PPP Presentation

A
Vijay Kumar
SE(Civil)
CPWD, New Delhi
(Cell +919015913222)
vijaymonal@yahoo.com
Mtech
Presentation
at IIT Delhi
“Public Private Partnership (PPP) : A tool for
accelerating infrastructure growth in India”

PPP in
developing
countries
Literature
Review
Procurement
models
Shortlisting
of factors
Q- survey &
Factor
analysis
Private
Investment
to 2% of
GDP from
present 1%
Study of
failed
projects

Introduction …
 PPP is defined as a cooperative venture
between the public and private sectors build
on the expertise of each partner that best
meets clearly defined public needs through
the appropriate allocation of resources, risks
and rewards .
Resources
Risk
Private
Sector
Reward
Public
Sector
Public
Need

PPP requirement in India
PPP in India was initiated in 1991 with the power sector
and since then achieved some success in Telecom,
Roads, Ports and Airport sectors. The experience of
other countries suggests that it should be possible to
increase private investment in infrastructure in India
from its current level of 1% of Gross Domestic Product
(GDP) to 2% of GDP.

PPP : India Vs China
 In 1980 India actually had higher infrastructure
stocks – in power, roads and
telecommunications- but China invested
massively in infrastructure, overtaking India
by 1990 and the gap is widening .
 The gaps accelerated from 1998 to 2003, as
China invested around 7% of GDP in
infrastructure, far higher than India’s rate.

PPP : India Vs China
 The gap in infrastructure stocks is now so large,
that for India to catch up with China’s present
levels of stocks per capita by 2015, India would
have to invest 12.5 % of GDP per year.

Objective & Scope
i
Objective:To identify desirable and adverse factors
affecting infrastructure growth through PPP in the
major infrastructure sector in India
Scope : Study of PPP Procurement models in India
in different sectors and extending the study of PPP
models of developing countries,
& Study of Various failed PPP projects world wide
India China Philippines Thailand Malaysia
Hongkong Maxico Chile Bolivia Hungary Argentina

Methdology
i Literature Survey
Study of procurement models for PPP in different
sectors in India
Study of PPP models in different countries
Identify & short list factors for Questionnaire survey
Factor analysis to find desirable and adverse factors

Characteristics of PPP
A contractual relationships between public and private
sectors in infrastructure developments.
A cooperative venture between the public and private
sectors, built on the expertise of each partner
To meet clearly defined public needs through the
appropriate allocation of resources, risks and rewards.
Reduces costs, increases construction and operation
efficiencies, and improves service quality
Utilizes private sector knowledge, expertise and capital..

Approaches in PPP
Finance-based approach - that tends to use
private financing to satisfy the infrastructure
needs. It relies on user fees and project
demand to fund projects
Service-based approach.- Under this
approach the objective is to use the skills,
innovations and management of the private
sector in service delivery

Principles of PPP
* Availability of PPP institution, PPP policy and
implementation units.
* Perception of private finance objectives, value for
money
* Perception of risk allocation and contractor’s
compensation
* PPP process, transparency and disclosure
* Standardization of PPP procedures and contracts, and
..
* Performance specifications and method specifications

Arrangements
in
PPP
BOT 65%
of all
DBFO
DBOMBOO
BTO
Arrangements in
PPP

PPP in the world
 The private finance initiative (PFI) was
launched in UK in 1992. Since then it has
become an incredibly popular mechanism
for procuring public infrastructure in
various countries. The aim of PFI is to bring
the private sectors finance management
skills and expertise into the provision of
public sector facilities and services.

PPP in the world
 Design- Build- Finance- Operate (DBFO)
model in UK- for a financially free standing
project.This model is relevant
 Joint Venture – This is useful for the projects
whose costs can not be recovered entirely
through charges on end-users. The govt
provides subsidies for social benefits not
reflected in the project cash flow.

PPP in the world
 Build-Transfer-Operate ( BTO) is preferred over
BOT in the state of California because the BTO
would keep ownership and thus tort liabilities
of the project with the state upon construction
completion. This avoids higher tolls anchored
by the prohibitive insurance costs borne by
concessionaire to cover liabilities such as
highway accidents and related property
damages.

PPP in the world
 CHINESE MODEL:
 SINO- Foreign Joint Venture- BOT projects –
Chinese parties contribute development costs,
mining and land use rights, certain
construction costs and labour costs.
Foreign parties input cash, equipment, design
of facilities and technical assistance. The
project agreement usually includes umbrella
guarantee from a Chinese financial institution
and a take-and-pay contract where necessary.

PPP in the world
 Chinese Model ---
 TOT ( Transfer-Operate-Transfer) scheme for
project acquisition – This allows foreign investors
to buy existing projects facilities operate them
over a specified period and transfer back at no
costs to the government.
 Wholly foreign funded BOT project – Some pilot
BOT projects have been developed under a
national experiment BOT program.These
projects are of sole foreign ownership and are
guaranteed for foreign exchange convertibility for
debt service and equity by Chinese government
authorities

PPP in the world
 PPP projects in Hong Kong – A special ordinance is
passed for each project as there is no general BOT
legislation in Hong Kong.
 The government provides no finance or subsidy, no
guarantees on minimum traffic flows/ returns. And
no guarantee against any further competitive rules.
 The watch dog role of the Independent Commission
against Corruption ( ICAC) means that the ICAC
monitors the whole procurement process to ensure
transparent, fair and non-corrupt competition.

Public Private
Weight
age
- 0 + - 0 +
Political Clearance 9
Partnership Structure 3
Project scope 5
Environmental
Clearance
5
Construction risk
allocation
4-8
Operational risk
allocation
8
Financing Package 4
Economic viability 5-10
Developer financial
involvement
9
Total

Selection of Private partner
A critical issue in PPP in infrastructure development is
the selection of the right private sector partner. This
necessitates a best valued source selection (BVSS)
methodology. Various criteria are classified into four
evaluation packages for PPP projects in general.
 Financial
 Technical
 Safety, health and environmental and
 Managerial

Selection Process in AAI
 The privatization of Air Port expansion,
operation & maintenance for 30 years
involved selection of a competent agency who
can invest and manage for such long tenure.
The generation of revenue will be from
number of passenger handled and No. of
Airoplane handled plus revenue from leasing
of commercial space available at the air port .
 The selection of concessionaire involved four
stage bidding process in Delhi and Mumbai Air
Port privatization.

Selection Process in AAI…
 Phase –1 required the consideration of certain
mandatory requirements.
 Phase - 2 involved the consideration of financial
commitments. All remaining offers would then
assessed in phase 3 for a minimum benchmark
of 80% on the two technical pre-qualification
criteria. These two were (a) Management
Capability, Commitment and value addition and
(b) Development Capability,
 Phase 4 involved maximum % of revenue
sharing for selection

Selection Process in NHAI
 The National Highway Authority of India (NHAI) is executing
national highways across the country. The system of contract
execution is now shifting from the system of cash project
(project funded by government) to funding through public
private partnership.
 The revenue generation is through the collection of toll tax
from the vehicles. The entire concession period is 20 years for
six lane roads and 12 years for a four lane road. The
evaluation criteria for selection of concessionaire is mainly
based on following two parameters :-
 Experience as developer and/or construction experience.
 Financial capability in terms of networth.

PPP in Ports
PPP in construction and expansion of sea port in
India
 In India the development of new ports as well
as expansion of existing ports are now being
taken on the large scale.
 The selection of private party is based on
Development & Management capability and
% of Royalty sharing

Comparison of procurement systems in AAI,
Port, Highways
Item Airport Port Highways
Concession
period
30 years 20 years 20 years for 6 lane
and 12 years for 4
lane
Revenue
Collection
Number of passengers handled
+ Number of aero plane handled
+ leasing commercial space
From
number of
cargo
handled
Toll collection from
vehicles
Tendering
System
Open tendering Open
tendering
Open tendering
Pre-
qualification
criteria
Experience required as
management capability,
development capability
Experience
required in
handling
cargo
Experience required
for development /
C/o of highways
(optional) +
financial capability

Comparison of procurement systems in AAI,
Port, Highways
Item Airport Port Highways
Bidding
stages
4 stage 2 stage 2 stage
Consultant Additional consultant in addition to
AAI
No
consultant
Independent
consultant
Design
proof
checking
Separate consultant Separate
consultant
Separate
consultant
Revenue
stages
For brown field airport- Revenue
collection from beginning,
For green field airport – Revenue
collection after completion
Revenue
collection
after
completion
Revenue
collection after
completion
Revenue
sharing
By client By client By client

28
PPP
MALAYSIA
THAILAND
HONG KONG
PHILIPPINES
CHINA
INDIA

PPP in Hong Kong China
• To release government resources for
other purpose.
OBJECTIVE
• Tariff is decided by bidding with provision
of escalation.
TARIF
POLICY
• Bidding on toll rates. No provision
of grant.
Bidding
parameter

 Bidding parameter for uncertain traffic roads : Fixed
Price Lump-sum contract.
 Feasibility report and preliminary design is given by
Govt.
 Provision of toll stability fund minimizes down side risk .
 Selection of Bidder : No shortlisting procedure.
Interested parties submit bids which is evaluated by a
committee from different dept.
PPP in Hong Kong China.

 Concession period : 30 years.
 Land acquisition : Govt provides land free of
cost. Access road is also provided free of cost.
 Promotional campaign : advertising to increase
traffic volume.
 Only 20 % of PPP projects are profitable.
PPP in Hong Kong China.

 Govt. direct involvement (from the office of EPU
like PMO).
 No defined selection criteria. No BOT law. Project
is identified by Private sector and proposal is
submitted for approval and award.
 Tariff is derived from the concessionaire’s
proposal. Tariff’s rate is decided on IRR of 15%
generally.
 Feasibility study , Design & Specification is worked
out by Concessionaire.
PPP in Malaysia

 Malaysia’s PPP is considered successful.
 Monitoring fromTop of govt.
 Work awarded at higher toll rates as no
competition.
 Funds, soft loans are provided by domestic
banks for which govt. gives guarantee. Therefore
it is the govt. which takes risk.
PPP in Malaysia

 Feasibility study , Preliminary Design and
Monitoring : Two dept of govt. (DOH and ETA)
acts parallel causing confusion in doing
feasibility study and project monitoring.
 Land acquisition is done at market rate causing
high project cost.
 Bidding system : No Transparent Bidding
process. No BOT law. Many projects have
entered into conflicts.
 No provision/ predefined criteria for toll
escalation
PPP in Thailand

 Proper BOT law.
 Land acquisition by Govt.
 Transparent system for evaluation of solicited and
unsolicited bids.
 Govt. identifies and prepare feasibility report and
bidding document.
 Bidding parameter : lowest toll rate is the basis of
selection of concessionaire.
 Toll regulatory board to regulate toll and escalation in
toll.
 No govt. guarantee for loan etc.
PPP in Philippines

 PPP applicable to all sectors except Airport.
 Central Govt. , local govt., local body prepares feasibility
report and bidding depending upon their jurisdiction.
 Selection of bidder through prequalification
 No bidder is allowed to compete for cost less than
market price.
 Govt. only guarantees foreign exchange rate fluctuation
to a foreign bidder.
 Provision of toll adjustment and extension of concession
period.
PPP in China

China India
PPP in China & India - Highway
• Project expressway authority
of China (PEA)
• Chinese legal authority to
sign contract and to operate.
• Developer -Project company
• Bidding on costs near to
market price.
• National highway
authority of India (NHAI)
• Project director signs
contract and operate.
• Developer-
Concessionaire.
• Bidding on lowest cost
irrespective of market
price.

China India
PPP in China & India - Highway
• Provision for extension of
BOT term and extension of
concession period.
• Independent engineer for
PMC and issue of completion
certificate.
• No guarantee except foreign
exchange rate.
• Land, access road are
provided free of cost
• No built in provision of
extension of concession
period.
• Same
• Same
• Same

 Project was signed in 1998 , Construction
completed in 2005 , 84 km , Rs 1600 crore,
Concession up to 2030.
 Project concessionaire Manila NorthToll way
Corporation (MNTC) a joint venture company of
infrastructure, construction ,
& toll management company. JV of two domestic
and two foreign company.
Case study : North Luzon Expressway (NLEX)
Philippines

 Debt : equity funding: 2.5 : 1
 No govt. guarantee. No market risk by govt.
 Authorized toll rates with mechanism for
enhancement based on escalation indexes.
 Compensate concessionaire only if revenue from
toll is less due to failure of govt. to implement
agreed toll rate.
.
Philippines

 Large increase in toll rates were successfully
enforced by govt. with the help of NGO and
advertisement and other communications.
Philippines
Toll ($) 0.24 0.33 0.52 2.48
Year Before
Dec 2003
Dec-03 Jul-04 Feb-05
Continued
for
> 6 years 7months 7months
Increase
inToll
27% 58% 377%

 .
Failed Projects
A large no. of PPP projects in Mexico ,23 out of 52
awarded by 1995 had to be taken over by Govt. as these
projects met cost and time overrun. Govt. paid huge debt
to banks and construction companies before taking over
.
Reason : combination of small contract duration about 15
years and existence of parallel free traffic roads
M1/M15Toll motorway of Hungary constructed on PPP
was to be taken over by govt. because of low traffic
volume than the forecasted.
Reason : Strong emphasis was not given in estimating
cost and traffic forecast.

 .
Failed Projects
Water supply system in Bolivia with a 40 year
concession period turned into litigation and
massive violent movement because of high rise
in tariff on water supply causing public uproar.
Assessment of willingness to pay by the public was not
given due emphasis during feasibility

 .
Failed Projects
. Thailand awarded a 25 year concession for an
elevated toll road for 400 million dollar. The developer
faced several problems due to non-fulfilment of pre-
construction obligations by the govt. which failed to
remove a local road competing with toll revenues. As a
result, traffic volumes and revenues were less than
forecast, the tollway company could no longer service
its debt. The govt. had no option but to authorize a
substantial toll increase and take some of the
developer’s existing loans.
Financial profitability and sustainability is heavily
depended on Government’s respect on contractual
agreements

 .
Failed Projects
. Bulgaria government awarded a concession
agreement without competitive bidding Bulgaria-
Trakia highway in 2004. The opposition parties
attacked the project on the basis of lack of
transparency , and high government contribution and
construction price. The concessionaire asked to
increase construction costs due to legal obstacles
causing substantial delays and did not want to assume
the risk of lower-than-expected traffic. As a result , the
talks with the concessionaire collapsed financial closure
could not achieved.
Uncompetitive procurement gives a strong position to
the negotiating private party and can lead to long delays
and excessive cost to the government. .

 .
Failed Projects
. Argentina govt. signed a PPP contract with a
consortium called Augus Argentinas for water supply
services. After a severe economic crisis government
rescinded the concession, it argued that Augus
Argentinas did not comply with the obligations on
expansion and quality. The company replied that a
freeze in tariff revenues made it to difficult to achieve
the original targets.
: An external macroeconomic shock can create an
unexpected situation for the government , whereby it
cannot comply with its contractual duties in PPP .

Model Questionnaire
 Name:
 Name of your organization:
 How long have you been with the company ? ---Years
 List your degrees obtained and major fields of study?
Bachelore/Master/PhD & ------Field of study?
 What is your experience background ?
 -----Years as field and / or office engineer.
 -----Years as project manager ,-----Years as executive
 Please identify the significance of the following factors
(listed on next pages) affecting infrastructure growth using
Public Private Partnership:
Most adverse -1 Adverse -2 Insignificant -3
Desirable -4 Most desirable –5

Thank you !
Questionnaire Survey
Most adverse -1, Adverse -2 , Insignificant – 3 ,
Desirable – 4 , Most desirable – 5
f1. Feasibility report prepared by
government resulting biased report
favourable to government
1 2 3 4 5
f2. Project estimated cost on a lower side
projected by govt
1 2 3 4 5
f3. Cap of 40% of project cost for grant by
govt.
1 2 3 4 5
f4. Toll rate not being kept a bidding
parameter (No competition on toll rate)
1 2 3 4 5

Thank you !
Questionnaire survey
f5. Works of comparatively smaller value
also being floated
1 2 3 4 5
f6. Traffic jam due to manual tolling (Lack
of electronic toll collection) causing public
uproar against PPP projects.
1 2 3 4 5
f7. Less concession period mostly 20 years
against generally adopted 25-30 years
turning project economically unviable
1 2 3 4 5
f8. No system of advertising to boost traffic
/ increase traffic volume on PPP roads.
1 2 3 4 5
f9.Lack of communication / advertisement
to increase popularity of toll road ( to
offset higher toll)
1 2 3 4 5

Thank you !
f10. Lack of involvement of NGO to
propagate benefit of well maintained toll
road.
1 2 3 4 5
f11. Leakage of traffic through parallel free
routes / less costly routes
1 2 3 4 5
f12. Cartel formation of bidders leading to
higher quoted cost.
1 2 3 4 5
f13. Monitoring / initiative by ministry rather
than higher offices like Prime Minister’s
office (lack of govt. commitment)
1 2 3 4 5
f14. Multiple interest of authorities such as
law and order by state govt., project
execution by central govt.
1 2 3 4 5

Thank you !
f15. Conflicts among concessionaire , among
concessionaire, state govt., local bodies and
central govt. due to overlapping authorities
1 2 3 4 5
f16. Local govt. opposition to national plan 1 2 3 4 5
f17. Policy of no extension of concession
period at any cost even due to force majure,
change of scope etc.
1 2 3 4 5
f18. Large No. of Govt. regulations 1 2 3 4 5
f19. Provision of toll regulatory board 1 2 3 4 5

Thank you !
20. Lack of contractual flexibility towards
unpredicted events in the contracts
1 2 3 4 5
21. No proper forecasting of revenues and
costs in feasibility study
1 2 3 4 5
22. Absence of assessment of willingness to
pay toll by public
1 2 3 4 5
23. Lack of assurance of financial
profitability and sustainability by
government’s respect of contractual
agreements
1 2 3 4 5
24. Lack of advance technology (in
comparison to developed countries) 1 2 3 4 5
25. Lack of solid legal framework (in
comparison to countries like US,UK)

Thank you !
26. Policy of restrictive bidding (Example : a
bidder can be pre qualified for only up to 8
projects and can be awarded up to 4 projects
in NHAI)
1 2 3 4 5
27. Limit on no of pre qualified bids
(Example: Only up to 5 bidders can be pre
qualified for a project in NHAI)
1 2 3 4 5
28. Funding agency not taking risk
1 2 3 4 5
29. Lack of toll revenue stability fund
causing more downside risk for
concessionnaire
1 2 3 4 5

Thank you !
f30.No guarantee of exchange rate like rupees
versus dollar etc. by govt.
1 2 3 4 5
f31. Availability of limited equity financing for
PPP projects.
1 2 3 4 5
f32 . Availability of Limited Mezzanine
financing for PPP projects
1 2 3 4 5
f33. Interest rate caps on External
Commercial Borrowing(ECB)
1 2 3 4 5
f34. Underdeveloped debt markets 1 2 3 4 5

Thank you !
f35.Strict regulation on pension fund and PF
funds for investment in PPP projects
1 2 3 4 5
f36. Strict regulation on SLR and CRR
requirement not favorable for PPP projects.
1 2 3 4 5
f37. High percentage of labour cost 1 2 3 4 5
f38. No safeguard against external macro
economy shock against unexpected financial
turmoil
1 2 3 4 5
f39. Large fluctuation of prices of material /
services etc. (lack of price stability)
1 2 3 4 5

Thank you !
f40. Uneconomical / over-safe design and
specification by govt. resulting into inflated
cost of project
1 2 3 4 5
f41. Redundancy of existing manpower of
govt dept causing resistance to
adopt/implement PPP scheme.
1 2 3 4 5
f42. Inefficiency of bureaucracy in taking
faster decisions.
1 2 3 4 5
f43. Multiple approval requirement 1 2 3 4 5
f44. Limited capacity of government to
implement large volume of projects.
1 2 3 4 5

Thank you !
f45. Provision of independent regulatory
authority for PPP projects.
1 2 3 4 5
f46. Law and Order problem 1 2 3 4 5
f47. Political instability 1 2 3 4 5
f48. Complex land acquisition system 1 2 3 4 5

Characteristics of Respondents
Organization Total Qualification Experience in
years
Degree Master PhD 2-5 5-15 >15
Govt. 16 10 6 0 4 9 3
Public sector 15 11 4 0 4 8 3
Private 21 18 3 0 4 12 5

Factors (Mean in Descending Order)
Provision of
independent regulatory
authority for PPP
projects
3.462
Toll rate not being kept
a bidding parameter (No
competition on toll rate)
3.404
No forecasting of
revenues and costs in
feasibility study
3.385
Cap of 40% of project
cost for grant by govt 3.385
Strict regulation on
pension fund and PF
funds for investment in
PPP projects
3.308
Policy of no extension of
concession period at any cost
even due to force majeure,
change of scope
3.308
Absence of assessment of
willingness to pay toll by public 3.231
Limit on no of prequalified bids 3.192
Monitoring / initiative by
ministry rather than higher
offices like Prime Minister’s
office (lack of govt.
commitment)
3.192
Funding agency not taking risk
3.173

Interest rate caps on
External Commercial
Borrowing(ECB)
3.154
Provision of toll
regulatory board 3.154
Uneconomical / over-safe
design and specification by
govt. resulting into
inflated cost of project
3.154
No safeguard against
external macro economy
shock against unexpected
financial turmoil
3.077
High percentage of labour
cost
3.077
Lack of assurance of financial
profitability and sustainability
by government’s respect of
contractual agreements
3.077
No system of advertising to
boost traffic / increase traffic
volume on PPP roads
3.077
Lack of solid legal framework
(In comparison to countries
like US,UK)
3
Lack of advance technology (in
comparison to developed
countries)
3
Traffic jam due to manual
tolling (Lack of electronic toll
collection) causing public
uproar against PPP projects
3

Availability of Limited
Mezzanine financing for
PPP projects
2.923
Large number of govt.
regulations 2.923
Lack of communication/
advertisement to increase
popularity of toll road ( to
offset higher toll)
2.923
Works of comparatively
smaller value also being
floated
2.923
Multiple interest of
authorities such as law and
order by state govt., project
execution by central govt.
2.846
Large fluctuation of prices of
material / services etc. (lack
of price stability)
2.846
Lack of toll revenue stability
fund causing more down side
risk for concessionaire
2.827
Lack of involvement of NGO
to propagate benefit of well
maintained toll road
2.769
Policy of Restrictive bidding
(Note : A bidder can be
prequalified for only up to 8
projects and can be awarded
up to 4 projects in NHAI
2.769
Project estimated cost
reflected on a lower side by
govt
2.692

Limited capacity of
government to implement
large volume of projects
2.692
Redundancy of existing
manpower of govt dept
causing resistance to
adopt/implement PPP
scheme
2.692
No guarantee of exchange
rate like rupees versus
dollar etc. by govt
2.692
Feasibility report prepared
by government resulting
into biased report favorable
to government
2.692
Underdeveloped debt
markets 2.673
Strict regulation on SLR and
CRR requirement not
favorable for PPP projects 2.615
Less concession period mostly
20 years against generally
adopted 25 - 30 years turning
project economically unviable
2.615
Conflicts among
concessionaire, state govt.,
local bodies and central govt.
due to overlapping authorities
2.577
Local govt. opposition to
national plan 2.539
Multiple approval requirement
2.519

Availability of limited equity
financing for PPP projects
2.462
Cartel formation of bidders
leading to higher quoted
cost
2.462
Lack of contractual
flexibility towards
unpredicted events in the
contracts
2.442
Law and Order problem 2.404
Leakage of traffic through
parallel free routes / less
costly routes
2.231
Political instability 2.096
Complex land acquisition
system
1.904
Inefficiency of
bureaucracy in taking
faster decisions.
1.808

Most desirable factors
Rotated Component Matrix
Component
1 2 3 4 5
f45 0.174 0.401 0.837 0.06 -0.076
f3 -0.736 0.121 -0.366 0.34 0.162
f4 0.119 0.794 -0.072 0.04 0.046
f21 0.797 0.249 0.225 0.138 0.246
f17 0.106 0.919 0.079 -0.028 0.139
f22 0.889 0.298 -0.215 0.124 0.059
f13 0.204 0.144 -0.012 0.844 0.086
f19 0.054 -0.389 0.789 0.006 0.275
f28 0.278 0.139 -0.045 -0.824 0.106
f27 0.488 -0.363 0.387 -0.299 -0.14
f35 0.119 0.132 0.119 0.002 0.952
f33 0.896 0.115 0.04 -0.112 0.153
f40 0.749 -0.124 0.304 0.027 -0.528

Most adverse factors
Rotated Component Matrix
Component
1 2 3 4
f11 0.534 0.019 0.605 0.217
f12 0.016 0.588 0.474 0.226
f16 0.497 0.702 -0.054 -0.084
f20 0.838 -0.118 0.042 0.024
f31 -0.019 -0.529 0.567 -0.282
f42 0.269 -0.695 -0.037 0.159
f43 0.821 0.065 0.173 0.037
f46 0.114 0.096 0.77 0.142
f48 0.16 0 0.148 0.733
f47 -0.068 -0.03 0.028 0.747

List of desirable factors
New desirable
factors after factor
reduction
D1:
 Cap of 40% of project cost for grant by
govt,
 No proper forecasting of revenues and
costs in feasibility study,
 Absence of assessment of willingness to
pay toll by public,
 Limit on no of prequalified bids (Note :
Only up to 5 bidders can be prequalified
for a project in NHAI),
 Interest rate caps on External
Commercial Borrowing(ECB),
 Uneconomical / over-safe design and
specification by govt. resulting into
inflated cost of project
•Realistic projection
of project viability,
project costing &
financing, and limit
on competitive
bidding

List of desirable factors
New desirable factors
after factor reduction
 D2: Toll rate not being kept a bidding
parameter (No competition on toll rate),
 Less concession period mostly 20 years
against generally adopted 25 - 30 years
turning project economically unviable
Control on toll rate and
realistic concession
period for toll collection
 D3: Provision of independent regulatory
authority for PPP projects,
 Provision of toll regulatory board
Provision of
Independent regulatory
authority for PPP
 D4: Monitoring / initiative by ministry
rather than higher offices like Prime
Minister’s office (lack of govt. commitment),
 Funding agency not taking risk
Lesser interference by
govt and more
delegation of power.
 D5: Strict regulation on pension fund and
PF funds for investment in PPP projects
Strict regulation on
pension fund and PF
funds for investment in
PPP projects.

Most Adverse Factors
A1
-Lack of contractual flexibility towards
unpredicted events in the contracts,
-Multiple approval requirement
Factors after reduction:
Lack of Single window system
for all required approval
including provision for
mitigating unpredicted event
A2
-Cartel formation of bidders leading to
higher quoted cost,
-Local govt. opposition to national plan,
-Inefficiency of bureaucracy in taking
faster decisions
Unethical practices by bidders,
inefficient bureaucracy and
unhealthy govt. conflicts
A3
-Leakage of traffic through parallel free
routes / less costly routes,
-Availability of limited equity financing
for PPP projects,
-Law and Order problem
Loss of revenue due to
lawlessness discouraging equity
flow for PPP projects.

Most Adverse Factors
A4
-Political instability,
-Complex land acquisition system
Factors after reduction:
Lack of consistent political
will to simplify complex land
acquisition system.
A5
-Lack of contractual flexibility
towards unpredicted events in the
contracts,
-Multiple approval requirement
Lack of Single window
system for all required
approval including provision
for mitigating unpredicted
event

Conclusion
 Desirable factors after factor analysis affecting infrastructure
growth thro PPP:
 (i) Realistic projection of project viability, project costing,
financing, and limit on competitive bidding
 (ii) Control on toll rate and realistic concession period for
toll collection
 (iii) Provision of Independent regulatory authority for PPP
projects
 (iv) Lesser interference by govt and more delegation of
power.
 (v) Strict regulation on pension fund and PF funds for
investment in PPP projects.

Conclusion
 B. Adverse factors after factor analysis affecting
infrastructure growth thro PPP :
 (i) Lack of Single window system for all required approval
including provision for mitigating unpredicted event
 (ii) Unethical practices by bidders, inefficient bureaucracy
and unhealthy govt. conflicts
 (iii) Loss of revenue due to lawlessness discouraging equity
flow for PPP projects
 (iv) Lack of consistent political will to simplify complex land
acquisition system
 Conclusion : Results were checked with experienced people
who are working in PPP projects and their opinion are
commensurate with the results obtained from factor analysis.

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