1.

Introduction
2. Impediments to Infrastructure
3. Government Policies / Roles /
Finances / Regulator
4. Sectoral overview
5. Financing Infrastructure in India

2
 India Brand Equity Foundation (free, needs
registration, worth it)
 http://www.ibef.org/

 Make in India
 http://www.makeinidia.com/sectors

 Infrastructure and Project Monitoring Division

 http://www.cspm.gov.in/english/index.html

 Public Private Partnerships In India

 http://www.pppinindia.gov.in/ 3
1. Infrastructure – Introduction (definitions)

2. Who should build infrastructure – Cycle of

privatization
3. Historical perspective (Willingness-to-
pay/Willingness-to-charge)
4. Role of Infrastructure in Nation Building
5. What kind of Infrastructure? Who pays for it?
6. Vicious and Virtuous Cycle of Infrastructure

4
Oxford dictionary:

“the basic physical and

organizational structures and
facilities (e.g. buildings, roads,
power supplies) needed for the
operation of a society or enterprise”
5
 Transportation Infrastructure
 Roads, bridges, airports, ports, waterways
 Water and sanitation infrastructure
 Potable water supply, sewerage systems
 Energy infrastructure
 Power plants, transmission, oil and gas
 Telecommunication infrastructure
 Housing, Facilities and Recreation

6
 Economic Growth Engine

 Poverty Alleviation

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Source: A LOWESS smoother is used for the fitted line. The share of the population who are under the poverty line of
USD1.91 per day from WDI dataset and the Infrastructure dataset from Calderón, Moral-Benito, Servén (2014).
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 Investment in Infrastructure is necessary
for growth.

 To achieve the GDP of $5 trillion by 2024-

25, India needs to spend about $1.4 trillion
(INR 100 lakh crore) over these years on
infrastructure.

Source: Government of India, Economic Survey 2019-20 11

 The NIP has projected total infrastructure
investment of INR 102 lakh crore during
the period FY 2020 to 2025 in India.

 Major sectors
 Energy (24 per cent)
 Roads (19 per cent)
 Urban (16 per cent)
 Railways (13 per cent)

Source: Government of India, Economic Survey 2019-20 12

 Central Government (39 per cent) and State
Government (39 per cent) are expected to
have equal share in funding of the projects

 The Private Sector expected share is 22 per

cent.

 It is expected that private sector share may

increase to 30 per cent by 2025.
Source: Government of India, Economic Survey 2019-20 13
 Investment in Infrastructure is necessary
for growth.

 To achieve the GDP of $5 trillion by 2024-

25, India needs to spend about $1.4 trillion
(INR 100 lakh crore) over these years on
infrastructure.

14
 The NIP has projected total infrastructure
investment of INR 102 lakh crore during
the period FY 2020 to 2025 in India.

 Major sectors
 Energy (24 per cent)
 Roads (19 per cent)
 Urban (16 per cent)
 Railways (13 per cent)
15
 Central Government (39 per cent) and State
Government (39 per cent) are expected to
have equal share in funding of the projects

 The Private Sector expected share is 22 per

cent.

 It is expected that private sector share may

increase to 30 per cent by 2025.
16
414th FLASH REPORT ON CENTRAL SECTOR PROJECTS
(Rs.150 crore and above)
May, 2020

17
 The Flash Report for May 2020 contains
information on the status of the 1683
Central Sector Infrastructure Projects
costing 150 crore and above.

18
During the reference month:
1. Out of 1683 projects, 3 projects added costing
Rs.6,917.60 crore

2. 456 projects are delayed with respect to their

original schedules and 63 projects delayed vis-à-
vis their date of completion reported in the
previous month

3. Of these 63 projects, 19 are Mega Projects

costing 1000 crore and above.
19
 Ahead of Schedule 9

On Schedule 242

Cost overrun 405

Delayed wr to latest schedule 412

Delayed 456

Without proper date of commissioning 976

Total Projects 1683

0 500 1000 1500 2000

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1. Delay in land acquisition
2. Delay in obtaining forest/environment clearances
3. Lack of infrastructure support & linkages
4. Delay in tie-up of project financing
5. Delay in finalization of detailed engineering, change in
scope
6. Delay in tendering
7. Delay in ordering & equipment supply
8. Law & order problems
9. Geological surprises
10. Pre-commissioning teething troubles and contractual
issues.
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 ??????

 Do we have some statistics?

 More in session on urban infra.

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 Institutions for infrastructure development
 UN SDG / 74th CAA
 Capacity building / Hand holding – JNNURM,
Smart Cities
 Sponsoring ministries, sector wide policies,
solicited proposals
 Union list, State List, ULBs
 Regulator – TRAI, AERA, CERC
 Niti Aayog / Planning Commissions, 5 – year plans
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 The 74th constitutional amendment
act mandated the setting up and devolution of
powers to Urban local bodies (ULBs) or city
governments as the lowest unit of governance in
cities and towns.

 This landmark initiative of the Government of

India in 1993 was built upon the premise that all
‘power’ in a democracy rightfully belongs to ‘the
people’
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 Regulation refers to “controlling human or
societal behavior by rules or regulations or
alternatively a rule or order issued by an
executive authority or regulatory agency of a
government and having the force of law”.

 Regulation covers all activities of private or public

behavior that may be detrimental to societal or
governmental interest but its scope varies across
countries.
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 Public interest theory - which conceives
regulation as arising from the need to rein
in the free exercise of market forces and
consumer and producer impulses in cases
where such a display can act as an obstacle
to the maximization of societal well being

35
 Capture theory - regulation as being supplied in
response to the demands of interest groups
struggling among themselves to maximize the
incomes of their members.

 It gives importance to political economy factors

which get manifested in the unequal bargaining
powers of different vested interest groups which
in turn result in their unequal influence over
regulatory rules/norms and hence outcomes.
36
 In other words, regulation is seen as a tool
which can be manipulated by different
interest groups to their advantage

 See “The immaculate conception of Reliance

Jio” (available at “https://thewire.in/tech/the-
immaculate-conception-of-reliance-jio” )

37
 State Perspective - to address social risk,
market failure or equity concerns through
rule based direction of social and individual
action

 Economist Perspective - regulation by the

state as necessary only when a natural
monopoly exists

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 When established? On 20 February 1997 to
regulate telecom services and tariffs. Earlier
it was done by the Central Government.

 Headquarter – New Delhi

 Composition – TRAI shall have a Chairman,

at least two and at the most six members, all
appointed by the Central Government
44
 Mission – To create and nurture conditions
for growth of telecommunications in a
manner and at a pace to enable India play a
leading role in emerging global information
society.

 It also has jurisdiction over the

broadcasting sector.

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 According to the TRAI act, amended in 2000, the
functions of the TRAI have now been divided
between two separate bodies namely:
a) The Telecom Regulatory Authority of India (TRAI)
b) The Telecom Disputes Settlement and Appellate
Tribunal (TDSAT)

 The recommendatory and regulatory functions are

vested with the TRAI while dispute settlement &
adjudicatory functions are handled by the
Appellate Tribunal.
46
 To ensure compliance of terms and conditions of
license by either issuing directions or
recommending termination of license for non-
compliance.

 Limited powers in this regard because any action

under the license can only be taken by the licensor
which is the Central government.

 But TRAI has the freedom to issue any kind of

directions to the service providers.
47
 Ensure technical compatibility and effective inter-
connection between different service providers

 Lay down the standards of quality of service to be

provided to protect the interest of the consumers

 Ensure effective compliance of universal service

obligation

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 The core idea is that India has still not abandoned
the process of planning and the country still has
planned development in action.

 However, the only difference is that the process

of planning is entirely different.

 The first major difference is that instead of a

single five year plan, the country will have three
plans spread over three different time periods.
53
 “…….The 14th Finance Commission raised
the share of states in the divisible pool from
32% to 42%, leaving no additional funds for
allocation to states through Niti Aayog. The
annual resource allocation exercise that
brought state chief ministers to the
doorstep of the Planning Commission is now
a thing of the past”.
https://blogs.timesofindia.indiatimes.com/toi-edit-page/niti-aayog-at-two-it-is-performing-
vital-functions-that-are-fundamentally-different-from-the-planning-commission/ 54
 First is a 15 year “Vision” that encompasses
overall goals and objectives of the country for
next 15 years.

 Second is a 7 year “Strategy” which lays the

roadmap of development for next seven years
dividing those goals and objectives into two
parts.

 Third and Final is a “Three Year Action Agenda”

which states the tasks and targets to be
accomplished in next three years time frame 55
 New approach is more democratic
 NITI Aayog works as a think tank. No
power to grant finance.
 No plan and non-planned expenditure from
the top.
 Flexible approach
 No matching electoral cycles
 Allows course correction

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 Roadway Sector Discussion – IBEF Report
 Indian road sector budget; Central Road Fund; 28 kms
of road construction per day

 Roadway sector – how to tackle challenges

 Supply/Demand; Capacity
 Finance – 50% of nation’s PPP projects; TOT; HAM

 Delhi metro case

 Finance angle, supply-demand angle
 Question – are we meeting our transportation goals?
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 Railway sector – efficient transportation,
potential for most cost effective solution

 Airport sector – connectivity, convenience,

improving accessibility, boosting tourism, city
development

 Port sector – India’s gateway; Exports/Imports;

Domestic Cargo

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 Key Measures of Improvement:
 Freight traffic (tonnage, tonne-miles, cost/tonne-mile),
Logistics cost
 Passenger traffic (millions of passengers, cost/mile)
 Travel time, turnaround time

 Across sectors of transportation billions of dollars will

be spent (FDI on automatic route, tax incentives,…)
 India is infrastructure deficient, needs the investment.
 Opportunities are there for private sector.
 Challenge – again the same (land, finance, approvals)
60
 List at least five different
infrastructure sectors

 How would you define the

infrastructure deficit for that
sector (if it exists)?

61
 Sector Demand side Supply side
solution solution
1. Road transport
sector
2. Power
generation sector
3. Water sector
4. Waste
management
5. Oil and Gas
6. Sanitation
sector 62
 Sector Demand side Supply side
solution solution
1. Road transport
sector
2. Power
generation sector
3. Water sector
4. Waste
management
5. Oil and Gas
6. Sanitation
sector 63
64
 USD 8.21 billion outlay planned for highways during 2016-17. In
addition, NHAI has been authorised to generate Internal & Extra
Budgetary Resource (IEBR) of USD 8.85 Billion during 2016-17.

 NHAI shall raise its resources under IEBR through 54 C Bonds,

Tax Free Bonds and others as approved by the Ministry of
Finance.

 USD 22.6 billion budgetary support for central road sector

development during 2012-17.
 5.23 million kms of roads and highways in the country.

 1.01 million kms of National Highways.

65
 The implementation agencies of MoRTH
include the following:

 National Highways Authority of India (NHAI)

 State/UTs PWD (Public Works Department)
 National Highway and Infrastructure Development
Corporation Limited (NHIDCL)
 Border Roads Organisation (BRO)

66
Fiscal incentives for the sector

 100% FDI through automatic route allowed subject to

applicable laws and regulation.
 Right of way (ROW) for project land made available to
concessionaires free from all encumbrances.
 NHAI/GOI to provide capital grant (Viability Gap
Funding/Cash Support) up to 40% of project cost to enhance
viability on a case to case basis.
 100% tax exemption for 5 years and 30% relief for next 5
years, which may be availed of in 20 years.
 Duty free import of modern high capacity construction
equipment.
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Source – PTI Images
68
 Why to build a new highway?
 Growth/Development
 Meeting demand / Increase capacity

69
 Transportation is a derived demand
 Transportation supply – link performance function

 Congestion is a temporal and spatial problem

 Supply – Demand Management Strategies (short

term and long term)
 Copenhagen cycle friendly city
 Norway – Electric mobility
 Singapore – licensing scheme for vehicles
 Pricing
 Competitive transit prices
 Congestion pricing, higher parking, tolls
etc.
 HOV lanes
 Park and Ride
 Work rescheduling

71
 There is a need for growth and mobility in any society

 Choice of a transportation system will be function of the

community values with constraints such as funding,
environmental Degradation, quality of Life

 Tradeoffs and Compromises are required t0 meet the

objectives and satisfy constraints

 Urban Transportation Planning – Tools for Informed

Decision Making

 Based on data, models and forecasting techniques. Needs

constant refinement and fine tuning.
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 Interest free subordinate loans from the GOI, GNCTD, HUDA, and NOIDA
for supporting the cost of the land required for the project.
 The long-term debt required for the project was raised by the GOI,
through a loan agreement executed with JICA at concessional rates of
interest and transferred to the company.
 Immunity from exchange rate fluctuation – fluctuation risk for the period
of repayment of foreign loans was to be shared between the GOI and the
GNCTD, equally.
 Exemption from property tax and electricity tax.
 Exemption from import duty, excise duty, sales tax and works contract
tax.
 No dividend to be paid on government equity until the JBIC loan is fully
repaid.
81
 For example, for Phase I of the Delhi Metro project, the
Government of India gave a customs and excise duty
exemption amounting to more than USD 280 million to the
DMRC in 2002

 Delhi Government gave a tax relief of USD 92 million in the

form of sales tax and works contract tax waivers, as well as a
waiver of 1% cess

 Delhi Metro is also provided electricity at a subsidized rate

on a cost-to-serve basis and at a lesser rate – at least 40%
less in 2011 – than other non-domestic consumers

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 According to the Environmental Impact Assessment report
of Phase I of the Delhi Metro, the project required 348.45
hectares of land and needed to relocate 2,502 Jhuggies
(Hazards Centre, 2006)

 Between 2000 and 2004, more than 100,000 Jhuggies in

Delhi have been displaced 10–25 km away from their original
location

87
 The bus route availability and frequency reduced after
relocation – from a 5-minute headway to 63 minutes (13
times).

 For 19% of the households the income remained the same

after relocation, while for 66% it decreased, and for 15% it
increased. On average, household income reduced

 The daily travel distance after relocation increased from an

average of 4.4 km to 15.4 km, resulting in an increase in
travel time as well as cost

88
 Residential and commercial areas, on average, land value
within 500 m of a metro line increased by 11.3% and 18.1%,
respectively

 Another study, by Magicbricks.com in 2012, found that areas

such as Model Town and Azadpur, in North Delhi, witnessed
an average appreciation of 30% in capital values after the
advent of metro rail services

89
 Delhi Metro gives 61 g of CO2 equivalents per
passenger km of travel on the Delhi Metro

 Estimated CO2 equivalent emissions per

passenger km from rail transit in developing
countries to be in the range of 20–50 g

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 As of 2016-17, IR has a total route network of
about 67,368 kms.

 It operates more than 22,300 trains daily

 It has 0.278 million wagons, 69,322 coaches

and 11,461 locomotives

92
 Over 23 million passengers travel by trains
daily in India.

 The passenger traffic stood at 8,286.95

million in FY18 and is expected to increase to
15.18 billion by FY20

 Around 1,159.57 million tonnes of freight was

transported via trains in FY18 and 2,165
million tonnes is expected in FY20 93
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 DFCCIL, a special purpose vehicle, was set up for
implementing the DFC project under the administrative
control of the Ministry of Railways

 The plan is to construct dedicated freight lines along the

Eastern (1856 km route length) and Western (1504 km
route length) parts of India

 Total length: 3,360 kms; total estimated cost: US$ 12.44

billion as on July 2016; of which US$ 5.41 billion has already
been spent by the Government as of January 2018.

 The physical progress of the project upto January 2018

was 40.3 per cent. 99
100
 India is the 9th largest civil aviation market in the
world, In FY18, domestic passenger traffic
witnessed a growth rate of 18.3 per cent

 In FY18, airports in India witnessed a domestic

passenger traffic of about 243.28 million people.

 Investments worth US$ 6 billion are expected in

the country's airport sector in 5 years

101
 India’s civil aviation market is set to
become the world’s third* largest by 2020
and expected to be the largest by 2030.

 In-service fleet size of Indian airlines stood

at 588 airplanes, as of May 2018. It is
further expected to grow to 1,100 planes by
2027.

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 Delta Airlines owns close to 1250 airplanes, Fedex owns 680 aircrafts, China
Airways own 354 planes.
 Combined order from India for planes in next few years is about 1000.
105
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 Until 2013, AAI was the only major player
involved in developing and upgrading airports in
India

 Post liberalization, private sector participation in
the sector has been increasing

 Government of India has given ‘in-principle’

approval to 19 airports out of which 7 are going to
be developed on a PPP basis with an investment
of Rs 27,000 crore (US$ 41.89 billion).
107
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 Sector MW % of Total
State Sector 84,627 24.6%
Central Sector 102,926 29.9%
Private Sector 157,136 45.6%
Total 3,44,689

113
Fuel MW % of Total
Total Thermal 2,21,803 64.3%
Coal 1,96,098 56.9%
Gas 24,867 7.2%
Oil 838 0.2%
Hydro (Renewable) 45,457 13.2%
Nuclear 6,780 2.0%
RES* (MNRE) 70,649 20.5%
Total 344,689
114
 Energy Generation from
Year Conventional Sources % of growth
(BU)

2009-10 771.551 6.6

2010-11 811.143 5.56
2011-12 876.887 8.11
2012-13 912.056 4.01
2013-14 967.150 6.04
2014-15 1048.673 8.43
2015-16 1107.822 5.64
2016-17 1160.141 4.72
2017-18 1205.921 3.95
2018-19* 527.388 3.66
115
 Energy Peak
Requireme
Availability Surplus(+)/Deficts(-) Peak Demand Peak Met Surplus(+) / Deficts(-)
Year nt
(MU) (MU) (MU) (%) (MW) (MW) (MW) (%)
2009-10 8,30,594 7,46,644 -83,950 -10.1 1,19,166 1,04,009 -15,157 -12.7

2010-11 8,61,591 7,88,355 -73,236 -8.5 1,22,287 1,10,256 -12,031 -9.8

2011-12 9,37,199 8,57,886 -79,313 -8.5 1,30,006 1,16,191 -13,815 -10.6

2012-13 9,95,557 9,08,652 -86,905 -8.7 1,35,453 1,23,294 -12,159 -9.0

2013-14 10,02,257 9,59,829 -42,428 -4.2 1,35,918 1,29,815 -6,103 -4.5

2014-15 10,68,923 10,30,785 -38,138 -3.6 1,48,166 1,41,160 -7,006 -4.7

2015-16 11,14,408 10,90,850 -23,558 -2.1 1,53,366 1,48,463 -4,903 -3.2

2016-17 11,42,929 11,35,334 -7,595 -0.7 1,59,542 1,56,934 -2,608 -1.6

2017-18 12,12,134 12,03,567 -8,567 -0.7 1,64,066 1,60,752 -3,314 -2.0

2018-19* 5,47,611 5,44,403 -3,208 -0.6 1,72,381 1,70,765 -1,617 -0.9

116
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 Control generation cost
 Acquiring sources of fuel supply
 Diversifying generation technologies
 Additional revenue streams – carbon credits
etc.
 Smart grids, smart metering

119
The country's installed power generating capacity of 334.4 gigawatt
(GW, or 1,000 megawatts) as of January 2018
120
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Statewide
solar
installation
in
India

122
https://electrek.co/2018/05/11/tesla-giant-battery-australia-reduced-grid-service-
cost/
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 India has a sixth of the world’s population, it
accounts for only about 0.8% of total
geological reserves, with 5.7% of world’s
proven coal reserves, and 0.4% of the world’s
proven hydrocarbon reserves.

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Piyush Tiwari, Manisha Gulati, An analysis of trends in passenger and freight transport energy consumption in India, Research in
Transportation Economics, Volume 38, Issue 1, 2013, Pages 84-90, ISSN 0739-8859,

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According to CGWB, the share of bore well irrigation increased from just 1 per
cent (1960-1961) to 60 per cent (2006-2007).

145
 Efficiency in Irrigation Water Use
 Efficient ground water management
 Reuse of treated waste water (satisfying
industrial demand)
 Water sector regulator (access to water,
distribution, etc.)
 Pricing
 Involvement of community
 Technology
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 The salt concentration in seawater is
~40,000 ppm and in brackish water is
~20,000 ppm.

 Through desalination, salt concentration is

reduced to around 300 ppm, which makes
the treated water suitable for drinking.

152
 A stellar example of using desalination
technology is in Israel, which has
transformed itself from being semi-arid to a
freshwater surplus nation.

 The Sorek desalination plant in Israel is one

of the largest reverse osmosis (RO)
desalination facility in the world supplying
treated water to 1.5 million people
153
 At present, India has around 182 desalination plants
located in different states.
 Gujarat has the maximum capacity for production of
desalinated water in the country with plants located at
Kutch, Jamnagar and Metapur.
 Tamil Nadu is the country’s second highest desalinated
water producer with plants at Minjur and Nemmeli, each
with a capacity of 100 MLD.
 An additional 400 MLD capacity is planned to be installed
at the Nemmeli plant. In addition, a Greenfield
desalination plant with a capacity of 400 MLD is also
being planned at Porur (Chennai).
154
 Oceanic pollution – byproduct of the process
 Water to be sourced about 2 kms from the coast – expensive
 Adjusting plant for various salinity (technological challenge)

 Capital and operating costs associated with desalination are

quite high.
 The capital cost to set up desalination capacity of each
incremental MLD is around USD 1 million or INR 70 million or
more.
 Operating expense is around USD 1 or INR 70 per kl of water
produced where power costs and membrane replacement
costs comprise 2/3rd of the total operating cost.
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 Focus on 3Rs of Water (reducing, reusing
and recycling)

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Source: Parkin, J. and Sharma, D., 1999. Infrastructure planning. Thomas Telford.
160
Source: Parkin, J. and Sharma, D., 1999. Infrastructure planning. Thomas Telford.
161
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 Infrastructure Planning can be conceived as a multistage
process

 The infrastructure Planning Process must take into

account the local context …
 Local needs should be satisfied …
 The project should comply with the existing institutional and legal
frameworks …
 The project should align with political objectives and ideology …
 The project should be technically and economically feasible „

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 „The preliminary feasibility stage of the
project establishes the need for the project.

 Existing information as well as field visits

are conducted to substantiate the need for
a project.

 This phase also determines the kinds of

detailed studies that need to be
undertaken 165
 „The Detailed Studies and Project Structuring
stage is often the most time-consuming.

 Technical Studies (e.g. geotechnical studies, land

surveys) need to be undertaken to help design the
infrastructure. …

 Economic and Market studies (e.g. Willingness to

Pay studies) must also be undertaken.

166
 „Other studies that are undertaken are

 Environmental Compatibility and

Environmental Impact Assessment …
 Socio Economic Cost Benefit Analysis …
 Financial Analysis

167
 „„At the conclusion of detailed stage, a Detailed
Project Report (DPR) is also prepared with
detailed technical specifications „

 Financial Engineering and Structuring must also

be done during this stage …

 For Private participation in infrastructure, the

private sector may be tasked with many of these
studies
168
 Once the DPR is prepared, the project can be contracted
out. …
 Expressions of Interest are sought …
 Requests for Proposals are sought …
 Pre-bid conferences are held to clarify terms of the project …
 Proposals are evaluated and a successful bidder is selected „

 The successful bidder then proceeds with the construction

of the project.

 Once the project has been built and commissioned,

operations can commence and the infrastructure service
can be availed by the citizens
169
 „An Operations and Maintenance Contract can be given to
a separate party.
 Maintenance Parameters can be fixed well in advance …
 Technical Maintenance and quality issues, Revenue generation
issues and Administrative risks must be considered in this phase „

 In the case of Private Provision of Infrastructure, a

winning bidder is selected based on their ability to build
and operate the infrastructure „

 Each of these stages varies in duration

170
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 The greater the time spent on project
preparation and structuring, the more
likely it is that the project can be
implemented smoothly and in a cost-
effective manner.

 Hasty project preparation often leads to

rework of documents, leads to false or
missing information, and leads to project
delays. 172
 Infrastructure project development is seldom a
linear or a deterministic process.
„
 At all stages, the developing agency must work in
partnership with several stakeholders. …

 For successful projects, partnership is vital „

173
 Upon identifying a need and performing
economic analysis, the sponsoring agency might
feel the need to build a coalition and seek
external expertise to successfully complete a
project.

 A process of coalition building might then be put

into place

 Government and Political buy-in must be secured

at all levels, and the project can be modified in
order to ensure this 174
 “Emerging Fears” from residents of the local
communities, including environmental and social
groups can then be confronted and alleviated
both by transparent consultations and further
modifications to the project

 Project Financing can be obtained and the project

can proceed to completion

175
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 Process flows from design to construction, maintenance
and rehabilitation

 For infrastructure to function effectively, it must start

with a good design

 Design of pavements, buildings, bridges; theoretical

design vs empirical design

 Design is often practiced in a deterministic way –a specific

design can be defined that uniquely fits a set of physical
circumstances

 Reliability based design 177

 Design Is The First Cost Related Element Of
Infrastructure Management

 Good economical optimum design is critical

to any effective infrastructure
management

178
 Maximum or reasonable economy in terms of both agency
and user costs
 Maximum or adequate safety
 Maximum or reasonable serviceability over the design
period
 Maximum or adequate capacity
 Minimum or limited physical deterioration due to
environmental and use influence
 Minimum or limited noise and air pollution
 Minimum or limited disruption of adjoining land or facility
use
 Maximum or good aesthetics

179
 Specific objectives of the design process in terms of
technical, social and economic terms

 Develop a design strategy of minimum (or reasonable)

economy, safety and serviceability

 Consider all possible design alternative strategies

 Recognize and incorporate the variability in design factors

 Maximize the accuracy of predictions of serviceability,

safety and physical deterioration for the alternatives
considered
180
 Maximize the accuracy of estimating costs and benefits

 Minimize the cost of design including labor, testing and

computing time

 Maximize information transfer and exchange between

construction and maintenance personnel

 Maximize the use of locally available materials and labor

in the considered design strategies

181
 Availability of time and funds for the design and
construction
 Availability of materials
 Minimum and/or maximum dimensions allowed
 Capabilities of construction & maintenance personnel and
equipment
 Testing capabilities
 Capabilities of structural and economic models available
 Quality and extent of design information available
182
 Information needs related to input, objectives and constraints
 Environment, load, traffic, material characteristics
 Other factors –cost, estimated service life, inflation, interest rate;
sensitivity analysis

 Analysis of structure, flow characteristics and other aspects of the

facility

 Generation of alternate designs strategies

 more than just thickness design
 consideration of various material types and sources
 expected construction, maintenance and performance evaluation policies
 QC/QA methods

 Economic evaluation and optimization of the strategies

183
184
 Construction converts design
recommendation into a physical reality

 Successful construction meets the planning

and design objectives within the budget
and time constraints

 Changes in site conditions may warrant

changes in design
185
 Interrelationships of construction with
other phases of infrastructure management

 Construction quality assurance

 Documentation

186
 Set of Drawings

 Project Specifications –Details of materials

to be used, characteristics etc.,

 Standards and Specifications

187
 Use of physical, financial and personnel
resources to convert designs into physical
reality
 Estimation
 Scheduling of activities
 Legal aspects
 Finances and Cost control
 Records

188
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193
 A project Company or a Special Purpose
Vehicle is created to execute a project …
 Project Company makes limited guarantees …
 Also known as non-recourse financing …
Lenders
have recourse only to the project vehicle and
not to the parent companies …
 Typically the asset being financed has a limited
life

194
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196
197
 „Is it a recent phenomenon? …
 No it isn't! It has been around since medieval
times. „
 Became very popular in mining and oil
exploration projects in the 70s „
 Adopted by the power industry in the US in
the 80s „
 PPP’s in other sectors now use it
extensively
 Volume of project financed projects is
198
 From the borrowers perspective

 Less risk as their other assets are not at stake

 Comparatively fewer covenants …

 Large transaction costs in putting the deal

together

199
 Pros …
 More transparency …
 Greater project-based incentives …
 Guaranteed and high returns? …
But there are risks „
 What criteria do lenders consider? …
 Technological risks …
 Strength of sponsors, financial credibility?
 Government backing/ Guarantees, expropriation risks? …
 Project economics …
 Social and Environmental Risks? …
 Equity invested by sponsors …
 Absence of competition 200
201
 New project delivery mechanisms

 Automation

 Building Information Modeling

 Asset management approach

202