Infrastructure Development

• The recently announced National Infrastructure Pipeline (NIP) by the Ministry of Finance envisages an investment of Rs 111 lakh crore in infrastructure in the six fiscal years until 2020-25, compared to the investment of Rs 57 lakh crore in the preceding seven fiscal years.
• Over the past Seventy-five years, we have also actively brought in Public-Private Partnerships (PPPs), not just for financial additivity, but for increased stake holding to deliver higher quality customer-oriented infrastructure.
  • PPPs have two critical players: the public side, called the Authority and the private side, called the Concessionaire. The share of private investment out of the Rs 57 lakh crore was 27%. Our expectations at the turn of the millennium were an optimistic 40%. For the future, the NIP expects a more realistic 21%.

Project Structuring

• Bundling and unbundling of activities: To enable greater focus, and to facilitate PPPs, we had to ‘unbundle’ activities, either vertically or horizontally or both, and in some cases, even ‘bundle.’
  • The power sector is a good example. Electricity Boards were vertically unbundled into Generation, Transmission and Distribution Companies.
  • Distribution Companies further got horizontally unbundled, on a regional basis.
  • Roads got ‘bundled’ with other activities to increase scope for revenue generation like food courts, petrol pumps and even real estate development, the last one being at Yamuna Expressway.

Project Evaluation: Financial, Economic and Risks

• Projects have moved from being evaluated just financially-often without a revenue model, to economic evaluation with externalities (also called social cost benefit analysis) to evaluations that include identification of risks and risk mitigation/management plans.
  • The road sector is a good example, where initially only budgetary support was sought, and there was no revenue model.
  • Then financial models became more important, along with social cost benefit analysis, and then a risk management plan.

Sourcing of Funds

• Starting from just budgetary support, to private funding, to revenue models, to partial government support through viability grants, various sources of funding have come to play. Varied forms of financing have emerged such as:
  • Equity by promoters
  • third party equity
  • bank financing
  • insurance and pension funds
  • multilateral agency funding
  • foreign direct investments
• With this, due diligence practices have become more rigorous, making project evaluations more meaningful.
• Tendering and Bidding Process: Over the years, the documentation and processes have gotten more structured. The documentation brings multiple stakeholders together, and with a focus on anticipating issues. The bidding process is also more consultative, and manages expectations.
  • Example: The currently ongoing privatisation of certain Passenger Train Operations is an example of openness, transparency and responsiveness.
• Professional transaction advisors have come in (also by a transparent selection process), to help manage the transaction process.
• Bid criteria have evolved over time to get better alignment between the promoter and project expectation, as well better risk allocation, transparency and monitor ability.

Project Management

• While greater professionalism and technologies have come in, vulnerability to land acquisition and environmental clearances have affected this.
• Construction management has evolved as a discipline, with professionals being trained at the postgraduate level.
• Its importance is critical in India, since a lot of construction has to happen under ‘brown field’ conditions, with having to continue serving ongoing users.

Post-Project Issues

• Facilitating the concessionaire to face operating challenges has increased over time.
• Post-project ownership: Post-project ownership is an important issue, where the original goals of competition or conflict of interest need to be considered, while at the same time providing a healthy platform for buy and sell of concessions.
• Regulation and Dispute Resolution: This space has changed quite significantly over the years. Many regulatory institutions have been set up
  • the Telecom Regulatory Authority of India
  • the Central and State Electricity Regulatory Commissions
  • Tariff Authority for Major Ports
  • Airport Economic Regulatory Authority
• There is also an Appellate for each regulator, so that appeals against any regulator’s act can be heard and resolve. And then there is the judiciary. However, not all aspects and sectors are covered.