What Are The Advantages And Disadvantages Of A Ppp Project

Decent Essays

I. Introduction

India is a developing country and transportation forms the backbone of the Indian economy. Rail transport is the most used system for long range and large quantity commodity transport. However, it has some limitations. Most of the times, the large-scale projects like road development were taken up by the Government solely, however, this increased the financial as well as labour stress on the Government bodies. Therefore, an alternative arrangement in the form of Private Participation Projects (Public Private Participation) under the headings like Build – Operate – Transfer (BOT) can be applicable.

In the process of the financing planning, there are many assessment methods such as NPV (net present value), BCA (benefit cost …show more content…

The types of risks are several at the different at each stage of the project and hence need to be mitigated appropriately.

1.1.1) Project Start - up phase

During this phase, equipment is tested, raw material inputs are ordered, project staffing is completed, and marketing starts. Loan exposure may rise slightly during this phase due to working capital requirements and final payments to contractors and equipment suppliers. Only then can proper risk assessment be done.

1.1.2) Engineering & Construction Phase

The Project Company draws down the majority of the loan to finance construction activity, equipment purchase, and other pre operating costs. This phase can last several years, depending on the size of the …show more content…

These projects are usually funded with a considerable reliance on external debt, although in most cases liberal grants from the project owners serve to keep leverage moderate Levels. The financing structure is also reviewed for the exposure to interest rate and refinancing risks, given the limited appetite of the Indian capital markets for fixed interest rate long duration (in excess of 10 years) project finance debt. Floating interest rate structure could potentially affect debt servicing, particularly during periods of rising interest

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