Indian Institute of Management, Nagpur

Post Graduate Programme in Management (2017)

INFRASTRUCTURE FINANCING, PUBLIC PRIVATE PARTNERSHIP AND
REGUALTION
Coordinator: Professor V. Ranganathan.

Contact: ranga@iimb.ac.in

Prerequisites: None

Course description and Objective:

Infrastructure Projects were traditionally funded by the Government based on the

principle of public provision where markets fail. Markets generally failed in
infrastructure mainly because of high investments, long gestation periods, and
huge economies of scale and consequent natural monopoly characteristics.
Sometimes there were also risks unacceptable to private sector. However, in
recent years there has been increasing emphasis to build infrastructure projects
through Public Private Partnership (PPP), principally invoking ‘government failure’
as a cause, but also for sourcing private sector finances from the market and also
private sector expertise. Due to their inherent high risks these projects are
executed through Project Finance method, instead of the traditional balance
sheet financing. The key to the success of PPP is both a recognition that private
sector is there to make profits, and also an obligation to society that such profits
should be moderate, keeping in mind that the assets so created must benefit the
society maximally by maximizing their use, through appropriate tariffs. The role
of Government in supporting the private sector as well as in governance in
keeping the public interest in view is thus critical.

The Course covers the features of Project Financing, explores the agency costs in
public and private ownerships, examines different methods of privatization and
takes up a few case studies in Public Private Partnership to highlight the need for
management capacity in Government for successful implementation of
Infrastructure projects. Further it goes on to discuss the role and types of
regulation in Infrastructure monopolies.
Evaluation: mid term 30%; term paper: 25% ; presentations in each class 15%:
final exam: 30%
Course outline:

Sl. no. Date Topic Reading

2016
1-4 Infrastructure Economics Infrastructure Economics – VR *
Dec 21, 22
5 Project Finance 1. Project Finance - Freshfields
Dec 28
6 Design & development of 2. Contract Design
Dec 28 contracts and Concession 3. Development of contracts – Phillips & Dufficy
award 4. Concession award - do -
7 Risk management and 10. Project risk identification exercise
Dec 29 Sources of finance 11. Political Risk Analysis – HBS
12. Pindyck and Rubenfeld “Diversifiable vs
nondiversifiable risk” Microeconomics 3rd edn.
13. Country risk – Euromoney, Economist
14. Sources of finance & political risk support – M. Ossius
15. Philippe Benoit “Infrastructure Finance – The World
Bank Group’s Financial Instruments” World Bank,
technical paper 312, 1996
8 Electricity restructuring 1. Agarwal, Manish; Alexander, Ian and Tenenbaum,
Dec 29 Bernard “The Delhi Electricity Discom Privatisations:..”
Paper no.8, Oct 2003, World Bank *
2. VR ‘Determining T&D losses in India: Their impact on
distribution privatisation’ EPW Feb 12, 2005 *
3. Dossani, Rafiq and V Ranganathan ‘Farmers’
willingness to pay for power in India: conceptual
issues, survey results and implications for pricing’
Energy Economics 26 (2004) 359-369
4. Power sector Data –
9 Electricity Restructuring 1. Issues in PPA competitive bidding – VR
Jan 4, 2018 2. VR ‘Tanir Bavi: A case of bureaucratic bungling? The
Hindu June 16, 2003
3. VR ‘ Tanir Bavi: How not to sign PPAs’ EPW July 5, 2003

4. VR ‘Why the Tanir Bavi arbitration award should be

 struck down’ KERC proceedings

10 Electricity Regulation 1. Khan A.E The Economics of Regulation MIT Press, ch.1
Jan 4 and 4
2. Glynn D.R ‘The mechanisms of price control’ Utilities
Policy April 1992
3. Beesley ME and Littlechild SC “The regulation of
privatized monopolies in the UK” Rand Journal of
Economics 20 (3) autumn 89
4. Bunn, Derek W ‘Evaluating the effects of electricity’ J.
of OR Socy. 45(4) pp367-375
Newbery and Pollitt ‘The Restructuring and Privatisation of
CEGB – Was it worth it? DAE, Cambridge. 6 March 1996

11 Case: East Europa Toll East Europa Toll Road – M. Ossius

Jan 5 Road

12 Public Private Partnership 1. Caselets on PPP

Jan 5 2. Bangalore Mysore Infrastructure Corridor
13 Case: Airport Privatisation Case: Mumbai, Delhi Airport Privatisation
Feb 1
14
Feb 1 -do -do-
15 Infrastructure Project notes
Feb 2
appraisal
16 Regulation 1. Averch and Johnson “Behaviour of the firm under
Feb 2 regulatory constraint” AER 52 (1962)pp1052-69
2. Khan AE “The Economics of Regulation” MIT Press
3. Beesley and Littlechild “The regulation of privatized
monopolies” Rand J. of Economics (20)3, Augumn89
17 Guest lecture
Feb 8
18 Telecom : Spectrum 1. Ken Binmore and Paul Klemperer “The biggest auction
Feb 8 auctions ever: The sale of the British 3G telecom licences” The
Economic Journal 112 (March), C74-C96. 2002
2. Milgrom, Paul “Putting Auction Theory to work: The
Simultaneous Ascending Auction” 4/99
 19 Postal restructuring – Crew, M and Paul Kleindorfer “Progress toward
Feb 9 liberalization of the postal and delivery sector” Springer 2006
Drawacks of public procurement procedures – Case of
India Post contract award
20 Students’ presentations Project presentations
Feb 9
End term examination