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ABSTRACT

Infrastructure represents the “wheels” of economic activity. People demand infrastructure facilities not only for direct utilization but also for raising their productivity. Infrastructure in India is in grim need of being upgraded. Massive investments are being required in near future. However, the government has a responsibility of not only to upgrade the existing facilities but also to develop new ones too. In developing countries where resources with government are fixed, the privatization of infrastructure is the only answer to this problem. India is also going towards the privatization and there is also need for private investments to be made in an extensive way to meet the need of huge investments. BOT or Build, Operate & Transfer concept is utilized by government, which is a public private partnership. The infrastructure projects are large scale and complex type projects. Highways, power plants, ports, railways and other public facilities are examples of the infrastructure projects. The limited budgets with public agencies and the serious needs for such facilities helped in creating a new method for projects delivery. This method is Build-Operate-Transfer (BOT) delivery system. In BOT projects, there are two main participants. The first participant is the host government of the country where the project will be built and the second one is a private sponsor. The private sponsor usually represented by a consortium of investors or private entity and responsible for designing, constructing the facility, maintaining and operating the facility after commissioning for an agreed duration called concession period and arranging for financing these phases of the project life cycle. By the end of the concession period, the ownership of the facility will be transferred to the host government. The concession period is the time when the private sponsor is collecting back its cost and gaining profits from the service that they offer out of the completed project. The growth can be resulted by providing finance, operation, maintenance, construction and other basic requirements. After the completion of the project, the project is transferred to the host government party. The maintenance and the
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The ultimate outcome of the present study is in the form of generic models which can be used for the contractual & financial analysis of Road projects on BOT basis. two are based on comparative analysis of risk mitigation techniques in BOT toll project & BOT annuity project and third one the realization is based on financial analysis. In this type of project Government refers private sector to participate in the project due to the dearth of public funding. participants are exposed to various kinds of risks. The project involves different types of risks during the implementation of the whole projects and to avoid these multiple risk effective management methods and good managerial risk are required.construction of BOT model is done with great responsibilities as the wager are high for both the government and the private parties involved in the project. The most important issue of privately financed Road project are the management of risks. During this research author has tried to focus on how risks are allocated. In BOT Infrastructure projects. various risk mitigation techniques in concession agreement & effect of various risks on financial analysis of BOT road projects. ii . Three case studies have been considered. About 70% of BOT road projects fail due to improper allocation of risks between project participants. The present study is based on various aspects of development of Road or Highway projects and its privatization concentrating the contractual and financial issues.

Infrastructure Project: Development Thought BOT Model 2.TABLE OF CONTENTS Candidate’s Declaration Acknowledgements Abstract Table of Contents List of Figures List of Tables List of Abbreviations i ii iii iv viii x xi Page No.1 Introduction 1.2 Private Sector Project 2.3 Need of Infrastructure 2.4 Research Objective 1.5 Scope 1.4.1 Economic Infrastructure 2.3 Public Private Joint Venture 2.2.2 Need 1.4.8 Contribution of the Current Study to the Existing Literature 1-4 1 2 2 2 2 3 4 CHAPTER 2.1 Public Sector Projects 2.2 Social Infrastructure 2.5 Public Private Partnership iii 6-26 6 6 6 6 7 7 8 8 8 9 .4.2.4 Development of Infrastructure 2.3 Aim OF Present Study 1.6 Methodology 1.1 Introduction 2. CHAPTER 1.7 Literature Review 1.2 Types of Infrastructure 2. Introduction 1.

2.5.3.1 Contractual solution for Project Company 4.2 Government support 4.2 Types of contracts in PPP 2.6.1 Definition 2.2.5.3 Lease Contract 2.7 Financing of BOT projects 2.5 Main agreements in BOT projects 2.7.6.6 Advantages and Disadvantages of BOT projects 2.6.4 Types of PPP in road infrastructure 3.3 Stages of BOT 2.2.4 Major participants in BOT projects 2.4.6.6.2 Indian Transport Infrastructure 3.8 Conclusion CHAPTER 3.1 Political risk insurance 4.2 BOT-Annuity basis 3.3.2 Incentives announced by Government to private sector 3.5.1 BOT-Toll basis 3.3 BOT-Special Purpose Vehicle 3.1 Definition 2.6.1 Introduction 3.3.5.7 Conclusion iv 9 11 11 12 12 12 12 13 13 14 15 17 19 21 21 22 23 25 26 27-31 27 27 28 28 29 29 30 30 30 30 31 32-43 32 32 33 36 37 39 39 40 41 42 43 43 .3.6 Build Operate & Transfer 2.4.5 Build Operate & Transfer 2. Public Private Partnership in Indian Road Sector 3.5 Risk mitigation 4.1 Project financing 2.2.6.4 Concession Contracts 2.6 Risk mitigation techniques 4.7. Risk Involved in BOT Model for Road Projects 4.3 Public Private Partnership in road infrastructure 3.5.6 Conclusion CHAPTER 4.4.6.5.5.3 Insurance 4.2.2 Parties involved in financing 2.6.2 Force majeure risk insurance 4.5 Advantages of PPP in road infrastructure 3.4 Allocation of risks 4.3 Types of risks 4.7.6.3 Instruments used in project financing 2.1995 3.1 Introduction 4.2.2 Variants of BOT 2.1 The National Highway (Amendment) Act.2 Management contracts 2.6.1 Service Contracts 2.2 Risk identification in BOT for infrastructure projects 4.

3 Competitive negotiations 5.9 Conclusion CHAPTER 6.2 Non-discounting criteria 6.6.1 Introduction 6.3 Project or Concession agreement 5.5.1.2 Financial appraisal techniques 6.00 to km 89.2 Type of agreements 5.1 Competitive bidding 5.6.6.3 Financial Analysis of Case Study Project 6.2 Double Stage Bidding 5.Sonbarsa Section) 6.6.5.2.5.5. Financial Analysis of BOT Road Projects 6.5 Financial Closure by Concessionaire 5.5 Results of financial modelling of case study 6.7 Risk Management in Concession Agreement 5.5.2.1 BOT(Toll Projects) 5.2 Qualification Stage 5.2 Restrictive Procedure 5.00(Muzaffarpur .5.6.6.1 Prequalification stage or RFQ 5.5 Procurement method 5.6.4 Steps of Financial Analysis Model 6.8 Case Study 5.2.5.1.5.2 Financial bidding stage/Bidding stage 5.1.1.3.4 Selection of concessionaire for BOT projects 5.2 BOT(Annuity Projects) 5.5.Contractual Analysis of BOT Road project 5.2 Direct negotiation 5.6.6 Procurement Procedures for Road Projects 5.1 Introduction 5.6.3.2.5 Case Study: 2 Laning Strengthening of NH-77 from km 0.CHAPTER 5.6.1 Introduction 6.1 Single Stages bidding 5.1 Open Procedure 5.4 Assumed Situations for financial analysis 6.2 Overall approach 6.3 Evaluation of tenders/bids 5.1 Discounting criteria 6.5.6 Conclusion 44-59 44 44 45 46 46 46 47 47 48 48 49 50 50 50 52 52 52 55 55 55 56 56 56 58 58 59 60-78 60 60 61 63 63 63 68 68 68 69 73 76 78 79-81 v .3 Financial Proposals 5.4 Award of Contract 5.6.3 Financial Analysis Model 6.1 Test of Responsiveness 5.6.1.

1 Introduction 7. Conclusion and Recommendations 7.5 Future scope of work REFRENCES 79 79 80 80 81 82-83 84 LIST OF PAPERS PUBLISHED vi .2 Observations 7.CHAPTER 7.3 Outcome of seminar 7.4 Recommendations 7.

7 Figure 2.1 Extent of private sector participation (Source: JCEM. appropriate ministries) 9 12 14 15 17 20 22 22 23 24 27 Figure 3.6 Figure 2. Feb 08) Page No.8 Figure 2.1 Figure 2.10 Figure 2.2 Figure 4.1 Transport demand growth in India Steps in Risk management 28 32 vii . Figure 1.5 Figure 2.11 Figure 2. Feb08) Types of contracts in PPP The BOT Concept Analysis of variants of BOT Role of Public Private Partnership in BOT projects BOT project agreement Cash flow over concession period Corporate financing approach Project financing approach Parties involved in project financing Planned investments in India till 2012 (Source: Government of India.12 Figure 3.1 Figure 2. 3 6 8 Figure 2.9 Figure 2.2 Description Flowchart for Methodology Types of Infrastructure Development Pattern and Cash Flow of Infrastructure Project (Source: JCEM.3 Figure 2.LIST OF FIGURES Figure No.4 Figure 2.

1 Figure 6.4 Figure 6.1 Figure 5.3 Figure 5.2 Figure 4.4 Figure 7.2 Figure 5.5 Risk profile in various phases Risk management process Agreements in BOT projects Restricted procedure for BOT procurement Competitive Negotiations for BOT procurement Framework for procurement of concessionaire for BOT Road projects Financial appraisal techniques Cash flow diagrams Financial analysis model for BOT Road projects Sensitivity analysis for IRR Sensitivity analysis for NPV 32 38 44 47 48 57 60 64 67 78 78 viii .3 Figure 7.3 Figure 5.2 Figure 6.Figure 4.

11 13 19 37 37 49 51 51 55 69-71 72 72 72 ix .2 Table 6.LIST OF TABLES Table No.1 Table 4.3 Table 6.1 Table 5.1 Table 2.1 Table 6.4 Table 6.3 Table 5.4 Decription Potential advantages of using PPP Comparative Analysis of Contracts in PPP (Source: World Bank ) Participates & their Primary Goal Country & Project risk Risk allocation between various parties Comparison of various procurement methods Project category in single stage bidding Escalation factor Experience factor in two stage bidding Cost Estimate Traffic Growth Rates (%) Prescribed Toll Rates Revenue collection per annum Page No.3 Table 4. Table 2.2 Table 5.2 Table 5.2 Table 2.

LIST OF ABBREVATIONS BOT BOOT BOO BRT BOOST BLT BTO PPP GDP Build Operate Transfer Build Own Operate Transfer Build Own & Operate Build Rent & Transfer Build Own Operate Subsidize & Transfer Build Lease & Transfer Build Transfer & Operate Public Private Partnership Gross Domestic Product SPV OPIC MIGA Special Purpose Vehicle Overseas Private Investment Corporation Multilateral Investment Guarantee Agency (World Bank) PRI Political Risk Insurance MCA SERV Model Concession Agreement Swiss Export Risk Insurance x .