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EXECUTIVE SUMMARY

It is being increasingly recognized in India that lack of good quality infrastructure is a bottleneck that
must be removed in order to push the growth rate of our country. To achieve the targeted economic
growth, there is an urgent need to increase the level of investments in infrastructure. Government
estimates peg the total infrastructure investment requirement in the country at about USD320-350
billion over the next five years. Considering the high emphasis on using PPP as an important format for
creation and maintenance of infrastructure and considering the realistic levels that PPPs can go up to,
about 20% of the total (USD64 to 70 billion) is estimated to come from PPP route.
Despite massive investment opportunities and the establishment of a framework for private sector
participation in highway infrastructure development programmes in India, private investment (including
foreign direct investment) in this sector is not up to the expected level.
Land acquisition, need for long term fund, number of approvals, time and cost overruns, absence of
adequate government guarantees, incorrect project valuation by NHAI, etc. are some of major issues. All
these issues lead to the RISK element and quotient of the project. Successful completion of the project
is possible only when the risks in the project are spread between the various parties and each risk is
handled by the party, which can most efficiently and cost-effectively control or handle it. In current
situation, the various stakeholders in the road sector value chain are not convinced with the various
risks allocation provided in the different road sector contract models.
However some of the inherent risks of an infrastructure project can be mitigated by practicing Due
Diligence. Infrastructure projects have the following main characteristics:
Longer maturity: Financing for infrastructure needs to have enough maturities ranging from 5 to
40 years. Such ranging can essentially reflect the accessing options and estimating the life of
created infrastructure in actual context.
Larger amount: Infrastructure finance is included with different set of initiatives which
essentially measure the range of amount needed in order to complete the projects in the local
rationalities.
Higher risk: When large range of amounts are invested for long duration of time a risk may be
elevated which can cause immense uncertainty in its course.
Fixed and low real returns: The financing for infrastructures is mostly linked with the scale of
economies and annual returns of the projects under maintenance. Further perfect returns must
be judged before financing a project of constructing infrastructure essentially. Apart from such
characteristics, issues such as capital risks initiates to reduce such risk are considered to the
greater extent in order frame the perfect financing action for constructing the infrastructure
which is about to construct in the localities of India.
Due to all these factors it becomes necessary to weigh all the infrastructure projects on financial
standards like feasibility analysis, due diligence, sensitivity analysis, etc. all these standards form an
important part of due diligence.
OBJECTIVE OF THE REPORT
This report has the following objectives:
Understand the PPP model and its different modalities.
Elucidate the process and importance of risk analysis with the help of a financial model
for state highways.
In-depth study of the due diligence stage (including feasibility studies and financial
analysis) in the overall project management process with the case of Kozhikode
Monorail Project.
METHODOLOGY FOLLOWED
BIBLIOGRAPHY
1). Yescombe, E.R. (2002). Principles of Project Finance. California, USA: Academic Press
2) Planning Commission, Government of India (2009, May). Financing Infrastructure Projects through
the India Infrastructure Finance Company Limited (IIFCL). Retrieved May 30, 2014. From
http://www.infrastructure.gov.in/pdf/IIFCL.pdf
3) Ministry of Finance, Government of India. http://toolkit.pppinindia.com/ Retrieved May 29, 2014
4) Public-Private Infrastructure Advisory Facility. http://www.ppiaf.org/ Retrieved June 1, 2014
5) PriceWaterhouseCoopers. Infrastructure Public-Private Partnership (PPP) Financing in India (2009,
September).

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