$2.$ Interest rates play a bigger role in most of the project financing. Discuss.

Broad $($Key$)$ points:

Most of the large infrastructure projects are financed through debt because of the following reasons:

Infrastructure projects are long gestation with expected regular cash flow, hence debt servicing through interest rates can be achieved, as long as the project generates relatively steady cash flows

Eg BOT road project with toll income.

Debt is a cheaper source of financing, compared to equity along with the tax exemption in debt financing.

It might not be possible to get a fixed rate loan for all the projects because of the long life of the projects.

Hence the expected movement of interest rates $($during the period of the project$)$ is an important element which needs to be considered.