Distribution of Highways Public Private Partnerships in India: Key Legal and Economic Determinants

Working Paper

Published By

CDDRL Working Papers

September 2009

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Private sector participation and private investment have become the mainstay of the Government of India's policy toward infrastructural development. The success of the ongoing eleventh five-year plan critically depends on the success of Public Private Partnerships (PPPs) in infrastructure. Moreover, several state governments are also trying to attract PPPs for the provision of public goods.

In this paper, we have studied the performance of the Public Private Partnerships (PPPs) programme of Government of India, for development of highways and expressways. The focus of the study is on the following questions: Why have some projects attracted private investment while others have not? Why only a few states have attracted PPPs, while some others have completely failed to do so? We have also discussed some other issues related to the PPP policy and its limited success. We have provided a set of legal and economic variables that explain the skewed distribution of PPPs across projects as well as across the states. We have shown that the richer states have attracted more PPPs than the poorer ones. Besides, the probability of PPP is higher for projects located on national highways connecting richer states, and those located closer to mega cities. Moreover, ceteris paribus, the quality of governance, in terms of the level of property rights protection, in a state is also a significant explanatory variable. Empirical evidence in support of these claims is conclusive and robust. In the light of our findings, we have answered the following additional questions: Is PPP a viable and desirable public policy for development of infrastructure in poor states? What are the lessons emerging from the Indian experience with PPPs so far? Our dataset includes all of the highway and expressway projects that have been or are being developed as a part of the National Highways Development Project (NHDP).

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