The Infrastructure Risk Guarantee Fund (IRGF), announced in Union Budget 2026-27, has been conceptualised as a ₹1,000 crore sovereign-backed corpus managed as a trust under the National Credit Guarantee Trustee Company. According to reports from Business Standard, the fund is designed to strengthen private developer confidence during infrastructure development and construction phases by providing prudently calibrated partial credit guarantees to lenders. Under-construction projects must meet specific criteria including public-private partnership (PPP) or privately-funded infrastructure projects with concession agreements with sovereign or sub-sovereign counterparties. The guarantee covers delays outside developer control, including sovereign risks such as land acquisition, environmental clearances, and force majeure conditions.
As reported by Business Standard, the fund operates with specific financial parameters including project costs between ₹200 crore and ₹5,000 crore. The debt-to-equity ratio is capped at 75:25, with eligible cost overruns capped at 30% of original project cost. For illustration, a ₹5,000 crore project with a 10% cost overrun of ₹500 crore would trigger a maximum payout of ₹375 crore. The payout is computed only on the debt portion of eligible overruns, funded at the same debt-to-equity ratio.
Latest data from the Ministry of Statistics and Programme Implementation (MoSPI) reveals a massive infrastructure cost overrun crisis, with infrastructure projects worth more than ₹150 crore each recording a cumulative cost overrun of around ₹2.88 lakh crore in August 2026. According to the MoSPI report, 1,731 ongoing infrastructure projects across 17 central ministries/departments were monitored, with the total revised cost reaching ₹33.60 lakh crore compared to their original cost of ₹30.72 lakh crore. The cumulative expenditure incurred on these projects stands at ₹16.33 lakh crore, accounting for approximately 48.59% of the revised project cost, indicating steady progress in project implementation.
According to the analysis by Business Standard, the fund faces several critical expansion needs to become more impactful. The current ₹1,000 crore corpus may be insufficient given that India's annual infrastructure spend is ₹25 trillion with private capital participation at roughly 20%, accounting for about ₹5 trillion annually. Even if 10% of projects face time or cost overruns, the cumulative project cost overrun at maximum 30% could reach ₹75,000 crore, with debt exposure of ₹56,250 crore. The analysis suggests the fund should expand to around ₹50,000 crore to remain meaningfully relevant, particularly given the scale of cost overruns revealed in the latest MoSPI data.
As reported by Business Standard, the analysis identifies six key dimensions requiring attention. The fund should allow discretion in applicability rather than exhaustive peril lists, expand eligibility above ₹5,000 crore for projects like 400 km highways costing ₹6,000 crore or 1,200 MW solar farms costing ₹8,000 crore. The scheme should protect project special purpose vehicles (SPVs) directly rather than just lenders, and establish credible institutions for claim finalisation to prevent disputes. The analysis also recommends defining geographical scope to include cross-border projects backed by sovereign agreements.
