In this article we will discuss about Public-Private Partnership (PPP) in Road Construction in India.
In recent years, Public-Private Partnership is gradually becoming popular. Historically, investments in infrastructure, particularly in the highways, were being made by the Government mainly because of large volume of resources required, long gestation period, uncertain return and associated externalities.
The increasing volume of resource requirements and the concern for managerial efficiency and consumer responsiveness in recent times have led to an active involvement by the private sector also. In order to encourage the participation of the private sector, the Department of Road Transport and Highways has laid down comprehensive policy guidelines for the participation of the private sector in the highway sector.
Government has also announced several incentives such as tax exemptions and duty-free import of road building equipment’s and machinery to encourage participation of private sector.
Public-Private partnership is a new joint initiative undertaken by the government for the development of infrastructure so as to access specialised expertise and proprietary technology and sharing of risks and capital investments with the privates sector and also to attain benefits in terms of cost saving in the project. NHAI has exploited a variety of contractual structures in moving towards PPP.
Projects in Phase I involving expenditure of over Rs 5,797 crore being implemented through PPP include Rs 2,354 crore in the BOT- annuity mode and Rs 3,443 crore in the BOT-toll mode. In Phase II, PPP projects would account for an expenditure of around Rs 11,600 crore.
NHDP Phase III-A covering 4,000 km at an estimated cost of Rs 22,000 crore has already been approved. Projects under this phase are being taken up only on BOT (Toll) basis and Government is providing the required viability gap funding limited to 40% of the project cost of each sub-project.
Additional 6,000 km at an estimated cost of Rs 33,000 crore are proposed to be covered under NHDP Phase-IIIB for which approval to prepare the Detailed Projects Roads has already been given.
This Phase generally comprises stretches of National Highways carrying a high volume of traffic, connecting State capitals with the network developed under NHDP Phase I & II and providing connectivity to places of economic commercial and tourist importance.
It has also been decided that all the sub-projects in NHDP Phase-Ill to Phase-VII would be taken up on the basis of PPP on Build Operate and Transfer (BOT) mode. The private sector participation envisaged in Phase II of NHDP has also been increased considerably.
In 2008-09, the government is expecting to attract a minimum investment of Rs 35,000 crore for various public—private partnership. NHAI alone is likely to complete projects worth Rs 20,000 crore against a target of Rs 31,000 crore fixed for the year 2008-09.