Contents
1. Introduction 3
1. Introduction 3
2. Prevalent Challenges in the sector 4
2. Prevalent Challenges in the sector 4
2.1 Lack of Funding 4
2.2 Guarantee of Cash Flows 4
2.3 Forex Risk 4
2.4 Macro-economic Variables 4
3. Solutions to the Challenges 5
3. Solutions to the Challenges 5
3.1 Making Funding Available 5
3.2 Adequacy in Cash Flow 5
3.3 Forex Risk Mitigation 5
3.4 Macro-economic Variables 5
Case Study 1: Alandur Sewerage Project 7
Case Study 1: Alandur Sewerage Project 7
Introduction 7
Objective 7
Financing Structure 7
Exit Strategy 8
Case Study 2: Delhi Gurgaon Expressway 9
Case Study 2: Delhi Gurgaon Expressway 9
Introduction 9
Objective 9
Financing Structure 9
Obligations of Concessionaire and NHAI 10
Exit Strategy 10
Case Study 3: Mumbai Metro 11
Case Study 3: Mumbai Metro 11
Introduction 11
Financing Structure 11
Process Analysis 12
Case Study 4: Bhiwandi Electricity Distribution Franchisee 13
Case Study 4: Bhiwandi Electricity Distribution Franchisee 13
Introduction 13
Financing Structure 13
Introduction
Twenty-six public–private partnership (PPP) road projects have been cancelled in India since 2013. With this, India has caught up with the worldwide average rate of PPP project cancellations. India has seen 4% of its 834 PPP projects being cancelled from 1990 - 2014. As a percentage of total investments, India has seen 4.7% of these investments cancelled compared to the worldwide rate of 4%.
Table 1: Cancelled Infrastructure Projects with Private Participation in India, 1990–2014
Countries |
Projects Reaching Financial Closure |
Projects Cancelled |
Cancelled Projects as Percent of Total |
||||
Number |
Investment Commitment (in bn. $) |
Number |
Investment Commitment (in bn. $) |
Number |
Investment Commitment (in bn. $) |
||
India |
834 |
330 |
33 |
15.6 |
4 |
4.7 |
|
Source: Economic & Political Weekly September 24, 2016
A PPP Project is a project based on a contract or concession agreement, between a Government or statutory entity on the one side and a private sector company on the other side, for delivering a specific service on payment of user charges. The obligations and rights of all stakeholders including the government, users and the concessionaire flow primarily out of the respective PPP contracts. Unlike private projects where prices are generally determined competitively and Government resources are not involved, PPP projects typically involve transfer of public assets, deputation of governmental authority for recovery of user charges, control of monopolistic services and sharing of risks and contingent liabilities by the Government. The justification for promoting PPP lies in its potential to improve the quality of service at lower costs, besides attracting private capital to fund public projects.
Figure 1: PPP Project Deal Diagram
Source: ABR class ppt-PAFM-CRISIL-1 by Dr. Anupam Rastogi (NMIMS)