1. Public Private Participation in National
Highways
Focus: Role and Risks of Private Sector
Presented By:
Rashi Saxena
Priyanka Saklani
MBA-Infrastructure
4. Role Playing
Government Private Sector
Expected to provide land Expected to invest funds
for the project site, during the construction
regulatory clearances, and and maintenance phases
a concession right to the of infrastructure projects
contractor/ concessionaire
7. Challenges
• High initial investment
• Long gestation period
• Transfer of control rights over public assets to
private hands
• Risk allocation between public and private
sectors
8. Model Concession Agreement
• It is a policy and regulatory framework to
address issues important for limited recourse
financing of infrastructure projects
• It also addresses other important concerns
such as user protection, independent
monitoring, dispute resolution and financial
support from the Government.
9. Financial Viability of Highway Projects
• Capital cost is the variable that will determine
the financial viability of a project
• Bidders would, therefore, seek appropriate
capital grant/subsidy from the NHAI
10. Policy Provisions
The policy essentially provides for two kinds of
contracts:
• BOT Toll Contracts (BOT, BOOT, etc.)
• BOT Annuity Contracts
• SPV Contracts
11. Risks faced by a Concessionaire
• Revenue Risk/Traffic Risk
• Force Majeure
• Environmental Risk
• Construction and O&M Risk
• Financial Risk
• Regulatory Risk/Political Risk
This framework addresses the issues which are typically important for limited recourse financing of infrastructure projects, such as mitigation and unbundling of risks; allocation of risks and rewards; symmetry of obligations between the principal parties; precision and predictability of costsand obligations; reduction of transaction costs; force majeure; and termination. It also addresses other important concerns such as user protection, independent monitoring, dispute resolution and financial support from the Government
In the given scenario, higher the capital cost, greater would be the compulsion of project sponsors to seek larger grants
BOT Toll: concessionaire recovers investment by charging toll from usersBOT Annuity: concessionaire is assured a minimum return on his investment. Govt. bears the entire risk w.r.t. toll incomeSPV: formed by one or more entities esp. for one project. The govt. can be one such partner