Public Private Partnership As a Catalyst for Developing Highway Infrastructure: a Case Study

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) 515 Dr. Sandeep Singh Virdi, Jaideep Singh International Journal of Engineering Technology, Management and Applied Sciences www.ijetmas.com June 2017, Volume 5, Issue 6, ISSN 2349-4476 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) 516 Dr. Sandeep Singh Virdi, Jaideep Singh International Journal of Engineering Technology, Management and Applied Sciences www.ijetmas.com June 2017, Volume 5, Issue 6, ISSN 2349-4476 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 517 Dr. Sandeep Singh Virdi, Jaideep Singh International Journal of Engineering Technology, Management and Applied Sciences www.ijetmas.com June 2017, Volume 5, Issue 6, ISSN 2349-4476 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

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