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Title: Public Private Partnership : A Tool for Accelerating Infrastructure Growth in India


1
A
Public Private Partnership (PPP) A tool for
accelerating infrastructure growth in India
Mtech Presentation at IIT Delhi
Vijay Kumar SE(Civil) CPWD, New Delhi (Cell
919015913222) vijaymonal_at_yahoo.com
2
PPP in developing countries
Literature Review
Private Investment to 2 of GDP from present 1
Study of failed projects
Growth in infrastructure . thru
PPP
Procurement models
Q- survey Factor analysis
Shortlisting of factors
3
Introduction
  • PPP is defined as a cooperative venture between
    the public and private sectors build on the
    expertise of each partner that best meets clearly
    defined public needs through the appropriate
    allocation of resources, risks and rewards .

Public Need
4
PPP requirement in India
  • PPP in India was initiated in 1991 with the
    power sector and since then achieved some success
    in Telecom, Roads, Ports and Airport sectors. The
    experience of other countries suggests that it
    should be possible to increase private investment
    in infrastructure in India from its current level
    of 1 of Gross Domestic Product (GDP) to 2 of
    GDP.

5
PPP India Vs China
  • In 1980 India actually had higher infrastructure
    stocks in power, roads and telecommunications-
    but China invested massively in infrastructure,
    overtaking India by 1990 and the gap is widening
    .
  • The gaps accelerated from 1998 to 2003, as China
    invested around 7 of GDP in infrastructure, far
    higher than Indias rate.

6
PPP India Vs China
  • The gap in infrastructure stocks is now so large,
    that for India to catch up with Chinas present
    levels of stocks per capita by 2015, India would
    have to invest 12.5 of GDP per year.

7
Objective Scope
  •  i

India China Philippines Thailand Malaysia
Hongkong Maxico Chile Bolivia Hungary Argentina
8
Methdology
  •  i

9
Characteristics of PPP
10
Approaches in PPP
11
Principles of PPP
12
Arrangements in PPP
13
PPP in the world
  • The private finance initiative (PFI) was launched
    in UK in 1992. Since then it has become an
    incredibly popular mechanism for procuring public
    infrastructure in various countries. The aim of
    PFI is to bring the private sectors finance
    management skills and expertise into the
    provision of public sector facilities and
    services.

14
PPP in the world
  • Design- Build- Finance- Operate (DBFO) model in
    UK- for a financially free standing project. This
    model is relevant
  • Joint Venture This is useful for the projects
    whose costs can not be recovered entirely
    through charges on end-users. The govt provides
    subsidies for social benefits not reflected in
    the project cash flow.

15
PPP in the world
  • Build-Transfer-Operate ( BTO) is preferred over
    BOT in the state of California because the BTO
    would keep ownership and thus tort liabilities of
    the project with the state upon construction
    completion. This avoids higher tolls anchored by
    the prohibitive insurance costs borne by
    concessionaire to cover liabilities such as
    highway accidents and related property damages.

16
PPP in the world
  • CHINESE MODEL
  • SINO- Foreign Joint Venture- BOT projects
    Chinese parties contribute development costs,
    mining and land use rights, certain construction
    costs and labour costs.
  • Foreign parties input cash, equipment, design
    of facilities and technical assistance. The
    project agreement usually includes umbrella
    guarantee from a Chinese financial institution
    and a take-and-pay contract where necessary.

17
PPP in the world
  • Chinese Model ---
  • TOT ( Transfer-Operate-Transfer) scheme for
    project acquisition This allows foreign
    investors to buy existing projects facilities
    operate them over a specified period and transfer
    back at no costs to the government.
  • Wholly foreign funded BOT project Some pilot
    BOT projects have been developed under a national
    experiment BOT program. These projects are of
    sole foreign ownership and are guaranteed for
    foreign exchange convertibility for debt service
    and equity by Chinese government authorities

18
PPP in the world
  • PPP projects in Hong Kong A special ordinance
    is passed for each project as there is no general
    BOT legislation in Hong Kong.
  • The government provides no finance or subsidy, no
    guarantees on minimum traffic flows/ returns. And
    no guarantee against any further competitive
    rules.
  • The watch dog role of the Independent Commission
    against Corruption ( ICAC) means that the ICAC
    monitors the whole procurement process to ensure
    transparent, fair and non-corrupt competition.

19
Project Evaluation by PST method
  • Project Scoring Table (PST) is used for
    evaluation of PPP project on many factors from
    political risk to operational risk.
  • Using the PST helps both the public agency and
    its private partners evaluate potential projects
    in three ways.
  • 1. Establish the overall viability of the
    project .
  • 2. Define the parity between the owner and the
    developer .
  • 3. PPP partners determine their interests where
    they are coincident and where they diverge.

20
Public Public Public Private Private Private
Weightage - 0 - 0
Political Clearance 9
Partnership Structure 3
Project scope 5
Environmental Clearance 5
Construction risk allocation 4-8
Operational risk allocation 8
Financing Package 4
Economic viability 5-10
Developer financial involvement 9
Total
21
Selection of Private partner
  • A critical issue in PPP in infrastructure
    development is the selection of the right private
    sector partner. This necessitates a best valued
    source selection (BVSS) methodology. Various
    criteria are classified into four evaluation
    packages for PPP projects in general.
  • Financial
  • Technical
  • Safety, health and environmental and
  • Managerial

22
Selection Process in AAI
  • The privatization of Air Port expansion,
    operation maintenance for 30 years involved
    selection of a competent agency who can invest
    and manage for such long tenure. The generation
    of revenue will be from number of passenger
    handled and No. of Airoplane handled plus revenue
    from leasing of commercial space available at the
    air port .
  • The selection of concessionaire involved four
    stage bidding process in Delhi and Mumbai Air
    Port privatization.

23
Selection Process in AAI
  • Phase 1 required the consideration of certain
    mandatory requirements.
  • Phase - 2 involved the consideration of financial
    commitments. All remaining offers would then
    assessed in phase 3 for a minimum benchmark of
    80 on the two technical pre-qualification
    criteria. These two were (a) Management
    Capability, Commitment and value addition and (b)
    Development Capability,
  • Phase 4 involved maximum of revenue sharing for
    selection

24
Selection Process in NHAI
  • The National Highway Authority of India (NHAI) is
    executing national highways across the country.
    The system of contract execution is now shifting
    from the system of cash project (project funded
    by government) to funding through public private
    partnership.
  • The revenue generation is through the collection
    of toll tax from the vehicles. The entire
    concession period is 20 years for six lane roads
    and 12 years for a four lane road. The
    evaluation criteria for selection of
    concessionaire is mainly based on following two
    parameters -
  • Experience as developer and/or construction
    experience.
  • Financial capability in terms of networth.

25
PPP in Ports
  • PPP in construction and expansion of sea port in
    India
  • In India the development of new ports as well as
    expansion of existing ports are now being taken
    on the large scale.
  • The selection of private party is based on
    Development Management capability and of
    Royalty sharing

26
Comparison of procurement systems in AAI,
Port, Highways
Item Airport Port Highways
Concession period 30 years 20 years 20 years for 6 lane and 12 years for 4 lane
Revenue Collection Number of passengers handled Number of aero plane handled leasing commercial space From number of cargo handled Toll collection from vehicles
Tendering System Open tendering Open tendering Open tendering
Pre-qualification criteria Experience required as management capability, development capability Experience required in handling cargo Experience required for development / C/o of highways (optional) financial capability
27
Comparison of procurement systems in AAI,
Port, Highways
Item Airport Port Highways
Bidding stages 4 stage 2 stage 2 stage
Consultant Additional consultant in addition to AAI No consultant Independent consultant
Design proof checking Separate consultant Separate consultant Separate consultant
Revenue stages For brown field airport- Revenue collection from beginning, For green field airport Revenue collection after completion Revenue collection after completion Revenue collection after completion
Revenue sharing By client By client By client
28
(No Transcript)
29
PPP in Hong Kong China
30
.
PPP in Hong Kong China
  • Bidding parameter for uncertain traffic roads
    Fixed Price Lump-sum contract.
  • Feasibility report and preliminary design is
    given by Govt.
  • Provision of toll stability fund minimizes down
    side risk .
  • Selection of Bidder No shortlisting procedure.
    Interested parties submit bids which is
    evaluated by a committee from different dept.

31
.
PPP in Hong Kong China
  • Concession period 30 years.
  • Land acquisition Govt provides land free of
    cost. Access road is also provided free of cost.
  • Promotional campaign advertising to increase
    traffic volume.
  • Only 20 of PPP projects are profitable.

32
PPP in Malaysia
  • Govt. direct involvement (from the office of EPU
    like PMO).
  • No defined selection criteria. No BOT law.
    Project is identified by Private sector and
    proposal is submitted for approval and award.
  • Tariff is derived from the concessionaires
    proposal. Tariffs rate is decided on IRR of 15
    generally.
  • Feasibility study , Design Specification is
    worked out by Concessionaire.

33
PPP in Malaysia
  • Malaysias PPP is considered successful.
  • Monitoring from Top of govt.
  • Work awarded at higher toll rates as no
    competition.
  • Funds, soft loans are provided by domestic banks
    for which govt. gives guarantee. Therefore it is
    the govt. which takes risk.

34
PPP in Thailand
  • Feasibility study , Preliminary Design and
    Monitoring Two dept of govt. (DOH and ETA)
    acts parallel causing confusion in doing
    feasibility study and project monitoring.
  • Land acquisition is done at market rate causing
    high project cost.
  • Bidding system No Transparent Bidding process.
    No BOT law. Many projects have entered into
    conflicts.
  • No provision/ predefined criteria for toll
    escalation

35
PPP in Philippines
  • Proper BOT law.
  • Land acquisition by Govt.
  • Transparent system for evaluation of solicited
    and unsolicited bids.
  • Govt. identifies and prepare feasibility report
    and bidding document.
  • Bidding parameter lowest toll rate is the basis
    of selection of concessionaire.
  • Toll regulatory board to regulate toll and
    escalation in toll.
  • No govt. guarantee for loan etc.

36
PPP in China
  • PPP applicable to all sectors except Airport.
  • Central Govt. , local govt., local body prepares
    feasibility report and bidding depending upon
    their jurisdiction.
  • Selection of bidder through prequalification
  • No bidder is allowed to compete for cost less
    than market price.
  • Govt. only guarantees foreign exchange rate
    fluctuation to a foreign bidder.
  • Provision of toll adjustment and extension of
    concession period.

37
PPP in China India - Highway
  • China
    India
  • National highway authority of India (NHAI)
  • Project director signs contract and operate.
  • Developer-Concessionaire.
  • Bidding on lowest cost irrespective of market
    price.
  • Project expressway authority of China (PEA)
  • Chinese legal authority to sign contract and to
    operate.
  • Developer -Project company
  • Bidding on costs near to market price.

38
PPP in China India - Highway
  • China
    India
  • Provision for extension of BOT term and extension
    of concession period.
  • Independent engineer for PMC and issue of
    completion certificate.
  • No guarantee except foreign exchange rate.
  • Land, access road are provided free of cost
  • No built in provision of extension of concession
    period.
  • Same
  • Same
  • Same

39
Case study North Luzon Expressway (NLEX)
Philippines
  • Project was signed in 1998 , Construction
    completed in 2005 , 84 km , Rs 1600 crore,
    Concession up to 2030.
  • Project concessionaire Manila North Toll way
    Corporation (MNTC) a joint venture company of
    infrastructure, construction ,
  • toll management company. JV of two domestic
    and two foreign company.

40
Case study North Luzon Expressway (NLEX)
Philippines
  • Project was signed in 1998 , Construction
    completed in 2005 , 84 km , Rs 1600 crore,
    Concession up to 2030.
  • Project concessionaire Manila North Toll way
    Corporation (MNTC) a joint venture company of
    infrastructure, construction ,
  • toll management company. JV of two domestic
    and two foreign company.

41
Case study North Luzon Expressway (NLEX)
Philippines
  • Debt equity funding 2.5 1
  • No govt. guarantee. No market risk by govt.
  • Authorized toll rates with mechanism for
    enhancement based on escalation indexes.
  • Compensate concessionaire only if revenue from
    toll is less due to failure of govt. to implement
    agreed toll rate.
  • .

42
Case study North Luzon Expressway (NLEX)
Philippines
  • Large increase in toll rates were successfully
    enforced by govt. with the help of NGO and
    advertisement and other communications.

Toll () 0.24 0.33 0.33 0.52 0.52 2.48
Year Before Dec 2003 Dec-03 Dec-03 Jul-04 Jul-04 Feb-05
Continued for gt 6 years gt 6 years 7months 7months 7months 7months
Increase in Toll 27 27 58 58 377 377
43
Failed Projects
  • .

44
Failed Projects
  • .

45
Failed Projects
  • .

46
Failed Projects
  • .

47
Failed Projects
  • .

48
Model Questionnaire
  • Name
  • Name of your organization
  • How long have you been with the company ?
    ---Years
  • List your degrees obtained and major fields of
    study? Bachelore/Master/PhD  ------Field of
    study?
  • What is your experience background ?
  • ----- Years as field and / or office engineer.
  • ----- Years as project manager ,-----Years as
    executive 
  • Please identify the significance of the following
    factors (listed on next pages) affecting
    infrastructure growth using Public Private
    Partnership 
  • Most adverse -1 Adverse -2
    Insignificant -3 Desirable -4 Most
    desirable 5

49
Questionnaire Survey Questionnaire Survey Questionnaire Survey Questionnaire Survey Questionnaire Survey Questionnaire Survey
Most adverse -1, Adverse -2 , Insignificant 3 , Desirable 4 , Most desirable 5
f1. Feasibility report prepared by government resulting biased report favourable to government 1 2 3 4 5
f2. Project estimated cost on a lower side projected by govt 1 2 3 4 5
f3. Cap of 40 of project cost for grant by govt. 1 2 3 4 5
f4. Toll rate not being kept a bidding parameter (No competition on toll rate) 1 2 3 4 5
  • Thank you !

50
Questionnaire survey Questionnaire survey Questionnaire survey Questionnaire survey Questionnaire survey Questionnaire survey
f5. Works of comparatively smaller value also being floated 1 2 3 4 5
f6. Traffic jam due to manual tolling (Lack of electronic toll collection) causing public uproar against PPP projects. 1 2 3 4 5
f7. Less concession period mostly 20 years against generally adopted 25-30 years turning project economically unviable 1 2 3 4 5
f8. No system of advertising to boost traffic / increase traffic volume on PPP roads. 1 2 3 4 5
f9.Lack of communication / advertisement to increase popularity of toll road ( to offset higher toll) 1 2 3 4 5
  • Thank you !

51
Questionnaire Survey Questionnaire Survey Questionnaire Survey Questionnaire Survey Questionnaire Survey Questionnaire Survey
f10. Lack of involvement of NGO to propagate benefit of well maintained toll road. 1 2 3 4 5
f11. Leakage of traffic through parallel free routes / less costly routes 1 2 3 4 5
f12. Cartel formation of bidders leading to higher quoted cost. 1 2 3 4 5
f13. Monitoring / initiative by ministry rather than higher offices like Prime Ministers office (lack of govt. commitment) 1 2 3 4 5
f14. Multiple interest of authorities such as law and order by state govt., project execution by central govt. 1 2 3 4 5
  • Thank you !

52
Questionnaire Survey Questionnaire Survey Questionnaire Survey Questionnaire Survey Questionnaire Survey Questionnaire Survey
f15. Conflicts among concessionaire , among concessionaire, state govt., local bodies and central govt. due to overlapping authorities 1 2 3 4 5
f16. Local govt. opposition to national plan 1 2 3 4 5
f17. Policy of no extension of concession period at any cost even due to force majure, change of scope etc. 1 2 3 4 5
f18. Large No. of Govt. regulations 1 2 3 4 5
f19. Provision of toll regulatory board 1 2 3 4 5
  • Thank you !

53
Questionnaire Survey Questionnaire Survey Questionnaire Survey Questionnaire Survey Questionnaire Survey Questionnaire Survey
20. Lack of contractual flexibility towards unpredicted events in the contracts 1 2 3 4 5
21. No proper forecasting of revenues and costs in feasibility study 1 2 3 4 5
22. Absence of assessment of willingness to pay toll by public 1 2 3 4 5
23. Lack of assurance of financial profitability and sustainability by governments respect of contractual agreements 1 2 3 4 5
24. Lack of advance technology (in comparison to developed countries) 1 2 3 4 5
25. Lack of solid legal framework (in comparison to countries like US,UK)
  • Thank you !

54
Questionnaire Survey Questionnaire Survey Questionnaire Survey Questionnaire Survey Questionnaire Survey Questionnaire Survey
26. Policy of restrictive bidding (Example a bidder can be pre qualified for only up to 8 projects and can be awarded up to 4 projects in NHAI) 1 2 3 4 5
27. Limit on no of pre qualified bids (Example Only up to 5 bidders can be pre qualified for a project in NHAI) 1 2 3 4 5
28. Funding agency not taking risk 1 2 3 4 5
29. Lack of toll revenue stability fund causing more downside risk for concessionnaire 1 2 3 4 5
  • Thank you !

55
Questionnaire Survey Questionnaire Survey Questionnaire Survey Questionnaire Survey Questionnaire Survey Questionnaire Survey
f30.No guarantee of exchange rate like rupees versus dollar etc. by govt. 1 2 3 4 5
f31. Availability of limited equity financing for PPP projects. 1 2 3 4 5
f32 . Availability of Limited Mezzanine financing for PPP projects 1 2 3 4 5
f33. Interest rate caps on External Commercial Borrowing(ECB) 1 2 3 4 5
f34. Underdeveloped debt markets 1 2 3 4 5
  • Thank you !

56
Questionnaire survey Questionnaire survey Questionnaire survey Questionnaire survey Questionnaire survey Questionnaire survey
f35.Strict regulation on pension fund and PF funds for investment in PPP projects 1 2 3 4 5
f36. Strict regulation on SLR and CRR requirement not favorable for PPP projects. 1 2 3 4 5
f37. High percentage of labour cost 1 2 3 4 5
f38. No safeguard against external macro economy shock against unexpected financial turmoil 1 2 3 4 5
f39. Large fluctuation of prices of material / services etc. (lack of price stability) 1 2 3 4 5
  • Thank you !

57
Questionnaire survey Questionnaire survey Questionnaire survey Questionnaire survey Questionnaire survey Questionnaire survey
f35.Strict regulation on pension fund and PF funds for investment in PPP projects 1 2 3 4 5
f36. Strict regulation on SLR and CRR requirement not favorable for PPP projects. 1 2 3 4 5
f37. High percentage of labour cost 1 2 3 4 5
f38. No safeguard against external macro economy shock against unexpected financial turmoil 1 2 3 4 5
f39. Large fluctuation of prices of material / services etc. (lack of price stability) 1 2 3 4 5
  • Thank you !

58
Questionnaire survey Questionnaire survey Questionnaire survey Questionnaire survey Questionnaire survey Questionnaire survey
f40. Uneconomical / over-safe design and specification by govt. resulting into inflated cost of project 1 2 3 4 5
f41. Redundancy of existing manpower of govt dept causing resistance to adopt/implement PPP scheme. 1 2 3 4 5
f42. Inefficiency of bureaucracy in taking faster decisions. 1 2 3 4 5
f43. Multiple approval requirement 1 2 3 4 5
f44. Limited capacity of government to implement large volume of projects. 1 2 3 4 5
  • Thank you !

59
Questionnaire survey Questionnaire survey Questionnaire survey Questionnaire survey Questionnaire survey Questionnaire survey
f45. Provision of independent regulatory authority for PPP projects. 1 2 3 4 5
f46. Law and Order problem 1 2 3 4 5
f47. Political instability 1 2 3 4 5
f48. Complex land acquisition system 1 2 3 4 5
  • Thank you !

60
Characteristics of Respondents
Organization Total Qualification Qualification Qualification Experience in years Experience in years Experience in years
Degree Master PhD 2-5 5-15 gt15
Govt. 16 10 6 0 4 9 3
Public sector 15 11 4 0 4 8 3
Private 21 18 3 0 4 12 5
61
Factors (Mean in Descending Order)
Provision of independent regulatory authority for PPP projects 3.462
Toll rate not being kept a bidding parameter (No competition on toll rate) 3.404
No forecasting of revenues and costs in feasibility study 3.385
Cap of 40 of project cost for grant by govt 3.385
Strict regulation on pension fund and PF funds for investment in PPP projects 3.308
Policy of no extension of concession period at any cost even due to force majeure, change of scope 3.308
Absence of assessment of willingness to pay toll by public 3.231
Limit on no of prequalified bids 3.192
Monitoring / initiative by ministry rather than higher offices like Prime Ministers office (lack of govt. commitment) 3.192
Funding agency not taking risk 3.173
62
Factors (Mean in Descending Order)
Lack of assurance of financial profitability and sustainability by governments respect of contractual agreements 3.077
No system of advertising to boost traffic / increase traffic volume on PPP roads 3.077
Lack of solid legal framework (In comparison to countries like US,UK) 3
Lack of advance technology (in comparison to developed countries) 3
Traffic jam due to manual tolling (Lack of electronic toll collection) causing public uproar against PPP projects 3
Interest rate caps on External Commercial Borrowing(ECB) 3.154
Provision of toll regulatory board 3.154
Uneconomical / over-safe design and specification by govt. resulting into inflated cost of project 3.154
No safeguard against external macro economy shock against unexpected financial turmoil 3.077
High percentage of labour cost 3.077
63
Factors (Mean in Descending Order)
Availability of Limited Mezzanine financing for PPP projects 2.923
Large number of govt. regulations 2.923
Lack of communication/ advertisement to increase popularity of toll road ( to offset higher toll) 2.923
Works of comparatively smaller value also being floated 2.923
Multiple interest of authorities such as law and order by state govt., project execution by central govt. 2.846
Large fluctuation of prices of material / services etc. (lack of price stability) 2.846
Lack of toll revenue stability fund causing more down side risk for concessionaire 2.827
Lack of involvement of NGO to propagate benefit of well maintained toll road 2.769
Policy of Restrictive bidding (Note A bidder can be prequalified for only up to 8 projects and can be awarded up to 4 projects in NHAI 2.769
Project estimated cost reflected on a lower side by govt 2.692
64
Factors (Mean in Descending Order)
Strict regulation on SLR and CRR requirement not favorable for PPP projects 2.615
Less concession period mostly 20 years against generally adopted 25 - 30 years turning project economically unviable 2.615
Conflicts among concessionaire, state govt., local bodies and central govt. due to overlapping authorities 2.577
Local govt. opposition to national plan 2.539
Multiple approval requirement 2.519
Limited capacity of government to implement large volume of projects 2.692
Redundancy of existing manpower of govt dept causing resistance to adopt/implement PPP scheme 2.692
No guarantee of exchange rate like rupees versus dollar etc. by govt 2.692
Feasibility report prepared by government resulting into biased report favorable to government 2.692
Underdeveloped debt markets 2.673
65
Factors (Mean in Descending Order)
Availability of limited equity financing for PPP projects 2.462
Cartel formation of bidders leading to higher quoted cost 2.462
Lack of contractual flexibility towards unpredicted events in the contracts 2.442
Law and Order problem 2.404
Leakage of traffic through parallel free routes / less costly routes 2.231
Political instability 2.096
Complex land acquisition system 1.904
Inefficiency of bureaucracy in taking faster decisions. 1.808


66
Most desirable factors
Rotated Component Matrix Rotated Component Matrix Rotated Component Matrix Rotated Component Matrix Rotated Component Matrix Rotated Component Matrix
  Component Component Component Component Component
  1 2 3 4 5
f45 0.174 0.401 0.837 0.06 -0.076
f3 -0.736 0.121 -0.366 0.34 0.162
f4 0.119 0.794 -0.072 0.04 0.046
f21 0.797 0.249 0.225 0.138 0.246
f17 0.106 0.919 0.079 -0.028 0.139
f22 0.889 0.298 -0.215 0.124 0.059
f13 0.204 0.144 -0.012 0.844 0.086
f19 0.054 -0.389 0.789 0.006 0.275
f28 0.278 0.139 -0.045 -0.824 0.106
f27 0.488 -0.363 0.387 -0.299 -0.14
f35 0.119 0.132 0.119 0.002 0.952
f33 0.896 0.115 0.04 -0.112 0.153
f40 0.749 -0.124 0.304 0.027 -0.528
67
Most adverse factors
Rotated Component Matrix Rotated Component Matrix Rotated Component Matrix Rotated Component Matrix Rotated Component Matrix
  Component Component Component Component
  1 2 3 4
f11 0.534 0.019 0.605 0.217
f12 0.016 0.588 0.474 0.226
f16 0.497 0.702 -0.054 -0.084
f20 0.838 -0.118 0.042 0.024
f31 -0.019 -0.529 0.567 -0.282
f42 0.269 -0.695 -0.037 0.159
f43 0.821 0.065 0.173 0.037
f46 0.114 0.096 0.77 0.142
f48 0.16 0 0.148 0.733
f47 -0.068 -0.03 0.028 0.747
68
List of desirable factors New desirable factors after factor reduction
D1 Cap of 40 of project cost for grant by govt, No proper forecasting of revenues and costs in feasibility study, Absence of assessment of willingness to pay toll by public, Limit on no of prequalified bids (Note Only up to 5 bidders can be prequalified for a project in NHAI), Interest rate caps on External Commercial Borrowing(ECB), Uneconomical / over-safe design and specification by govt. resulting into inflated cost of project Realistic projection of project viability, project costing financing, and limit on competitive bidding
69
List of desirable factors New desirable factors after factor reduction
D2 Toll rate not being kept a bidding parameter (No competition on toll rate), Less concession period mostly 20 years against generally adopted 25 - 30 years turning project economically unviable Control on toll rate and realistic concession period for toll collection
D3 Provision of independent regulatory authority for PPP projects, Provision of toll regulatory board Provision of Independent regulatory authority for PPP
D4 Monitoring / initiative by ministry rather than higher offices like Prime Ministers office (lack of govt. commitment), Funding agency not taking risk Lesser interference by govt and more delegation of power.
D5 Strict regulation on pension fund and PF funds for investment in PPP projects Strict regulation on pension fund and PF funds for investment in PPP projects.
70
Most Adverse Factors Most Adverse Factors
A1 -Lack of contractual flexibility towards unpredicted events in the contracts, -Multiple approval requirement Factors after reduction Lack of Single window system for all required approval including provision for mitigating unpredicted event
A2 -Cartel formation of bidders leading to higher quoted cost, -Local govt. opposition to national plan, -Inefficiency of bureaucracy in taking faster decisions Unethical practices by bidders, inefficient bureaucracy and unhealthy govt. conflicts
A3 -Leakage of traffic through parallel free routes / less costly routes, -Availability of limited equity financing for PPP projects, -Law and Order problem Loss of revenue due to lawlessness discouraging equity flow for PPP projects.
71
Most Adverse Factors Most Adverse Factors
A4 -Political instability, -Complex land acquisition system Factors after reduction Lack of consistent political will to simplify complex land acquisition system.
A5 -Lack of contractual flexibility towards unpredicted events in the contracts, -Multiple approval requirement Lack of Single window system for all required approval including provision for mitigating unpredicted event
72
Conclusion
  • Desirable factors after factor analysis affecting
    infrastructure growth thro PPP
  • (i) Realistic projection of project viability,
    project costing, financing, and limit on
    competitive bidding
  • (ii) Control on toll rate and realistic
    concession period for toll collection
  • (iii) Provision of Independent regulatory
    authority for PPP projects
  • (iv) Lesser interference by govt and more
    delegation of power.
  • (v) Strict regulation on pension fund and PF
    funds for investment in PPP projects.

73
Conclusion
  •  B. Adverse factors after factor analysis
    affecting infrastructure growth thro PPP
  •  (i) Lack of Single window system for all
    required approval including provision for
    mitigating unpredicted event
  • (ii) Unethical practices by bidders, inefficient
    bureaucracy and unhealthy govt. conflicts
  • (iii) Loss of revenue due to lawlessness
    discouraging equity flow for PPP projects
  • (iv) Lack of consistent political will to
    simplify complex land acquisition system
  •  Conclusion Results were checked with
    experienced people who are working in PPP
    projects and their opinion are commensurate with
    the results obtained from factor analysis.

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