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This chapter examines and analyses the reasons for implementing PPP projects, Privileges for private sector participation, success factors, and the negative factors affecting the implementation of PPP projects in India. This has been achieved based on the responses from industrial experts. A questionnaire survey was conducted with public and private sector professionals in India. The professionals were requested to indicate their score for the statements designed in the questionnaire. The results obtained were presented in bar-chart format.
5.2 Design of Questionnaire
A Questionnaire template was designed in order to analyse the implementation successfulness of PPPs in the Indian infrastructure industry. The responders of the survey questionnaire included industrial experts from the private and public sectors. These responders were requested to indicate their score against each statement based on Likert scale (1= strongly disagree, 5= strongly agree). The professionals were selected based on two main criteria:(1) They should must have sufficient knowledge in the area of PPP; and (2) They must have work experience with PPP projects. The below figures show the number of professionals per organisation for which the questionnaire has been designed and the number of professionals responded.
5.3 Questionnaire survey results
This section presents the opinions of the different professionals who responded to the questionnaire. The opinions collected for the four different statements were demonstrated and analysed by using bar-chart format. In the below bar-charts, Y-axis represents the number of respondents.
220.127.116.11 Grading of the reasons for implementing PPP projects in India
As in the questionnaire, a total of five reasons for implementing PPP projects were marked by the respondents. From the above bar-charts (Figure 5.3 to Figure 5.7) the top three reasons for implementing PPP projects can be graded as given below:
1) For improving the financial system of the country
2) To encourage private investment
3) For attaining superior quality of service
The top reason for implementing PPP projects as graded by the respondents was 'For improving the financial system of the country'. The majority of the respondents believed that PPP projects in the country are implemented to improve the economic growth of the country. From the past 6-7 years many public infrastructure projects like airports, roads, and railways were being implemented on PPP method. India has seen a rapid growth in the area of infrastructure development. Different professionals agreed that India can unleash its complete growth potential and grow at 9 to 10 per cent per annum by enhancing the infrastructure facilities (Chirag, 2010).
The second reason graded by the respondents was 'To encourage private investment'. The private sector adds value to the infrastructure projects such as fiscally and risk sharing. From the Hyderabad international airport case study it can be clearly seen that the equity share of the private sector is 74%. This shows that the private sector is supposed to play a foremost role in the future infrastructure boom. For building the infrastructure facilities it is expected that 30 % of the total investment should come from private sector entities.
The third reason graded by the respondents was 'For attaining superior quality of service'. India being a developing country the quality of service provided for building the infrastructure facilities is most vital. This feeling was reflected by the respondents as they believed this is also one of main reason for implementing PPP projects in the country. From the Pipavav Railway Corporation case study it can be supposed that company was providing latest standards of maintenance for operating the railway system for the movement of bulk and containerized cargo.
18.104.22.168 Grading of Privileges for Private sector's participation in PPP projects
Four privileges for Private sector's involvement in PPP projects were marked by the respondents. From the above bar-chart results (Figure 5.8 to Figure 5.11) the top three privileges can be graded as follows:
1) Government funding
2) Tax benefits
3) Government aid in financing
The top privilege for the Private sector's involvement in PPP projects graded by the respondents was 'Government funding'. The majority of the respondents believed that this is the important privilege for the private sector. In all the public infrastructure projects Indian government is holding an equity share and providing funds to the project. For example: In the case of HIAL, Andhra Pradesh state Government provided a public grant of INR 1070 million, this allowed the private sector to involve enthusiastically in the project. Moreover in PPP projects the political, regulatory and legal risks were shared by the government, this will be the decisive advantage for the private sector.
The second privilege graded by the respondents was 'Tax benefits'. The Indian Government's strong focus on encouraging infrastructure development broadens to tax policy, with a number of policy measures and incentives to the private party. For example in the case of Hyderabad international airport, HIAL has received VAT relief from the Government for the period of 10 years. This facilitated the private sector to take long-term debt from the financial institutions for making the project successful.
The third privilege graded by the respondents was 'Government aid in financing'. India's agenda to encourage PPP for infrastructure development intends at improving the quality and quantum of infrastructure services ensuring that stakeholders receive a share of benefits from the PPP projects. The VGF and IIFCL schemes support PPP to go a long way in construction of huge infrastructure projects in the country. Hence, India Infrastructure Growth is on the correct track to assist development of allied sectors (Infrastructure section, 2005).
22.214.171.124 Grading of the Factors that provide successful result of PPP projects
Five success factors for implementing PPP projects were marked by the respondents. From the above bar-chart findings (Figure 5.12 to Figure 5.16) the top three critical success factors can be graded as given below:
1) Constructive legal agenda
2) Commitment and accountability of private and public sectors
3) Allocation of risks to the best parties
The top success factor graded by the respondents was 'Constructive legal agenda'. This finding has implied that the current legal agenda is well documented to handle PPP projects. Unnikrishnan, (2007) mentioned that a fair and well-organized legal agenda is an important factor for successful implementation of PPPs and economic development of the country. A translucent and stable legal agenda would facilitate to make the contracts bankable. For example: In the year 1995 Indian Government has introduced a new act called 'National Highways Authority of India Act' for the construction, maintenance, and operation of the National Highways. This act paved the way for the successful outcome of PPP road projects in India (Boeing and Satyanarayana, 2006).
The second success factor graded by the respondents was 'Commitment and accountability of private and public sectors'. For instance consider the case of HIAL, because of strong commitment and accountability from the both public and private sectors the project was completed in a short time and become successful.To obtain the success of PPP project, both the public and private sectors must bring their corresponding skills and give their resources to attain good association (Planning commission, 2004).
The third success factor graded by the respondents was 'Allocation of risks to the best parties'. More than half of the respondents expressed their opinion favorably to this option. This could be the truth that in most of the Indian PPP projects the major risks are being assigned to the strong private sector parties. The PPP model involves the allotment of wide range of risks between the government, shareholders and financing institutions.In allocating risk between the public and private sectors, it is necessary to have an evident methodology (Loosemore, 2006)
Five factors which are restraining the implementation of PPP projects were marked by the respondents. From the above bar-chart findings (Figure 5.17 to Figure 5.21) the top three negative factors can be graded as follows:
1) Delays in negotiations
2) Lengthy bidding procedure
3) High charge to direct users
The first negative factor graded by the respondents was 'Delays in negotiations'. The majority of the respondents believed that negotiations between and public and private sector causes severe delay in PPP projects. For example: consider the Pipavav railway corporation project, it can be clearly said that the project got severely delayed in deciding the construction agreement with the Western railways. Consequently it took one and half year to get the contract signed. Therefore the concession agreement must be prepared in such a way as to cover all potential causes of later amendments, leaving minimum extent for renegotiation (Department of Economic affairs, 2007b).
The second negative factor graded by the respondents was 'Lengthy bidding procedure'. For huge PPP infrastructure projects, Indian Government was adopting International competitive bidding (ICB) process. This is a lengthy process that incurs diverse costs on each stage for selecting the capable concessionaire. In the year 2007 National highway authority of India (NHAI) could award only seven projects out of eighteen to the private concessionaire. The cause for the slow performance was the delay in deciding the model concession agreement (MCA) for PPP projects (Venugopal, 2009).
The third factor graded by the respondents was 'High charge to direct users'. Six respondents believed that by increasing the user charges, PPP projects were being severely affected. For instance, In the HIAL project there was a severe opposition and criticism from public for levying the user charges. The Government should seriously consider the regulatory measures on user charges for protecting and safeguarding the public interest.
This chapter presents the results of the questionnaire survey looking at the reasons for implementing PPP projects, critical success factors, Privileges for private sector participation and factors restraining the implementation of PPP projects in India.
The results showed that the top three reasons for implementing PPP projects were : (1) For improving the financial system of the country; (2) To encourage private investment; (3) For attaining superior quality of service. Majority of the respondents felt that PPP projects are being implemented to improve the economy of the country.
The top three privileges for private sector's participation in PPP projects were: (1) Government funding; (2) Tax benefits; (3) Government aid in financing. This finding reveals that respondents' puts stress on financial aspects, which play a key role for attracting private sector's involvement in PPP projects.
The top three critical success factors graded by the respondents were: (1) Constructive legal agenda; (2) Commitment and accountability of private and public sectors; (3) Allocation of risks to the best parties. These success factors were found to be imperative for contributing successful PPP projects in India.
The first three negative factors graded by the respondents were: (1) Delays in negotiations; (2) Lengthy bidding procedure; (3) High charge to direct users. These factors were found to have a negative influence, which causes much delay in the implementation of PPP projects.