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PUBLIC PRIVATE PARTNERSHIPS IN INFRASTRUCTURE DEVELOPMENT IN INDIA

Budget - By: - Mr. M. GOVINDARAJAN - Dated:- 11-3-2015 - Needs of Infrastructure Infrastructure is the basic physical and organizational structure needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function. It can be generally defined as the set of interconnected structural elements that provide a framework supporting an entire structure of development. It is an important term for judging a country or region's development. Infrast .....

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by increasing the productivity of labors and capital thereby reducing the costs of production and raising profitability, production, income and employment Impact of infrastructure Dr. Jeffrey Delmon, Senior Infrastructure Specialist of The World Bank, begins his book indicating that, Poor infrastructure impedes a nation s economic growth and international competitiveness (The World Bank 2006). Insufficient infrastructure also represents a major cause of loss of quality of life, illness and death .....

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s, and air transport, enable entrepreneurs to get their goods and services to market in a secure and timely manner and facilitate the movement of workers to the most suitable jobs. Economies also depend on electricity supplies that are free of interruptions and shortages so that businesses and factories can work unimpeded. Finally, a solid and extensive communications network allows for a rapid and free flow of information, which increases overall economic efficiency by helping to ensure that bu .....

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to get their goods to market. There is no doubt that providing support for infrastructure in an environment is challenging and evidence shows that investors in infrastructure are very sensitive to country risk. In this sense, it is the job of institution such as the World Bank Group to assistant governments to manage such risks, whether through enabling effective regulation and policy, through increased transparency, or risk sharing through instruments such as guarantees. Economic growth The imp .....

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which are in the nature of primary services and has a direct impact on the quality of life. The performance of infrastructure is largely a reflection of the performance of the economy. Infrastructure industries are measured by six key infrastructure and core industries (i.e., electricity, crude oil, petroleum refinery products, coal, steel and cement). Indian scenario India is the second fastest growing economy next to China. The development of infrastructure will develop the economic growth of .....

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ads and Bridges 36.22 16.63 78.54 15.28 Telecommunication 25.84 11.86 64.61 12.57 Railways (Including MRTS) 29.91 13.73 65.45 12.73 Irrigation (including water shed) 27.88 12.80 63.33 12.32 Water supply and sanitation 16.20 7.44 .....

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871,445 2,060,193 The development of infrastructure in all aspects is required to be fulfilled in India. The inadequate infrastructure results in the following: significant constraint on India s growth potential; retards GDP growth by 1% - 2% per annum (estimates); acts as a major barrier to Foreign Direct Investment; hinders the objective of inclusive development. Inadequate investment in infrastructure The following are the effect of ina .....

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etween the existing and required infrastructure is to be filled up. To improve the availability of the infrastructure is possible only by increased investments in the infrastructure assets. There is also a need to enhance the quality of service, minimum acceptable standards of service. The traditional public procurement will not meet the requirement in the development of infrastructure in India which is to develop the economic growth. The entire privatization is not at all possible in the mixed .....

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period of time; Where there is a substantial risk sharing with private sector; and the private sector receives performance linked payments that conform (or are benchmarked) to specified, pre-determined and measurable performance standards. Essence of PPPs The essence is partnership. The purpose of partnership is to deliver a project or a service traditionally provided by the public sector. The principle of partnership is to allow each party to do what they do best so as to provide greater valu .....

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s to promote PPPs in sectors like power, ports, highways, airports, tourism and urban infrastructure. Under the overall guidance of the Committee of Infrastructure headed by the Prime Minister, the PPP programme has been finalized and the implementation of the various schemes is being closely monitored by the constituent Ministries/Departments under this programme. Indian experience shows that competition and PPPs can help in improving infrastructure. The opening of the telecoms sector is a case .....

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res have dropped significantly. Even in the road sector, PPPs have demonstrated their efficacy wherever they have been used such as on the Jaipur-Kishengarh highway. Share of Private Investments in XI plan The share of private investments in XI plan for the development of infrastructure is as shown in the following Table: Table - 2 - Share of private investments in XI plan Sector Percentage Ports 81% Telecom 80% .....

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itious targets for flagship programmes in rural infrastructure. The sector wise investment in infrastructure for the XII plan is as tabulated below: Table - 3 - Sector wise investment in infrastructure for XII plan Sectors Rs. in crore US $ billion Share (%) Electricity (including NCE) 1,820,292 350.1 32.7 Roads & Bridges 914,536 175.9 16.4 .....

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87.714 16.9 1.6 Storage 148,933 28.6 2.7 Oil & gas pipelines 58,441 11.3 1.1 TOTAL 5,574,663 1072.1 100 As per the XII plan, the Planning Commission has set targets to achieve 50% of private and PPP funding in total infrastructure investments compared to a little more than 30% in the XI plan. The follow .....

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,633 $57 bn (36) 6,80,056 $131 bn (28) 12,89,762 $248 bn (23) Private 1,86,023 $36 bn (22) 8,87,504 $171 bn (37) 26,83,840 $516 bn (48) Total 8,37,159 $ 161 bn (100) 24,24,277 $466 bn (100) 55,74,663 $1072 bn (100) (Percent in brackets) PPP Projects in India The following table will show the sectoral representatio .....

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om leads in private investments. The power sector has attracted much investment from private. India is expected to make major investments in the power sector for rapid urbanisation, rural electrification and industries across the country. Under the Twelfth Plan, the private sector is likely to account for a major share of the additional capacity (55.6 per cent). PPP is likely to be the preferred route for such ventures. Recent initiatives in India The Government of India is promoting public-priv .....

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to PPPs in infrastructure 178 projects have been granted approval with a total project cost of ₹ 88,697 crores and VGF support of ₹ 16,894 crores; Support for Development Project Development of PPP - The India Infrastructure Project Development Fund (IIPDF) was launched in December 2007 to facilitate quality project development for PPP projects and ensure transparency in procurement of consultants and projects. National PPP Capacity Building Program - This program was launched in D .....

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The PPP tool kit is a web based resource that has been designed to help improve decision making for infrastructure PPPs in India and to improve the quality of infrastructure PPPs that are implemented in India. Success factors in PPP In making the PPP a successful the following factors are to be considered as essential: Careful planning of PPP project; Solid revenue and cost estimations; User willingness to pay and communication plan; Extensive feasibility study with use of PPP experts; Comp .....

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