GOVERNMENT INCENTIVES AND OTHER FORMS OF SUPPORTS

Government provide different types of incentives and various direct and indirect supports in almost all BOT projects to make the projects attractive to private sector and balance the risk transferred with the expected return. The extent and type of supports varies considerably depending among the other things on country and project risks. Government provides following incentives and supports to private sector.

Tax incentives and concessions: The tax regime of host country greatly influences the financing of BOT projects. Taxes have the effects of reducing the project cash flow. Governments normally provide various types of tax concessions to improve the financial viability of the projects. Tax concessions, though, are not a direct infusion of capital, but giving incentive in form of the following tax exemption results in availability of additional operating revenue:

• Exemption from corporate tax for concession period.
  
• Exemption from income tax for foreign project staff.
  
• Exemption from or reduction of real estate tax.
  
• Exemption from or reduction of import duties on equipment, raw materials and components for construction, O & M. of the project.
  
• Tax concession on royalties.
  
• Tax refunds for foreign investors reinvesting their profits in new infrastructure projects in the country.
  
• Capital allowances in the form of depreciation and amortization.
  

Land and other logistical facilities: In most of the BOT projects, host government provide the following supports relating to land and logistical facilities in one or more of following forms:

• Government, normally, provides land on which the project is to be built.
  
• Government constructs associated infrastructure facilities, including access roads, transmission lines and communications in some infrastructure projects.
  
• Government may also ensure availability of labours and building materials and raw materials during construction and operation stages.
  

Contribution of existing assets: In some PPP projects, government structured the project by bundling the scope for construction of new project facilities with operation and maintenance of an existing project asset. This arrangement enables the project sponsors to operate the existing assets and earn revenues from existing assets during the construction phase of the project.