Formation process of public private partnership in transport infrastructure in India

Abstract

The dissertation suggests that an attempt to create strong relational arrangements along with the contractual arrangements would lead to higher rate of success in PPP. Relational arrangements have become a major determinant because of the prevalent institutional, legal, and political frameworks in India. Given these frameworks, PPPs are expected to totter around and be guided more by relational arrangements than by contractual obligations in next couple of decades. In terms of regulatory mechanism, both cost plus/rate of return and price cap regulations have been used in India and both have been partially successful. Both are prone to renegotiation and in most of the cases, very little was spelt out upfront on renegotiation. In some cases, Ôrate of returnÔ regulation has been used along with Ôshare of revenueÔ as the bid variable, which is conceptually inconsistent. One interesting observation is that sometimes private players did not bring out issues of regulatory uncertainties upfront, as they may provide the private players a thin opportunity to seek rent at a later stage. The analysis also revealed twenty four key success factors for the formation process in the Indian context. These success factors were classified into a hierarchy through an interpretive structure model to form five levels: (i) critical, (ii) institutional, (iii) potential conflict management, (iv) process, and (v) capability. Critical success factors influenced the decision on the initial boundary of the project, while institutional and potential conflict management levels helped formalize the boundary and manage resources for the project. Process and capability level factors influenced the internal processes and sharing of risks/roles/responsibilities. Importance of the champion and the boundary spanners have also been pointed out in the dissertation. There are only two previous studies acknowledging the role of boundary spanners in PPP. Their role was found to be influential in the Indian context. Champions created the enabling environment, while boundary spanners worked within them to develop the relationship. Champions and boundary spanners could be driven from a variety of interests, which include striving for social welfare, public attention, and personal gains. The contributions of the dissertation are: (i) It identifies key success factors for PPP formation in the Indian context, (ii) It brings out the importance of relational arrangements as a new set of variables towards the success of a PPP project, (iii) It proposes to modify the conceptual understanding of formation process to include activities till the financial closure of a project, beyond the earlier definition of activities till the signing of the contracts, (iv) It helps in understanding ways in which proportion of successful projects can be increased, (v) It may be instrumental in capacity building by identifying the key areas to focus in the training exercise, (vi) It arrives at a set of decision rules for increasing the proportion of successful PPP projects, (vii) It identifies the critical role of boundary spanners in the Indian context, (viii) It demonstrates successful application of the mix methodology, which has been both appreciated and criticized at the same time, and (ix) It is the first study on the whole formation process of PPP projects in India. It can act as a building block for the further studies. The limitations of the dissertation are: (i) Since the analysis has been carried out ex-post, some of the factors (enablers/inhibitors) might have got emphasized in retrospect. It was not possible to either control or triangulate the relative importance of all the factors. (ii) Apart from those identified in the study, there may be some other factors, which did not get captured due to the selection bias, and (iii) The factors during implementation process have not been covered as a part of the dissertation.