Public Private Participation in National Highways

Focus: Role and Risks of Private Sector

Presented By:Rashi Saxena

Priyanka SaklaniMBA-Infrastructure

Definition

• Mobilize private funds and focus public funding in areas where private money cannot be channeled

Need

• Budgetary constraints • Managerial inefficiencies

Role Playing

GovernmentExpected to provide land for the project site, regulatory clearances, and a concession right to the contractor/ concessionaire

Private SectorExpected to invest funds during the construction and maintenance phases of infrastructure projects

Graph: Growth of PPP’s in Roads over the years

Challenges

• High initial investment• Long gestation period• Transfer of control rights over public assets to

private hands• Risk allocation between public and private

sectors

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.

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

Policy Provisions

The policy essentially provides for two kinds of contracts:

• BOT Toll Contracts (BOT, BOOT, etc.)• BOT Annuity Contracts • SPV Contracts

Risks faced by a Concessionaire

• Revenue Risk/Traffic Risk• Force Majeure• Environmental Risk• Construction and O&M Risk• Financial Risk• Regulatory Risk/Political Risk

THANK YOU!Questions?