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CE5870 : Infrastructure
Planning and Management
Module Assignment 2
Public Private
Partnerships
Satwik Gupta
3rd September, 2019
Content
1. Introduction
2. Types of Risks
3. Case Studies
4. Conclusion
Introduction
Infrastructure is the back bone of economic development of any Nation. There has been a
special impetus on infrastructure development due to its strong correlation with economic
development. The correlation of investments in rail, road and airport infrastructure to GDP is
higher than 0.9. India needs to spend 7-8% of its GDP on infrastructure which translates to annual
investment of $200 billion currently. However, India has been able to spend only $100-$110
billion till now, leaving a deficit of $90 billion.
To overcome and cater to these issues, the PPP’s have been on a rise. Public-private partnerships
(PPPs) are a mechanism for government to procure and implement public infrastructure and/or
services using the resources and expertise of the private sector. Where governments are facing
ageing or lack of infrastructure and require more efficient services, a partnership with the private
sector can help foster new solutions and bring finance. The only issue is that the risks associated
with them are also many and at times very high. The financial crisis of 2008 onwards brought
about renewed interest in PPP in both developed and developing countries and since then there
has been a periodic motion in the number of PPPs in play, on the rise in the current phase.
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Types of Risks
Risks can be classified as follows
Based on the phase of the project, the risks can be classified as
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8. Default : This generally occurs if the project is not going good and the revenue generated
by the private fellow is much below their expectations. In such circumstances the only
alternative left for the private fellow is to terminate the project. To avoid these, the public
entity should study the project cycle and if necessary find and approve alternatives for
revenue generation.
9. Handover : Handover is the last aspect in a PPP. If at the time the project is not in a good
state then effectively the project has failed since in a few years’ time it will again be of no
use to the public. Also at the time of handover the private party should have gained
enough revenue to overcome the investments in the project failure to which will lead to
losses.
Case Studies
Examples of PPPs
Stage Project Examples of
where problems were Learnings
Activity encountered
Of successful PPPs
Projects
Timarpur Integrated solid Vadodara Halol Toll Prior due diligence
waste management Road project:Incorrect studies of technical
Comprehensive
project: Detailed technical estimation of & legal implications.
Project due diligence
studies, financial & risk projected traffic Realistic Traffic
Preparation Studies & Robust
evaluation, obtaining resulting in increased estimates.
Traffic / Market
regulatory & statutory revenue Risk.
Projections
approvals were
done well in advance.
Hyderabad Speculative
Metro bids should be
project:C ommercial avoided &
Dealing with utilization of land along terminated; Fresh
Procurement
Speculative with metro project led to bidding should be
Bids wide divergent called for.
bids. Greater
incentive to
complete real
estate development at
the cost of
metro.
Hyderabad Metro Adequate due
project: M aytas Metro diligence of
Importance of
was badly affected due Experience &
Lead Consortium
to issues faced by its expertise of Lead
Member/
promoter– Satyam consortium member
Promoter of
Computer Services. or promoter.
Concessionaire
Project failed to
achieve financial closure.
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Hyderabad Metro project: Delhi Gurgaon Completing land
Government handover expressway project: acquisition prior to
Development Handling of
90% of the land within 120 difficulty in acquiring the Project Procurement.
LandAcquisition days from signing of the land impacted the
agreement. overall project schedule.
Alandur Sewerage Project: A single interface for
Key approvals, including coordination of all
Streamlining of
road cutting, shifting of approvals to prevent
Approvals &
services & environmental delays.
Clearances
clearances were taken in
advance.
Environmentally Vadodara Halol Toll Road PPPs have an
& Socially project: Intense public environmentally
responsive consultations were carried and socially
development out. responsive
framework: Bypasseswere introduced development
Learning: at various critical framework.
locations.
The Vadodara Halol Toll PPP projects to be
Road:D eep discount financially
Financing
bonds with an option of independent;
Innovation
take-out financing; Long Minimize reliance on
term loans as a part of its government grants
financing or
structure. schemes.
Amritsar Inter-state Bus Create
Favourable Terminal favourable
Operations Operating project:R eduction in operating
Environmnt concessionaire’s revenue environment for
risk. private sector
to
function optimally.
Conclusion
Infrastructure projects are a complex phenomenon, but most overruns are foreseeable and thus
avoidable. These arise due to a lack of professional and forward-looking risk management
players and as a result the projects go into vain. A good risk-informed project will involve the
following:
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These few principles will enable in a very efficient and hedged project, thus encouraging the
private players too to invest more in them and thus generate more revenue and at the same time
help the economy grow.
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