GIM CPPG

Infrastructure Development, Regulation and Financing

Faculty Offering

Sebastian Morris

Senior Professor, General Management & Public Policy & Chair, Centre for Public Policy & Governance

Programme / Term

PGP, BIFS / V (at GIM); PGP, PGP X (at IIMA)

No. of sessions

20-24 sessions depends upon the version of the course

Course description

Private provisioning of infrastructure has reemerged from the late 20th century, after having been in the doldrums for nearly 60 years,  though this time around  with innovations in oversight and regulation and choices with regard to market structure.  With the “de-regulation” movement that had started in the UK and the US, there has been a shift towards light and incentive compatible regulation. Another important change has been the pursuit of unbundling and the concomitant  marketization of segments of industry hitherto regulated as natural monopolies, while the networks were subject to incentive regulation.  In the UK, and from 1997 in India there has also been a privatization of infrastructure. In the UK this meant the reversal of the post WWII nationalizations, while in India “cold- privatizations” have been the norm. Regulation in India has not moved completely to incentive compatible mechanisms, and the electricity sector has moved to unbundling with marketization being just round the corner.  It is in PPPs in the roads, ports and airports that India has made major progress, and India is at a stage of development where the physical infrastructural investments would grow at very high rates, with much of the same happening through a deeper role for the private sector, given the organizational limitations of the state.  Similarly, in many developing countries, the agenda of privatization and PPPs have gone forward, which are seen to be significant mechanisms to enhance investments in infrastructure, and enhance social value. As a result, the practice of “government and infrastructure” consultation has grown along with very large growth of private investments in infrastructure.

Programme / Term

  1. To familiarize students with the special problems of infrastructure sectors, given the many market failures, with the traditional (state ownership, regulation) and modern (unbundling, marketization, incentive regulation)  modes of determining services provision, and develop skills in understanding regulatory practices in a wide variety of infrastructure. 
  2. In “public infrastructure” to develop approaches to public provisioning via for profit entities i.e. through PPPs. To develop understanding of the financing mechanisms for infrastructure and especially PPPs and the various risk allocation models. 
    To understand the issues relevant to regulation and structuring, to the development of domestic capital markets and the role of foreign funds. 
  3. To develop the skills and understanding necessary to structure, appraise, finance and implement infrastructure projects in sectors such as power, and transport (including rail, roads, air and ports). 
  4. To bring to the students the experience of India from 1997 onwards in the major infrastructure sectors (other than telecom).
  5. To understand and appreciate the language of regulation and private participation in infrastructure.

1. Core Courses

Market failures (revision). The natural monopoly in history. Regulatory experiences. Deregulation. Gas, electricity, telecom, natural gas networks. Incentive regulation.  
Social cost benefit analysis.  Social, private and public value. Innovations in regulation. RPI-X.  
Marketisation. Created markets in electricity and gas. 
The appropriability failure and public goods. Subtractability. Tariff mechanisms. Value creation through privatization. 
Public Private Partnerships and their design in a variety of contexts. Endogenous risks, risk allocation mechanisms. Case studies of PPPs. PPPs in water and sewerage sectors.   Financing infrastructure. Design of PPPs. The risk allocation framework.  
Capital markets and infrastructure. Brownfield investments.  The experience of India in detail. Take-out financing. InVITs. 
Basic transport economics. Design of road networks. 
Land acquisition, land markets and land aggregation. TP Schemes, TDRs.

Methodology

Students are expected to have gone through the core readings  and cases, before they come to class. They are expected to raise the issues for discussion and resolution. On a day when the readings are heavy they are expected to go through the readings in their groups, sharing and discussing the same.

Group Projects and Journal

Group projects are an integral part of learning. Students are expected to form into groups of 4/5 to work on their projects. The projects would be due a week from the close of the term. Proposals are due by the 6th class. Students are expected to take a project in consultation with the instructor. The proposals must include a statement of the problem they seek to address, breaking down the same in to questions and an indication of how they would address the same.  They should pose the questions sharply, and if the working involves data they must indicate the data sources as well. Students would maintain a journal in which they would record questions that they raised and the learnings, on a session by session basis. The same would be submitted for evaluation.

For whom

  1. Students seeking a deep understanding of the  new opportunities in PPPs and private capital in infrastructure, and willing to work hard would find the course engaging and useful. 
  2. Consultants in government and infrastructure verticals, developers, regulators, and senior (credit) staff of BSFIs seeking to finance infrastructure projects, would find the course very useful saving them many years of learning on the job. Prerequisites for the course would be basics of  microeconomics, capital finance, and financial markets.
  3. Students should have a sound knowledge of basic concepts in financing, microeconomics, and organizational management. This course would not suit the causal attendee.

Evaluation

Title

Percentage

Class Participation

30%

Exam/Individual assignment/Journal**

30%

Group Project

30%

TOTAL

100%

Section wise outline

Session Seq /Date & Time

Topic

Cases/Readings

1,2 and 3

Market Failure Regulation and Public Ownership in Concept and in History

Readings Rajan, R. (2000). “Market Failure and Intervention by the State”, IIMA Case.  Mansfield, Edwin (1985), Chapter 16 “Public Goods, Externalities and the Role of Governments”, in in  Mansfield, Edwin (1985), Microeconomics – Theory and Applications, Fifth Edition, W. W. Norton  and Company, New York and London

4 and 5

Innovations in Regulation

Readings  Decker, Cris (2009), “Characteristics of Alternative Price Control Regimes”, OFGEM, 2009.

6 & 7

The Challenge of Financing in a Liberal Financial Market

Readings  Morris, S. (2001), “Issues in Infrastructure Development – The Interlinkages” Chapter 1 in Morris, S. (ed.) (2001) Varma, Jayanth (2001), “Regulatory Dilemmas in Infrastructure Financing”, Chapter 4, in Morris, S. (ed.) (2001)

8

PPPs an Introduction

Readings Pollitt, Michael G  (2009), “The Declining Role of the State in Infrastructure Investments in the UK”, Working Paper, Judge Institute of Management, Univ. of Cambridge.  Morris, Sebastian (2004), “Overview”, in IIR2004 up to p.14 slipping into recession.

Reference Books

  1. India Infrastructure Report: 2001: Issues in Regulation and Market Structure, Oxford Univ. Press (https://www.researchgate.net/publication/334194110_INDIA_INFRASTRUCTURE_REPORT_2001_-_ISSUES_IN_MARKET_STRUCTURE_AND_REGULATION )
  2. India Infrastructure Report: 2002: Governance Issues for Commercialization, Oxford Univ. Press. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2289223
  3. India Infrastructure Report: 2003: Public Expenditure Allocation and Accountability, Oxford Univ. Press.
  4. Indian Infrastructure Report: 2006: Urban Infrastructure, Oxford Univ. Press. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2182502  https://www.idfc.com/pdf/report/IIR-2006.pdf
  5. India Infrastructure Report: 2004: Ensuring Value for Money, Oxford Univ. Press
  6. World Bank https://ppiaf.org/knowledge
  7. https://www.pppinindia.gov.in/toolkit/pdf/case_studies.pdf
  8. Gajendra Haldea http://www.gajendrahaldea.in/published-books.asp
  9. https://www.researchgate.net/publication/266880813_International_handbook_on_public-private_partnerships

Institutions where the course is offered

GIM, IIM-A

Course outline

Scroll to Top