develop projects, in a number of cities, which are now in progress. Positive spin-offs of FIRE(D) have been substantial even in the non-project cities. The most important impact is the motivation and interest created in other cities in different states to think of alternative ways of financing urban infrastructure other than the traditional methods of plan and budgetary allocations which have built-in aberrations hindering effective and efficient management. Equally important impact of the programme is the interest created amongst the financial institutions for funding urban infrastructure projects. The programme has also led to innovative urban management practices in some of the cities in terms of public-private partnerships (PPP), accessing the capital market and sprucing up of financial management practices.

Another substantive impact of the programme has been in changing the mind-set of planners, urban managers and policy makers relating to commercial viability of infrastructure and services like water supply, sewerage and solid waste management. These were regarded something like social welfare services that could not be structured on a commercial format. It has now been demonstrated that it is feasible to develop commercially viable and bankable projects for such urban infrastructures. It is now increasingly realised that these infrastructures as well have costs of production like any other economic goods and hence the costs have to be recovered through ingenuous project structuring, development, targeted subsidy and effective financial administration.

An important contribution of FIRE (D) has been that the FIRE (D) concepts and tools have attracted other international donor agencies, financial institutions, project development boards and the private sector.

Indo-USAID Financial Institutions Reforms and Expansion (FIRE-D) project Brochure

For further information on the programme, contact:

• Mr. N. Bhattacharjee
  Program Manager
  Office of Economic Growth
  US Agency for International Development (USAID INDIA)
  American Embassy, Shanti Path
  Chanakya Puri
  New Delhi – 110 021
  India
  Phone: 91-11-4198000
  Fax: 91-11-24198612
  email: nbhattacharjee@usaid.gov
   
• Dr. M.P. Mathur
  Professor (Coordinator FIRE-D)
  National Institute of Urban Affairs
  1st Floor, Core 4B, India Habitat Centre
  Lodhi Road, New Delhi – 110 003
  India
  Phone: 91-11-24643284, 24617517, 24617543
  Fax: 91-11-24617513
  email: mmathur@niua.org
   
• Mr. Lee Baker
  Chief of Party
  TCGI/PADCO, FIRE-(D) Project
  E-8/14, Vasant Vihar
  New Delhi – 110 057
  India
  Phone: 91-11-26143551, 26151081
  Fax: 91-11-26141420
  email: lbaker@ndf.vsnl.net.in