Infrastructure Management

Session 1
Introduction to infrastructure
NMIMS
Objective of this course
Facilitate appreciation for infrastructure
industry as descipline and as a career
option
Instill necessary skills for continuing
further research and studies in this space
Create an atmosphere of awareness and
knowledge for this industry in this institute
Methodology of the course
Discussions and debate on concepts
Sharing of facts and appreciation of
numbers
Case studies group activities
Agenda
Introduction to infrastructure
Introduction to the course
Key roles and responsibilities
How is infrastructure different from other
verticals
Importance of infrastructure
Key concepts infrastructure
Infrastructure stakeholders roles and
responsibilities





Introduction to infrastructure
How is a common person related to
infra?
Electricity
Water & Sewerage
Solid waste
Cold Storage
Warehouses
Urban transport
Oil & Gas
Social
Road
Rail
Airport
Port
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In addition to telecom..
Infrastructure is not a end objective
its a enabler
Infrastructure is key to:
Production of goods
& services
Trade & investment
Regional integration



Introduction to course
Gamut of infrastructure
Hard
Soft
Social
Healthcare facilities
Education Institutions
Housing
Public utilities (Bus stations,
Parking etc.)
Corrections and Justice (Prisons
etc.)
Road
Port
Airport
Railways
Water & Sewerage
Solid Waste
Management
Power
Oil & gas
Mining
Telecom
Institutional setups for delivery of
specialized services to people
So what will this course cover?
Transport
Energy
Urban
Introduction to sector
Role of sector in the overall economy
Status of infrastructure in India
o Demand and supply
o Global benchmarks Sector specific case
discussion
Future of sector
Key steps of developing infrastructure (Case study
based approach)
Future challenges and constraints
Role of future manager in the sector
Class presentation by group
Session 2 to 5 Ports and aviation , Road and rail, Energy, Urban Infra
Session 6: Infrastructure finance
Session 7: Designing the future
Session 8: Learning from examples
Group activity
12 groups of 4 participants:
Energy group
Urban Infra group
Surface transport group
General transport group

Each group will be given one project to
debate and brainstorm
Template and topics to be presented will
be shared in this week



How is infrastructure different
Basic features of infrastructure
development
What are the main characteristics of
infrastructure development?

Capital intensive investment
Extend over many years
Economy of scale
Network effects
Linkage effects
Various stakeholders with different interests
Advanced technical expertise
Basic features of large-scale infrastructure
development
What are the issues related with large-
scale infrastructure development?

Investment selection and resource allocation
Implementation
Operation and maintenance
Recurrent financing
Social and environmental considerations
External finance and technical assistance
Basic features of large-scale infrastructure
development
What is the governments role in large-
scale infrastructure development?

Planning and budget allocation
Coordination
Resource mobilization
Monitoring and evaluation
Institution and capacity building
Aid/donor management

Importance of infra case study 1
China vs India in port sector some facts
and figures
Importance of integrated planning
Role of transport infrastructure
Cost to trade
Importance of infra case study 2
Rail share in India versus the US for cargo
Cost of rail transport in India versus the
US
Linkage impact of lack of infrastructure
Resultant impact on business
Importance of infra case study 3
Industrial park infrastructure in India
versus the Middle East
Emergence of ME as global consolidation
hub
Impact on business and economy in
general
Importance of infra case study 4
Quality of road infrastructure in Gujarat
versus Punjab
Impact on investments in new businesses
Overall impact on economy and
opportunities



Key steps of infrastructure projects
Key steps in a infrastructure project
Conceptualization
Planning
Financial feasibility and structuring
Bidding and award
Project implementation
Project execution and monitoring
Project Termination



Key concepts
Key Development Concepts
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Public Private
This leads to PPP
New Projects
Existing projects
So what emerges is PPP
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100% private
100% Public
Duration in years
Lease
Service contract
Mgmt. Contract
Build-Own-Operate-Transfer
Build-Own-
Operate
Divesture
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What is a PPP
Collaboration or partnership between
Government and Private Players which is built on
the expertise of each partner and it meets clearly
defined public needs through the appropriate
allocation of:
Resources
Risks
Responsibilities, and
Rewards
Looking deeper PPP maturity varies
across sectors
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PPP Maturity
Low High
Low
High
Port
Airport
Railways
Road
Water,
Sewerage,
SWM
Urban
Transport
Why PPP?
Limitations of government resources and widening
infra gap
Expedite projects
Time-bound implementation
Appropriate risk sharing
Cost saving through efficiency and technology
Strong service orientation
Enabling public sector to focus on outcome and core
business
Characteristics of typical PPP
models
Criteria PPP (BOT/ BOOT etc.) PPP (Annuity) JV/ SPV Management Contract
Type PPP PPP PPP PPP
Revenue Source
Revenue rights
awarded to private
concessionaire over the
concession period
Regular periodic
payments received from
Government
Authority/Awarding
agency over operation
period
Revenue rights
awarded to SPV over
the concession period
Fixed and performance
linked periodic
payments received from
Government
Authority/Awarding
agency over operation
period
Bid Parameter
Concession period,
Revenue Share or
Grant (Capital Subsidy)
Periodic Payment by
Government
Concession period,
Revenue Share or
Grant (Capital Subsidy)
Periodic Payment by
Government
Typical Duration
18 30 years
(Concession Period)
15 18 years
(Concession Period)
18 30 years
(Concession Period)
5 10 years (Contract
Period)
Traffic Risk
Entirely borne by
Concessionaire,
In case of revenue
share, risk partly shared
by Government
No Traffic Risk
Entirely borne by SPV,
In case of revenue
share, risk partly shared
by Government
No Traffic Risk
Risk Return High Risk High Return
Low Risk Fixed
returns with no upside
High Risk (Though
relatively lower than
PPP (BOT/ BOOT)
High Return
Low revenue risk Only
performance risk
How is it different from traditional
models?
Different in terms of project development,
implementation, and management.
The administrative and approval processes in the case
of PPP projects are also different.
A PPP project is viable essentially when a robust business
model can be developed.
The focus of a PPP project is not on delivering a
particular class/type of assets but on delivering
specified services at defined quantity and levels.
The risk allocation between the partners is at the heart of
any PPP contract design and is more complex than that of a
conventional construction project.
A PPP contract generally has a much longer tenure than a
construction contract.
Relevance of PPP for India
Deficit in infrastructure services
Deficient infrastructure being a binding constraint
Need or economic growth and competitiveness
Poor infra impedes inclusive growth and poverty
reduction
Largely manufacturing and agriculture sector
Growing emphasis on infra spending
Constraint on government resources
Emphasis on private sector participation in infra

Principles of PPP in Indian Context
Implementation for provision of public assets and/or related
services
Ensure that the projects are planned, prioritized and managed to
benefit the users and maximize financial and economic
returns
Protect the interests of end users, project affected persons,
private and public sector entities and other stakeholders
Encourage efficient delivery of public services by engaging
proficient and innovative practices with the utilization of best
available skills, knowledge & resources in the private sector.
Adopting a transparent and pre-defined process for bid and
award of projects
Support and monitor the project through establishment of a
suitable institutional setup
And the results..
Investment largely limited to PPP in physical infrastructure
sector (roads, ports, power, airports, metro, urban sector)
Few PPPs in social sector (education, health, water supply).
Mixed success stories
Increased thrust on policy and regulatory reforms,
addressing operational issues, monitoring capacity etc.
Uncertain climate
All PPPs dont succeed
Poor setup
Policy and regulatory environment
Restrictions and conditions and expectations of risk transfer
Unrealistic expectations of PPPs thinking it provides free money or that
its the solution to all problems
Evolving project objectives
Sponsors sometimes lack consensus about the purpose of and expected
outcomes for the project
Attempt to compensate for this failure by overspecifying parameters
PPP is for revenue generation
Lack of internal capacity
Lack of skills to manage complex PPPs
All PPPs dont succeed
Failure to realize value for money
The borrowing and tendering costs associated
vis--vis efficiency gains
Lack of understanding of how to test value for
money
Poorly structured project
Over-aggression of bidders
Characteristics of good PPP project
Thorough and realistic cost/ benefits assessment
Well assessed Technical, Financial and Economic Feasibility
Strong private developer
Appropriate risk allocation and sharing
Policy and regulatory certainty
Robust financial market
Well organised public agency
Transparent and competitive procurement process

The Typical Process
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Public Private
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In-house
External consultants
Approvals as per nature of
project
Transaction Advisors
Independent Engineers
External consultants
Project led by concerned authority with approval from various agencies
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Enabling Institutional Setup
Designation agencies for development of projects in each sector
Standardised approval processes
Creation of funding institutions
Closer monitoring by the relevant Ministry
Stakeholder consultation for policy and regulatory intervention
Model Documents
RfQ
RfP
Concession Agreement
Enabling Institutional Setup
The Government has supported the creation of nodal agencies
such as the PPP Cells at a State or sector level to undertake
Identify, conceptualize and create a shelf of projects and recommend
approval of suitable projects for implementation on PPP basis
Assist in project development through consultants
Ensure rigorous adherence to managing effective and transparent
tendering processes
Create coordinated, efficient, machinery for PPPs whereby viable
transactions are tendered to the market
Develop internal evaluation guidelines in consultation with the
respective departments to evaluate and assess the projects
Act as the nodal agency for capacity building for PPP, through training
and technical assistance, to increase the deal flow of eligible projects
Ensure dissemination to consumers, investors and other government
entities on the benefits and procedures for PPP in a given sector.
Inspect, visit, review and monitor PPP projects under implementation.
Enabling Institutional Setup
Cabinet Committee on Economic Affairs of the Government has
created the PPP Appraisal Committee (PPPAC),
Every PPP project at the central government level, even where no
capital subsidy is required, is expected to obtain clearance from
the PPPAC.
The intent of the clearance process is to ensure that the projects
that are bid out are commercially robust, the provisions in the
contract document safe guard user and public interests and the
contingent liabilities of the Government are capped.
The PPPAC encourages the utilisation of standardized contractual
documents, which lay down the standard terms relating to
allocation of risks, contingent liabilities and guarantees as well as
service quality and performance standards, and standardised
bidding documents such as Model Request for Qualifications and
Model Request for Proposals that have been notified.



Thank you and next steps