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The book provides readers with a clear understanding of infrastructure challenges, how Public‐Private Partnerships (PPP) can help, and their use in practice. Infrastructure bottlenecks are generally considered the most important constraint to growth in many countries worldwide. Historically, infrastructure projects have been financed and implemented by the state. However, owing to the fiscal resource crunch, time and cost over‐runs, and the general poor quality of publicly provided infrastructure, many emerging market governments, including India, have increasingly adopted PPPs with billions of dollars of investment riding on them. The results have been varied – from spectacular airports like the Delhi International Airport Limited with the associated controversy over land use, to the renegotiation of contracts as in the case of Tata Mundra Ultra Mega Power Project. Illustrating concepts with relevant case studies, the book makes the challenges of PPPs understandable to industry and management practitioners as well as students of management, public policy and economics. It is useful to practitioners wishing to avoid the pitfalls in the tricky terrain of PPPs and policymakers wanting guidance in crafting proper incentives. It also helps students gain a holistic and “applied” understanding of this increasingly important and popular model.
“Public Private Partnerships (PPPs) in India are currently under stress. A comprehensive treatment of the subject by a long-time and erudite practitioner and a management academic, this book should be useful to students trying to learn the basics, while also being valuable to professionals and policy makers. The book suggests that the Government should hold bidders accountable to their submitted bids, thereby preserving sanctity of contract. This will discourage aggressive bidding which has become a serious and endemic problem. The book also suggests the use of better bidding criteria to mitigate traffic risk in transport projects. Policy makers should pay heed to these suggestions as they consider improvements in the PPP policy regime going forward.”—Arvind Subramanian, Chief Economic Adviser, India
“For a fast-growing India, infrastructure creation and operation is a great challenge and opportunity. This excellent book combines theory and practice on PPPs, and is very useful for professionals and students alike. With case studies and current developments, the authors bring out issues in India with global experiences as well. A must-read for infrastructure practitioners.”—Shailesh Pathak, Chief Executive (Designate), L&T Infrastructure
Development Projects Limited “India’s program of private participation in infrastructure attracted worldwide attention as it became one of the largest programs in emerging markets. As well as the volumes of finance mobilized, it garnered interest because of some of the innovative approaches developed, such as Viability Gap Funding. The Indian PPP story is well captured in this book, which also makes the point that India is seeing project cancellations and failures rise. The authors analyze the factors behind this and point the way to a more robust PPP market that learns from the experiences of the past.”—Clive Harris, Practice Manager, Public-Private Partnerships, World Bank



Chapter 1. Infrastructure and Public–Private Partnerships: Overview and Key Issues

This chapter provides an overview of the book. It outlines the current infrastructure gaps and the role of the public and private sectors in filling up these gaps. Thereafter, it provides a map of the book in terms of brief chapter summaries.
Kumar V. Pratap, Rajesh Chakrabarti

Infrastructure PPPs—Concepts and Evidence


Chapter 2. Infrastructure Challenges

This chapter discusses infrastructure characteristics, recent history of infrastructure provision, and infrastructure challenges. Many of the infrastructure challenges arise from its unique characteristics including its sunk cost nature, large externalities, public good, and natural monopoly characteristics. Preponderance of government provision of infrastructure continues despite considerable growth in private participation. Infrastructure challenges discussed in this chapter are large infrastructure deficit, fiscal resource constraint on public infrastructure investment, faulty allocation of limited resources across projects, time and cost overruns, poor quality of publicly provided infrastructure, and poor maintenance raising costs and reducing benefits.
Kumar V. Pratap, Rajesh Chakrabarti

Chapter 3. Financing Infrastructure

Infrastructure is generally financed from four sources—government budgetary support; internal and extra-budgetary resources of the public sector; private investment and project finance; and international funding. In this chapter, we review these sources of infrastructure finance as also the Indian experience in infrastructure financing in the 11th Plan (2007–12) and the 12th Plan (2012–17) periods. Finally, we look at the challenges in infrastructure financing.
Kumar V. Pratap, Rajesh Chakrabarti

Chapter 4. Public-Private Partnership (PPP) Concepts

This chapter discusses the concept and features of Public-Private Partnerships (PPPs) and contrasts them with Privatization and Outsourcing. Key issues include: making political sense; appropriate risk allocation among stakeholders, with risk allocated to that party that has more control over the risk factor; need for competitive bidding of projects; designing of appropriate bidding parameters; and crafting concession agreements in line with imperatives of non- or limited-recourse project financing. Sustainable PPPs need to provide value for money to the government, a computation missed in many countries. The case study of Delhi Airport Metro Express is used to illustrate the concepts.
Kumar V. Pratap, Rajesh Chakrabarti

Chapter 5. Models of PPP—Taxonomy and Issues

The major PPP models tried across the world are Build–Operate–Transfer (BOT), and its variants BOT (Toll) and BOT (Annuity); Design–Build–Finance–Operate–Transfer (DBFOT), Hybrid Annuity, etc. This chapter describes these models and discusses typical issues that arise in each of these models. Finally, the chapter discusses the Dar es Salaam Water and Sewerage Services (Tanzania) case study as an example of a lease contract.
Kumar V. Pratap, Rajesh Chakrabarti

Chapter 6. Sectoral Distribution and Sector-Specific Issues for Infrastructure PPPs

In this chapter, we discuss the sectoral spread of PPPs in economic infrastructure—energy, transportation, and water and sewerage—and social infrastructure—health and education. We also discuss the regional spread of PPPs along with their top sponsors. One recent tendency is the advent of emerging market investors and operators in developing countries, which should make these projects more robust to failure. Finally, we discuss the case study of Mexican Toll Roads, which elaborates on their cancelation and re-privatization.
Kumar V. Pratap, Rajesh Chakrabarti

Chapter 7. Designing and Structuring PPP Transactions

This chapter describes the key stages in bidding out PPP projects—Request for Qualification (RfQ) and Request for Proposal (RfP). It also describes the key elements of the Model Concession Agreement in terms of performance requirements, payment mechanism, dispute resolution mechanism, and termination provisions. While each PPP contract is unique, there is a need for standardization of the process and documentation involved in such contracts. Model standardized documents are generic with provision for project-specific flexibility that aims at imparting transparency, consistency, and predictability to the procurement process, ensuring objective, and expeditious decision making.
Kumar V. Pratap, Rajesh Chakrabarti

Chapter 8. Infrastructure Regulation

This chapter focuses on the types of regulatory systems like regulation by contract and autonomous regulatory institutions. While autonomous regulation is essential for private participation, developing countries struggle to establish a sustainable regulatory regime balancing the financial viability of the project with reasonable user fees. We also look at infrastructure regulatory institutions in India like Telecom Regulatory Authority of India (TRAI), Central and State Electricity Regulatory Commissions (CERC and SERCs), Tariff Authority for Major Ports (TAMP), and Airport Economic Regulatory Authority (AERA). Regulatory reforms in terms of objectives, autonomy, functions, and accountability are also discussed.
Kumar V. Pratap, Rajesh Chakrabarti

Infrastructure PPPs in India: Managing the Challenges


Chapter 9. PPPs in India

This chapter discusses the current status of PPPs in India; the PPP institutional framework in India; and evolving PPP policy, including the report of the Committee on Revisiting and Revitalising Public–Private Partnership model (or the Kelkar Committee report). It also covers critical debates about infrastructure projects in India, like environmental clearance and land acquisition. Finally, it discusses the role of PPPs in India’s Smart City Mission, a key initiative of the Government of India.
Kumar V. Pratap, Rajesh Chakrabarti

Chapter 10. When Things Go Wrong: Renegotiation and Cancelation of Infrastructure Projects

Renegotiation of signed long-term infrastructure contracts as well as their cancelation have increased in India, with opportunistic renegotiations that should be discouraged. This chapter starts with a brief conceptual background of renegotiations and then goes on to examine the international and Indian experience in renegotiations, while suggesting measures for preventing opportunistic renegotiations. Finally, the chapter examines the record of infrastructure project cancelations in India.
Kumar V. Pratap, Rajesh Chakrabarti

Chapter 11. Analysis and Case Studies of a Few Infrastructure PPPs in India

This chapter focuses on at a few selected issues and experiences of Infrastructure PPPs in India. It starts with a brief analysis of Value for Money (VfM) in India’s road sector projects. It then provides three extensive case studies: the Dabhol Power Project; the Delhi Power Distribution experience; and the Delhi International Airport Project to provide an in-depth view of the real-life issues involved with infrastructure PPPs in India.
Kumar V. Pratap, Rajesh Chakrabarti


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