International Journal of Engineering Technology, Management and Applied Sciences
www.ijetmas.com June 2017, Volume 5, Issue 6, ISSN 2349-4476
Public Private Partnership as a Catalyst for Developing Highway Infrastructure: A Case Study
Dr. Sandeep Singh Virdi(1), Jaideep Singh(2) (1) Assistant Professor, School of Management Studies Punjabi University, Patiala (2) Research Scholar, School of Management Studies Punjabi University, Patiala,
Abstract The quality of infrastructure is an indispensable element for achieving the economic progress of a country and the growth rate of the economy can be assessed by the transport infrastructure it possesses. The Road Infrastructure which encompasses a major traffic share in terms of movement of passengers as well as goods is critical for cohesion of the various sectors consequently giving rise to unbiased socio-economic development and positive contribution to the economy of the country. India has 2nd highest road network in world and is extensively used for transportation in India owing to ease of access, flexibility of operations, door-to-door service, security and reliability. Prior, road infrastructure projects being capital- intensive, the financing of the road projects was traditionally done by the Government. As the time elapsed the budgetary demands of other sectors increased, there were not adequate budgetary allocations for the development of road sector. In order to vanquish this situation of fiscal constraints, rising expenditures for refurbishing, maintaining and operating public assets, Government of India opted for a paradigm shift towards PPP-Public Private Partnerships route seeking innovation from the private partner through better management and expertise for the development of road sector especially national highways. The purpose of this paper is to analyse the role of the public private partnership as a catalyst for developing highway infrastructure taking the Yamuna Expressway Project as a case study. This study analysed publications to understand the concept of the Public Private Partnership and an extensive empirical investigation was taken up to examine the role of Public Private Partnership PPP as a catalyst in developing Highway Infrastructure. The study found that PPPs is a potent tool for delivering highway projects without banking on the government budget. The PPPs are a kind of service to the public by the private sector which it finances for the contract term. The PPP also increases the pace of development for building road infrastructure. Keywords: Road Infrastructure, Public Private Partnership, Yamuna Expressway.
INTRODUCTION Scenario of Road Infrastructure in India India has the second largest road network across the world at 4.7 million km. This road network transports more than 60 per cent of all goods in the country and 85 per cent of India’s total passenger traffic. Road transportation has gradually increased over the years with the improvement in connectivity between cities, towns and villages in the country. The Indian roads carry almost 90 per cent of the country’s passenger traffic and around 65 per cent of its freight. In India sales of automobiles and movement of freight by roads is growing at a rapid rate. Cognizant of the need to create an adequate road network to cater to the increased traffic and movement of goods, Government of India has set earmarked 20 per cent of the investment of US$ 1 trillion reserved for infrastructure during the 12th Five-Year Plan (2012–17) to develop the country's roads. (IBEF, 2017)
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The Box 1 below illustrates some of the Public Private Partnership (PPP) schemes and their Modalities adopted by the developed and developing countries worldwide. The modes indicates the stages of the contract and modalities clarifies the authorities, responsibilities and liabilities of the related PPP scheme. (INTERNATIONAL MONETARY FUND, 2004)
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REVIEW OF LITERATURE DEFINING PUBLIC PRIVATE PARTNERSHIP A broad definition that encompasses the wide diversity in partnerships is that “PPPs are cooperative ventures that involve the participation of at least one public and one private institution in which they jointly develop products and services and share risks, costs and resources” (Carroll and Steane, 2000; Linder, 1999) The term PPP has not been defined exhaustively. Different organisations / economies may have different views of PPP. The term and level of collaborative efforts guides the entity as being PPP. Essentially the term refer to a contractual agreement between public sector entity and private sector entity towards the achievement of some pre-defined and fixed aim. Normally it includes performance of the past which are commonly the responsibility of the public sector. (Gupta Arjun P, 2011). Lastly, from a realistic point of view it is observed that governments around the world have adopted PPPs with the aim of enhancing efficiency in service delivery and reducing budget deficit, which are similar to the motives of privatization (Siddiquee, 2011). HISTORY OF PUBLIC PRIVATE PARTNERSHIP The nomenclature of PPP started in form of Build Operate and transfer in 1858 for the construction of Suez Canal. £ 19 million spent on the revenue producing water ways was financed with a mixture of European and Egyptian financial support and was based on a concession to design, construct and operate. The company managed it for 99 years after which the ownership passed over to the Egyptian government. Many Roads and Railways in Europe and the United States were developed using private concession. PPP was introduced into the United Kingdom in 1979 in a move to improve the record of public sector procurement; the aim was to give incentives to the private sector to deliver new public projects on time and to budget and in some cases allow the private sector to run and maintain public assets on long term contracts. Public–private partnership (PPP) describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. These schemes are sometimes referred to as PPP or P3 Canning and Friday (1993).Many developed nations in the world jumpstarted their economies by accelerating their infrastructure and building on it; India and the United States of America is one of such nations. The late President J.F. Kennedy of USA once stated that, “America has good roads, not because America is rich, but America is rich because it has good roads”. (Chisa , Kayode, Ikeni, & Gambo, 2015) PUBLIC PRIVATE PARTNERSHIP IN INDIA Traditionally, the road projects were financed only out the budgetary grants and were controlled/supervised by the Government. The road system has attracted very limited private sector participation in the past. While the traffic has been constantly increasing at a rapid pace, the traditional system of financing road projects through budgetary allocation has proved to be inadequate. It was in this context that the necessity for exploring the innovative means of financing the highly capital intensive road projects was felt. The beginning of a significant private sector participation in road projects was made with the launching of India's largest road project - National Highways Development Project (NHDP). To encourage private sector participation, several initiatives have been taken by the government, which includes:- Declaration of the road sector as an industry. Provision of capital subsidy up to 40 % of the project coast to make projects commercially viable. 100 % tax exemption in any consecutive 10 years out of the first 20 years of a project. Provision of encumbrance free sites for work, i.e. the Government shall meet all the expanses relating to land and other pre-construction activities. Foreign Direct Investment up to 100 % in road sector. Easier external commercial borrowing norms
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Higher concession period, (up to 30 years) Right to collect and retain toll (facts-about-india, 2017) India has systematically rolled out a PPP program for the delivery of high-priority public utilities and infrastructure and, over the last decade or so, developed what is perhaps one of the largest PPP Programs in the world. With close to 1300 PPP projects in various stages of implementation, according to the World Bank, India is one of the leading countries in terms of readiness for PPPs. As per the 2015 Infrascope Report of the Economist Intelligence Unit, “Evaluating the environment for PPPs in Asia-Pacific 2014”, India ranks first in the world in “Operational Maturity” for PPP projects, third for sub-national PPP activity and fifth overall in terms of having an ideal environment for PPP projects. (Department of Economic Affairs, 2017).
Fig 1: Projects Awarded to BOT Fig 2: Total PPP Projects in India
SCALE AND SCOPE OF PUBLIC AND PRIVATE RESPONSIBILITY
(Source: Canadian Council for Public-Private Partnerships, 2011; Deloitte, 2006; in Roehrich et al, 2013) 518 Dr. Sandeep Singh Virdi, Jaideep Singh International Journal of Engineering Technology, Management and Applied Sciences
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DRAWBACKS OF PUBLIC PRIVATE PARTNERSHIP Public Private Partnerships (PPP) was adapted to auger growth in infrastructure development in the country and thereby giving a positive thrust to the Indian economy. The Government took the PPP route for implementation of projects in roads, ports, airports, railways, power and urban utilities as well as in social sectors. The contribution of PPPs in the infrastructure development across the country has been immense. However, poor planning towards implementation of the PPP model has led to faulty contractual structures and absence of remedial tools. This has created an illness of non-implementation and has proliferated growth of non-performing assets in the books of the project lenders in India. The failure of various PPP projects is a major reason for the books of the banks being saddled with non – performing assets. This has forced the Government to take corrective measures. In 2014 budget, the Government announced setting up of 3P India institute. Later, the Kelkar Committee was constituted for review and revitalization of PPP model. The Kelkar Committee submitted its report in November 2015. Based on the recommendations of the Kelkar Committee, this year's budget saw announcements for the Public Utility (Resolution of Disputes) Bill, new guidelines for renegotiation of PPP concession agreements and a new credit rating system for infrastructure projects. (DSK Legal, 2017)
CASE STUDIES: YAMUNA EXPRESSWAY PROJECT Yamuna Expressway Project between Greater Noida and Agra is India’s longest controlled-access expressway, developed by Jaypee Group under public private partnership (PPP) build operate transfer (BOT) model for a total value of US$ 2.3 billion. The project was conceived by the Government of Uttar Pradesh in 2001 and was formally inaugurated on August 09, 2012. The Expressway cuts in half the travel time from New Delhi to Agra, the city that is home to India’s top tourist attraction, the Taj Mahal. It has undoubtedly laid a solid foundation for the accelerated all-round growth and is expected to significantly boost the socio-economic development of the districts like Gautam Budh Nagar, Aligarh, Mathura and Agra located along the alignment. Leading the way for future development along the Expressway is the Budh International Circuit – India’s first and only ‘Formula One’ race track created and owned by Jaypee Sports International Ltd, which hosted its first F1 race in October, 2011. (Source:http://yamunaexpresswayauthority.com/) Yamuna Expressway: A PPP success story 2001 Announcement of project, formerly known as Taj Expressway 2003 Project was awarded to Jaypee Group 2007 Project renamed as Yamuna Expressway, construction commenced 2012 Project became operational
Fig 3: Noida to Agra Route (www.google.com)
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THE SALIENT FEATURES OF YAMUNA EXPRESSWAY (Environment and Social Due Diligence Report-Jaypee Infratech Limited, November 2015)
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The objectives of the proposed expressway were as follows: To provide a fast moving corridor to minimize the travel time; To connect the main townships / commercial centres on the Eastern side of river Yamuna; To ensure development of adjoining area; To relieve NH-2, which was congested and runs through the urban areas like Faridabad, Ballabhgarh, Palwal, Hodal, Kosi, Mathura, Farah and Runakata
SCOPE OF THE SUBPROJECT For operation and maintenance of about 165 km Expressway, main scopes of the subproject are provided below: Maintenance of shoulders, toll plazas, median, tree plantation; Undertaking major maintenance such as resurfacing of pavements, repairs to structures and refurbishment of tolling system and hardware and other equipment; Undertaking routine maintenance including prompt repairs of potholes, cracks, joints, drains, lighting and signage; Carrying out periodic preventive maintenance to the Expressway including tolling system; Highway patrolling; Maintenance of electrical, communication system and HTMS; and Medical first aid.
Fig 5: PQC Laying Fig 6: Toll Plaza under construction
(Source: Author site survey) Figure 5 shows the Pavement Quality Concrete being constructed by Wirtgen paver and Fig. 6 represents construction of Toll Plaza over the Yamuna xpressway Projects.. 521 Dr. Sandeep Singh Virdi, Jaideep Singh International Journal of Engineering Technology, Management and Applied Sciences
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(IV) RESEARCH OBJECTIVES The objectives of the study are: 1. To understand the concept of Public Private Partnership. 2. To study the role of Public Private Partnership in developing the highway roads. 3. To investigate how Public Private Partnership influences the development of road infrastructure taking Yamuna Expressway as a case study.
(V) RESEARCH METHODOLOGY The selection and categorization of data according to the problem area context and sub-topics was based on purposeful sampling, which (Leedy & Ormrod, 2005) describe as the ‘intentional non-random selection of data sources’ based on the selection of objects that will yield the most information about the research topic. Data Collection This study relies heavily on existing literature, interviews with the company officials, site visit and documents related to the project as its source of data. In this regard books, journal, scholarly articles and government publication on the subjects matter were consulted with a view to accomplishing the objectives stated above.
FINDINGS The Public Private Partnership is a paradigm shift towards development and mode of building highway infrastructure in a manner which deliver projects without affecting government funds as well as penetrating the political agenda by acting as a service to the public. Consequent to the public-private partnership contract, the private partner’s role is decisive in providing the expected service for the contract term and the public-private partnership management is vital factor for the delivering of expected service to the public. The Public Private Partnership is based on a profound and significantly structured contract so as to better serve the public interest, safety features and facilities on the road side and secure a long-term service perspective by managing the partnership effectively to assure accountability and transparency. The Public Private Partnership in Highway Road Infrastructure as in Yamuna Expressway Project is responsible for giving rise to new horizons and development prospects of the region over a period of time without affecting the regulatory framework.
RECOMMENDATIONS The Potential Public Private Partnerships (PPP) projects must be examined, evaluated, structured and the projects undertaken should ensure the feasibility for development of the area certain over long term so as to perpetuate secured public interests. The Government’s regulatory framework should be strong enough to not allow the private partner to take unfair advantage and partnership should be more collaborative so as to protect the rights of consumers and the contract terms should be critically reviewed with time while venturing into new projects so as to secure PPP program effectiveness. The Potential Public Private Partnerships (PPP) in highway projects may also be used to develop the adjoining areas and encourage trade, tourism, business opportunities as in the case of Yamuna Expressway Project and simultaneously enhance the social development.
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CONCLUSION The Public Private Partnership in Highway Projects have been adopted by the developed as well as developing countries to realise the aims of economic development, financing big projects, enhance quality of service, introducing advanced safety and security features and improve the level of accountability. The Public Private Partnership is independent of political issues and critically responsible for delivering expected service as well as its maintenance for the project term. The regulatory framework is a crucial aspect while addressing the issues of transparency, enhance quality and social development consequently resulting in economic development. The Yamuna Expressway project exemplifies the Public Private Partnership in Highway Road Infrastructure which empirically witnesses the growth and development of the region, increase in facilitation of general public, improved service quality, encouraging trade and tourism and hence results in integral development of the region.
LIMITATIONS OF THE STUDY The study is specifically based on the Public Private Partnership and its case study in India only. It does not conduct in-depth and comparative analysis of the prevalent practices, regulatory frameworks and types of Public Private Partnership in the developed and developing countries. The findings may or may not vary depending on the location and kind of the project.
AGENDA FOR FUTURE RESEARCH There is much research yet to be done to design models and practices which can be adopted to build a sustainable road infrastructure comparable to the best roads in the world. The prospects like model design, construction techniques, latest information system, safety and security techniques in road infrastructure in developed countries, evolving better standards, performance evaluation of models and use of advanced technologies etc can be studied, explored, investigated and the track for economic and infrastructure development can be paved upon.
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INTERNATIONAL MONETARY FUND. (2004). Public-Private Partnerships. Retrieved from file:///I:/PHD/PHD%20IV%20Annual/Working%20paper%202017/YEW/031204.pdf Leedy, P., & Ormrod, J. (2005). Practical research: Planning and design. Upper River Saddle. New Jersey: Pearson Education, Inc. LINDER, S., H. & ROSENAU, P., V., (2000). Mapping the Terrain of the Public-Private Policy Partnership. In Public-Private Policy Partnerships, ed. P., V. Rosenau. The MIT Press. SIDDIQUEE, N., A., (2011). Rhetoric and Reality of Public-Private Partnerships: Learning from the Australian Experience. Asian Journal of Political Science. 19(2): 129-148.
Websites: www.google.com https://www.ibef.org http://yamunaexpresswayauthority.com
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