Risk perception in PPP infrastructure project financing in India

Abstract

PurposeThe purpose of this paper is to examine the risk perception of project sponsors in financing of public–private partnership (PPP) infrastructure projects in India.Design/methodology/approachThe methodology used is survey questionnaire that seeks the perception of risk managers in PPP projects. Rating and relative ranking of risk at various phases of PPP project have been analyzed and supplemented by unstructured interviews.FindingsThis paper shows that the perception of project sponsors for various levels of project risk categories differ significantly in PPP infrastructure projects. The practices of assessing risk and handling differ among the financing institutions. The ranking of risks shows a disagreement among respondents for relative importance. The project financiers that include major banks and financial institutions funding for the PPP infrastructure projects perceive risks differently, and their disagreement on the relative importance of risks may create a sub-optimality in risk management, and the essence of project sponsorship may be lost.Research limitations/implicationsThis paper examines the perceptions of the various risks involved in PPP infrastructure project financing. The authors emphasize on the infrastructure projects in the transportation and energy sector that are undertaken in the PPPs. This research can further be extended to the other infrastructure sectors such as roads, shipping and communication.Practical implicationsExperiences reveal that risk perception profoundly influence the implementation of infrastructure projects involving PPPs. To ensure smooth implementation and success of PPP infrastructure projects, the project sponsors must align, synchronize and develop consensus on the various funding and non-funding risks into the project curriculum.Social implicationsThe PPP infrastructure projects carry huge investment and are of strategic importance to the nation and society. In order that the provision of infrastructure which can be most economically and efficiently delivered through PPPs, the risk concordance assumes crucial importance.Originality/valueThe authors believe that this research may provide new direction to the visible and invisible misbalances in risk postures of project partners, which has been a cause of concern to the government and policymakers in India in the recent times.