What is negative grant in infra projects?

Answer 1

Negative grant means , it is the amount paid by a private company/contractor/private sector to the govt before getting the contract of the project under BUILD-OPERATE-TRANSFER MODEL (one type of the PUBLIC PRIVATE PARTNERSHIP MODEL) in bidding from govt,it is an pay in advance (aka UP FRONT amount) of likely future earnings (profit) of the private company/contractor from that project after its completion.

Eg: In highly profitable road projects , metro rail projects , govt calls for tender under PPP model/BOT model , where in a company / contractor who wants to take that project, should pay part of likely future earnings (eg: pre-agreed toll fee amount collected for 10 years ) as pay in advance amount i.e.,up front.

This amount paid(negative grant) + annual maintainance expenditure + infrastructure's material,labourers cost spent should be recovered along with its interest + profits from the future toll fees collection.Since toll is the revenue inflow, the project's viability depends on the traffic that can yield the toll.