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Interim Report
The working title:

The Development of Public Private Partnerships in the Indian Transport Sector.

Background:

Public Private Partnerships

Public Private Partnerships (PPP) are a collaborative procurement method involving private finance
to develop public infrastructure. This is alternative project delivery method, has shown to have great
potential; providing many benefits additional to the injection of private capital. PPP can be set up in
a varying organisational structure depending on the scheme. A general definition may be given to
this project delivery method when a sponsor contracts a Special Purpose Vehicle (SPV) or
concessionaire to deliver public infrastructure. The SPV is a project specific legal entity who delivers
the scheme. The SPV is made up of various project stakeholders who all have a financial interest in
the project. They are consolidated under an umbrella corporation specifically prescribed for the
project and for the period of project. The projected contracted length is generally the project
concession period, agreed with the public sponsor. This comprises of the time the SPV will deliver
the project as well as operating the infrastructure in order to remunerate their investment. The
companies are attracted to form an SPV as all debt financing the project will be under the SPV, giving
private corporations limited liability.

The stimulus of private investment can be the deciding factor between a project commencing and
being suspended. Nonetheless, the stakeholders must understand the private investment is not the
only gain from PPP – as this would be underutilising the potential of PPPs (Skelcher, 2005).
Ramakrishnan (2014) states a PPP project theoretically should improve the efficiencies of a scheme
as it is in the best interest of both the private and public sector to complete the development on
time. The public sector; in order to provide the infrastructure and service and the private sector; in
order to commence the remuneration of investment. Furthermore, PPPs have the potential to
provide production and allocation efficiencies as well as social and economic efficiencies REF.

Nonetheless, the absence of delays does not imply a reduction in quality as building quality
infrastructure as Grimsey and Lewis (2007) demonstrate is a expertise of the private sector. As the
SPV has control over the construction, operation and maintenance of the project it allows for supply
chain integration over the entire project cycle. Not only can construction cost be reduced but
synergies allows for consideration of costs during the whole project life cycle. Consequently, the
public sector are provided with fluid effective service, enabling innovation.

As Akintoye et al. (2002) identify, PPPs reduces economic distortion; the users pay for the
infrastructure rather than the bill being footed by tax payers. A financial deficit does not impede
infrastructure development and consequently economic growth.

A successful PPP project is one which distributes the project risks to the best establishment
(concessionaire or sponsor) equipped to handle them. Political, land acquisition, public interface and
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user patronage are typical examples of best public sector orientated risks. Design, construction,
finance, project management and time related are examples best suited for private partners to
burden.

The challenges for PPPs have resulted in many projects throughout the world failing. Many of these
projects did not fail in regards to infrastructure provisions but as financial entities. This naturally
indicates the misalignment of private vs. public interest and substandard risk transfer. Not all
projects are suited for PPP, with Parsons Brinckerhoff (REF) outlining for efficiencies to be realised
PPPs are generally adopted for medium-large projects, with implementation in smaller schemes in
only exceptional circumstances. This is due to the clear learning outcome from many failed PPPs of
ensuring user patronage is not overly forecasted, clear and transparent working relationships are
demonstrated and each party identifies and acknowledges the interest of their partner. REF
highlights this takes more complex planning and higher administration costs than traditional
procurement which may not be economical on smaller schemes. However, identifying the vast
benefits PPPs have to offer smaller schemes have been collated to a large financially viable PPP
project in order to realise these benefits.

PPP are a growing procurement choice in developing countries as it aligns with their growth
aspirations. Where traditional procurement may not be able to meet these aspirations, PPP provides
a tool for public bodies to contract private partners to enable this growth.

Public Private Partnerships in India

India is one of the largest and fastest growing economies in the world. Harisankar and Sreeparvathy
(2013) outline the infrastructure needs to sustain this growth is of the highest priority for the Indian
Government. Public infrastructure in India is growing at an unprecedented rate: taking the national
highways, over a five year period, have increased in coverage by almost 30% 1 with total road lengths
growing by 24% 2 (Source: NHAI 2014 and GoI 2009).

India 12th five year plan 3, outlined a total investment of $1trillion USD in infrastructure between
2012 and 2017. Of this outlay it outlined the need of up to 48% private investment.

GoI (2013) defined the amount of PPP schemes in India in 2012, at various stages in the project
cycle, as over 900. This makes India the largest PPP market in the world (InfraPPP 2016). Therefore,
India provides an exceptional research base into PPP procurement due to the potential learning
opportunities into this alternative project delivery method. Furthermore, GoI (2013) identified up to
60% of the PPP schemes in India are transport related. Therefore, this is the sector of infrastructure
focused on in this thesis as it provides the most prominent research area.

PPPs date back to around almost two decades, with the first in 1990 in XXXXXX. The natural
progression of time would naturally mean the market is now mature, however, this is not the case
with still further growth demonstrating: the supply shortages and the state of the infrastructure over
the last two decades.

1
National Highway: 66,590km (2009); 93,051km (2014)
2
National Road length: 3.3million km (2009); 4.24million km (2014)
3
Five year plans are set by the Government in India since its independence, with these plans the forecasted
spend on infrastructure is outlined
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A comparison with a mature market like UK P3s allows for a deep understanding into the
progression of P3 procurement. Furthermore, as outlined PPP reduces economic distortion.
Additional to the financial benefit, this has sustainable benefits as the charges are collected from the
users, the polluters. This charge can be portioned to the amount of pollution caused.

Equity, social, poverty issues.

Gopalkrishna and Karnam (2015) discusses the need of constructing ‘world-class highways network’
is to obtain Value for money (VfM). Value for money is economic savings to the government and
users when compared to alternative scenario. Quain (2013) and Boardman and Vining (2010) discuss
the limitations of VfM when applied to developing countries. They identify the differences in the
adoption of PPP approaches. A developed nation adopts PPPs in order to enhance the benefits
gained for their investment as opposed to traditional procurement approaches. A developing nation
adopts PPPs in order to plug the financial deficit prioritising the attraction of private capital. The
developed nation has the opportunity of choice and will only engage in PPP approach if it provides
VfM, whereas, the developing nation’s primary objectives are to find capital to enable the project –
not necessarily the approach which offers VfM, as it may be the only option available. Furthermore,
Shugart (2006) identifies the limitations of public sector comparator methods (PSC) such as VfM as:
inaccuracies; omission of risks; non consensus discounting; discount rate manipulation; high costs;
significant assumptions based appraising; no alternatives.

However, with consideration of the limitations a VfM study is the primary tool in India pu…

Sustainability. Air quality, pollution

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Aim:

Investigate the application of Public Private Partnership procurement in providing sustainable

transport provisions.

Objectives:

1. Develop understanding of PPP sector in India through desk research and through an
extensive literature review.
2. Carry out a Value for Money study into existing sustainable infrastructure procured under
PPP procurement. Identifying the limitations of the methodology and data used.
3. Identify outcomes and lessons learnt from a mature PPP sector such as the United Kingdom
whilst identifying applicability to India PPP industry.
4. Identify the viability of PPPs in providing the sustainable transport systems in India, the key
challenges and critical variables.

Methodology:

A mixture of quantitative and qualitative research methodology will be adopted for this thesis. Desk
and field research will be undertaken in order to further achieve the aim of the thesis.

The data will be gathered through interviews with various groups:

• Private sector PPP ‘specialists’ – John Stock, WSP | Parsons Brinckerhoff, Tewksbury
• Highways England (formerly known as the Highways Authority)
• Noida Engineering India
• Mumbai Metro Rail
• Delhi Metro Rail
• Hyderbad Metro Rail
• Literature
• Interviews with PPP specialist personnel:

A Value for Money study will be carried out with consideration of three case studies:

• Mumbai Metro Rail

• Delhi Metro Rail
• Hyderbad Metro Rail

A possibility of a further case study is still being discussed.

• Noida Engineering India (case study - India)

Scope: range of conditions to be included

Outline Structure:

The thesis is to document under 15,000 words this will be broken down into:

- Introduction, background, aim objectives, methodology: 2000 words

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- Literature review: 5000 words

- Data collection and analysis: 2000 words
- Discussions of case studies: 4000 words
- Conclusions and summary: 2000 words

Program timetable Gantt Chart:

List of Progress to date:

• Research:
o Attended PPP research course (Parsons Brinckerhoff/Balfour Beatty),
o Funding for projects module
o Investment Appraisal module
o Start on literature review,
• Data Collection – opened correspondence with research participants,

Main references: Government of India, Ministry of Finance (India),

Desk-Data Source: InfraPPP database, World Bank figures. PPPIndia

Field-Data Sources:

References

Akintoye, A., Beck, M. and Hardcastle, C. 2002. Public private partnerships. Wiley Online Library.
Boardman, A.E. and Vining, A.R. 2010. Assessing the Economic Worth of Public Private Partnerships.
Chapters.
Gopalkrishna, N. and Karnam, G. 2015. Performance Analysis of National Highways Public Private
Partnerships in India. Public Works Management & Policy. 20(3), pp.264-285.
Grimsey, D. and Lewis, M. 2007. Public private partnerships: The worldwide revolution in
infrastructure provision and project finance. Edward Elgar Publishing.
Harisankar, K. and Sreeparvathy, G. 2013. Rethinking Dispute Resolution in Public–Private
Partnerships for Infrastructure Development in India. Journal of Infrastructure Development.
5(1), pp.21-32.
Ramakrishnan, T. 2014. Financing Infrastructure Projects Through Public-Private Partnerships in
India. Transportation Research Record: Journal of the Transportation Research Board. (2450),
pp.118-126.
Shugart, C. 2006. Quantitative Methods for the Preparation, Appraisal, and Management of PPI
Projects in Sub-Saharan Africa. World Bank/PPIAF, mimeo.
Skelcher, C. 2005. Public-private partnerships. Oxford University Press, New York.