Understanding PPP

The definition and types of PPP can be seen here in my earlier post.

A paper by B. Raganelli, G. Fidone, Public Private Partnerships and public works, 2007 explains the relationship between the Public and the Private partner in PPP set up .It says that the public and the private partner shares Principal– Agent Relationship. They share a bilateral relation and they have to depend on each other for their functions. They end up having Information Asymmetries. The public entity looks after the public interest and good quality public work whereas the private entity is more concerned about the corporate profit.

A decision has to be taken while selecting the private party for the proposed project. There has to be clear rules and regulations which help the private party to understand the project in a better way so that it doesn’t result in Information Asymmetry. These clauses should be in line of the Public as well as Private party’s interest.

After selecting the private party, public party is unable to monitor the private party because of high monitoring costs so another problem arises of Moral Hazard. The private party indulges in practices which are contrary to the policies of the concession maker. This results in non performance of the private party leading to delay in completion of the project. That is why Penalty clause is always there in the concession agreement. The moral hazard problem could be solved by providing some incentives to the private operators for early completion of the projects or giving quality results.

All three problems namely Principal-Agent relationship, Information Asymmetry and Moral Hazard can arise in any of the project where two parties are involved and responsibilities are shared. A solution to these problems can be derived by making the concession agreement include all the possible clauses which could cause these problems to occur

DLF plans eight shopping malls by 2009

DLF will develop eight shopping malls under leasing format in the metros by March 2009, besides commencing operation in four malls by end 2008. The company will also open four shopping malls in the, of which three will be in Delhi NCR and one in Chandigarh.

Eight consortiums shows interest to revive airports

Eight consortiums have responded to the EoIs inviting consultants for or conducting pre-feasibility study on which of the 326 non-operational airports and airstrips around the country. Those in the fray include International Air Transport Association, KPMG and Deloitte Touche Tohmatsu India. KPMG has tied up with Mott MacDonald while Deloitte Touche Tohmatsu has joined hands with Zabir 2005 of Spain for carrying out the study. The study is to be conducted on airports and airstrips that are either privately owned or with state governments, the Army or Indian Air Force. The consultants report is expected to list out the investment needed in terms of land and other assets, apart from suggesting a road-map for development and methodology to be adopted for providing air connectivity in a phased manner.

Miscellaneous Links

1. Eleven trains to be introduced by Southern Railway. News clip is here.
2. Airlines cut flights to beat fuel woes. Kingfisher's Malaya in talks with RIL to import ATF(aviation turbine fuel) through oil companies.
3. NMMC submits reports for metro rail project in Navi Mumbai.
4. Ludhiana based Impact Projects signs JV for township projects in Amritsar.

Orissa to build four major roads through PPP route

Project Monitor News Bureau says "The Orissa government plans to construct four major roads in the state on public-private partnership basis at a cost of over Rs 2,100 crore.The project involves four laning of a 165-km long road between Sambalpur and Rourkela at an estimated cost of Rs 1,340 crore; constructing a 70-km road from Khuntuni to Kuradmal at a cost of Rs 400 crore; building an 18-km road between Joda and Bamberi at a cost of Rs 188 crore; and constructing a 42-km Koira-Lahunipada road with an expenditure of Rs 217 crore."

"The state government has started the preliminary works on the project and will soon appoint two private agencies for consultancy. The World Bank has agreed to bear the consultancy expenditure.
The funds for the project will be arranged after completing detail survey of about 900 acres of land required for all the four roads."

Hard and Soft Infrastructure

I came across this publication which defines Hard and Soft Infrastructure by Deepak Kumar who is an Associate consultant of ICFAI journal of Infrastructure.

He says" Infrastructure sector is divided into hard and soft infrastructure. The hard infrastructure includes roads and bridges, ports, airlines, railway, power,telecom while the soft infrastructure includes education, health, tourism,etc." It also lists out Initiatives of UPA Government- (2004-05) in the field of Infrastructure. This paper gives details about both hard and soft Infrastructure initiatives taken by the govenment.

I wonder how much of this is a true achievement as NHDP, NSEW coridoor are already in a fix cos of increasing cost of the projects and railway projects are also at halt as mentioned in my earlier post.

Bangaluru Airport In a mess

The new Bangalore airport is located some 40 kms away from the city in Devenhalli. The congested roads and the increasing traffic on the roads is making it the least preferred option for the people to travel. although the Airport had all world class facilities, capacity of handling 10 million passenger in a year. It has 50 ckeck in counters and there are no x-ray machines to screen the bags but the public is suffering because of the distance they have to cover on the road to catch a flight.

Passenger end up spending 3-4 hours travelling to and fro to the airport to catch a 1 hour flight. I wonder the land for the proposed airport was decided long back and it dint strike anybody's mind that distance could be a problem. More details are here.

Infrastructure deficit can derail India's growth: Rangarajan

Sluggish infrastructure development could derail India's growth rate and pose serious challenges to development, says C. Rangarajan, chairman of the Prime Minister's Economic Advisory Council. The main points which he made are:

1. "If we are to sustain the present growth rate and accelerate it to higher levels, we have to not only invest heavily in infrastructure projects through public-private partnerships but also ensure their timely execution."
2. "Efficient and speedy implementation of projects is critical in the infrastructure area.".
3. Yet, time and cost overruns, poor execution and bureaucratic hurdles have put a severe pressure on existing infrastructure, especially in urban areas. "As a result, our infrastructure facilities and urban amenities are groaning as they are stretched out," Rangarajan said.
4. "We need to invest equally in social infrastructure. The spending in health and education should be efficient as they are a function determining the quality of expenditure than quantum.
5. "The way out is to modernise and diversify the farm sector by improving the forward and backward linkages,"

This is what Rangarajan said. Here is another effort by the government to develop infrastructure by means of developing Inland waterways for transporting goods in wake of the rising fuel prices.

I had pointed earlier here a similar news item wherein they talked about putting the inland waterways in the forefront. Lets see when will it happen.

Bandra skywalk project inaugurated

On 24 June 2008, Maharashtra Chief Minister, Mr Vilasrao Deshmukh inaugurated Mumbai Metropolitan Regional Development Authority's Bandra skywalk project.

The project built at a cost of Rs.13.63 crore will cover a distance of 1.3 km having five entry/exit points. The skywalk will connect the railway foot over bridges to Kalanagar, passing through Annat Kanekar Marg, DP Road and Nandadeep Garden. It also provides crossing of Western Express Highway, Sio-Dharavi link road.Here is the news clip.

Miscellaneous Links

1. A man from India Blog points out to A Billion Dollar Home and A Billion Dollar Slum.
2. Gammon-Dragados begins work on Mumbai offshore container terminal after the acceptance of Pre Feasibility Report.
3. Railways to invite bids for Pune-Ahmedabad high-speed corridor.
4. Kochi cruise terminal to be developed on BOT basis.