1. PUBLIC-PRIVATE PARTNERSHIP:
ISSUES AND CHALLENGES
Group Members:
Nikhil Meshram 81
Ankeet Pandya 97
Abhijeet Nagre 89
Lerie Pereira 107

2. CHALLENGES OF PPP PROJECTS

3. PUBLIC PRIVATE PARTNERSHIP
BRIEF OVERVIEW

4. SECTORWISE PPP PROJECTS
Source: E&Y

5. SECTORWISE PPP PROJECTS APPROVED BY
PPAC AND THEIR STATUS
SECTOR PROJECTS
APPROVED BY
PPAC
OF WHICH
AWARDED
IMPLEMENTATION STATUS
COMPLETED UNDER
IMPEMENTATION
No Cost
No
Cost No Cost No Cost
ROADS 232 255 158 163 18 10 140
(>85%)
153
PORTS 32 38 22 21 6 3 16 16
OTHERS 17 16 2 1 - - 2 1
TOTAL 281 309 182 185 24 13 158 170
*Source: Department of Economic Affairs/NITI
 Since January 2006, PPPAC has approved 281 PPP projects in Central sector
involving investment of Rs.3.09 lakh crore. Out of these, 182 projects with an
investment of Rs.1.85 lakh crore have been awarded
(Cost in thousand crores)

6. STATE NO COST OF WHICH
ROAD PROJECTS OTHER PROJECTS
No Cost
(Rs in Crs)
No Cost
ANDHRA
PRADESH
4 14962 3 3148 1 11814
BIHAR 2 2420 2 2420 - -
HARYANA 1 383 - - 1 382
KARNATAKA 3 707 3 707 - -
MADHYA PRADESH 29 4468 20 3945 9 523
MAHARASHTRA 9 2334 9 2334 - -
ODISHA 1 1293 1 1293 - -
RAJASTHAN 3 1066 3 1066 - -
UTTARPRADESH 3 3285 3 3285 - -
TOTAL 55 30917 44 18198 11 12719
*Other projects include 8 food grain silo projects, 2 Transmission
projects and 1 Metro Rail project

7. PPP Eco-system in India
GoI has a progressive financial support system for PPP projects.
Some of the key initiatives include:
A. Setting up of India Infrastructure Finance Company Ltd. (IIFCL)
as quasi-equity.
B. VGF scheme (Viability Gap funding scheme)
 The GoI is expected to undertake capacity building interventions to
develop organizational and individual capacities for the purpose of
identification, procurement and managing of PPPs.
The PPP Cell in the Department of Economic Affairs will have
professionals who provide technical support to the ministries and
other authorities developing PPPs

8. Why is urgent for India to get Infra
PPPs right?
 India’s infrastructure is a key factor in
constraining rapid, competitive
economic growth and job creation and
thereby imposing huge costs on society
 can India become rich before it
becomes old? In other words, will
India accumulate enough wealth to
afford a decent quality of life for its
young and its old in the decades
ahead?
 Over the period 2013-30, India is
currently projected to have the world’s
largest need for infrastructure
investment, and the second largest
infrastructure deficit based on its
average spending during 1992-2011
*Source: WSJ Article

9. PPPs2.0-EMERGING CHALLENGES

10. PROJECT
STRUCTURING
MULTIPLE CHALLENGES
PROJECT
DEVELOPMENT STAGE
PROJECT AWARD AND
EXECUTION STAGE
PROJECT
MANAGEMENT &
MONITORING STAGE
1 LAND ACQUISITION
LACK OF
INFORMATION
3
2 GREEN CLEARANCES4
DISPUTE
RESOLUTION
7
FINANCIAL ISSUES5
CAPACITY OF PRIVATE PLAYERS6
MULTIPLE APPROVAL AGENCIES6
LACK OF INSTITUTIONAL CAPACITY6

11. FINANCING ISSUES
Bank appraisal of projects has in many cases suffered from lack of
adequate diligence, sometimes due to inadequate appraisal skills.
This has affected the quality of lending
There is a shortfall in equity capital with local sponsors.
Delays in execution of projects further leads to equity getting
trapped in ongoing projects, thus not being available for newer
projects.
Balance sheets of most prominent developers in the country are
stressed and over leveraged.
Underdeveloped debt markets

12. Multiplicity of institutions and overlap
in roles
Governments at all levels(ULB, State agencies etc) by and large
unable to create steady pipeline of projects due to Institutional
capacity constraints
Multiple agencies involved in Project implementation and overlap in
functions cause inordinate delays
 Inadequate capacity in authorities, consultants, financiers,
developers, statutory audit and vigilance in the PPP context has
given rise to misinformation
Lack of urban planning, and clear laws, regulations and procedures
has resulted in a slowdown of urban infrastructure projects

13. INFRA SLOWDOWN
INFRA POWER ROAD
June 13 19.1 29.8 21.5
June 14 11 14.4 14.6
Jan 15 10.4 14.7 7.9
Feb 15 10 13.9 7.5
March 15 10.1 14.2 6.7
April 10.6 15.4 5
May 15 8.6 13.6 4.6
June 15 9.2 13.1 3.4
July15 8.3 11.5 6.2
Aug 15 8.2 10.6 6.3
Sep 15 8.7 12.1 4.6
Oct 15 8.3 10.6 7.2
Nov15 8.7 10.4 7.5
Dec 15 8.4 10 7.9
CREDIT GROWTH DATA All fig in %
 Road Sector emerged as the only
silver lining , Infra continues to
be on downward spiral
 Credit demand is growing for the
road sector as a result of the
awarding of new projects and
feel
 large portion of this decline in
credit growth is also being linked
to the high number of stalled
projects in the infrastructure
space and their contribution to
the rising non-performing assets
(NPAs)
 Infra accounts for 50% of the
stalled projects and revival is the
key
Source: RBI Databank

14. Private sector problems
 Over-aggressive bidding with inadequate due diligence by bidders has
sometimes led to unviable offers
 Myopic assessment of risk factors and a failure to build in mitigation measures
(Due to mistaken belief that economy was growing at rapid pace at second half
of 2000)
 The quality of consultancy services in PPPs has not kept pace with the growing
need for such services in the country. This is reflected in inconsistent quality of
some advisory service
 Private sector developers, who were mainly construction experts, found they had
no appetite for long-term operations and maintenance (O&M) of infrastructure
assets
 The DCCO(Date of commencement of commercial operations) based asset
classification norm may have resulted in many projects getting classified as
NPAs

15. Public –Private-Partnership Within
BRICS

16. Brazil
 Federal laws provide an enabling framework for PPPs, there is no need for state
specific legislation
 Broad political consensus to maintain favourable frameworks and to be proactive on
concession projects
 Technical capacity has been the main bottleneck for PPPs, as the government has
been working to build institutional knowledge and to ensure that projects are
properly structured and launched
 Successful execution of projects (Road, Urban mobility &Airports), but problems
such as inordinate delays and fewer bidders than anticipated still persist
 uncompetitive and opaque bidding process, courts have further confounded the
process by issuing contradictory rulings in key areas
 The government has been criticised for limiting internal rates of return; however, the
private sector is still interested and willing to compete under these terms

17. RUSSIA
 Project selection regulations are solid, and transparency and fairness
requirements are in place
 Broad Political support for PPPs
 Country sovereign risk has been stable as public-sector external debt is low
 Conducive Investment climate
 Institutional actors involved in PPPs are not efficiently co-ordinated, which
undermines the impact of their activity
 Limited technical capacity
 Risk-allocation practices have not been implemented so as to facilitate private
participation

18. CHINA
 China has approved and implemented a new regulation for PPPs in June 2015
 Regulation aims to consolidate and refresh the various existing rules and
regulations on concessions
 It encourage private sector participation in the financing, construction and
operation of infrastructure and utility project
 Public sector is allowed to enter into concession contracts with foreign entities,
but there might be difficulties for non-PRC concessionaire to acquire the land
rights, import equipment and goods and handle taxation
 procedures of dealing with various government entities to develop projects is
complex in China
 State dominance which sometimes impairs the powers of Private players
 Uncertainties for private players as government sometimes does not fully
respect the agreement

19. SOUTH AFRICA
 SA has a strong business infrastructure, a sophisticated financial sector, and
comparatively high standards in accounting, regulatory structures and law
 Government, plays a lead role in identifying the need for a PPP, developing a
business case, designing the project, procuring a private party, ensuring that
procedures are complied with, and monitoring performance
 Risk allocation is generally assigned to the party best able to bear it
 Score card rating system for bidders
 Investors claim that the procurement process disproportionately favours
government
 Biggest challenge is the broader macroeconomic and political volatility including
labour unrest and currency volatility

20. ‘PPP’ Resetting in Union Budget 2016-17
 proposed Public Utilities Resolution of
Disputes Bill
 renegotiation of PPP projects
 new credit-rating mechanism for private
infrastructure projects
 Dividends will no longer be taxed in the
hands of the recipients (Key issue in
operationalization of REIT)
 Proposed far more practical structure for
Asset Reconstruction Companies
IMPLEMENTATION
OF KELKAR
COMMMITTEE
REPORT

21. THANK YOU