Evaluation of PPP Projects in India: The Case of Power Transmission Lines

In the Twelfth Five Year Plan (2012-2017), Indian government had set the ground for making investment in infrastructure, which is crucial to the growth and sustenance of Indian economy. To actualize this, the government has been methodically bringing out Public-Private-Partnership programs for development of various public utilities that contribute to the country's infrastructure .India has been a front runner in the implementation of PPP projects at the world level so far. However, issues like the sources of finance and funding, evaluation of PPP projects seem to be concern areas for the private players. In other words, there is no mechanism in place for appraising the projects. The long-term nature of PPP projects and the complexity involved in it make these projects unattractive for new private players. The aim of the paper is to decode one such area i.e. how to appraise a PPP capital investment, especially when multiple stakeholders are involved. The time-tested capital budgeting technique of appraising investment projects are employed. The authors have chosen a power transmission line which is being developed on PPP model. It is one of the most promising areas to scale up private investment. The results of the analysis present the project's internal rate of return at 12%, which is much above the company's hurdle rate computed. The project qualifies for selection from the financial angle. However, the soft aspects relating to the project like managerial expertise required etc. are not covered as a part of the study.