Assessment of Financial Risk Parameters Associated with Public-Private Partnership Port Projects in India

In developing countries infrastructure investment is increased in last few decades. Public private partnership plays important role in low- and middle-income countries for providing finance. 95% of India international trade is transport through port sector. Hence it is big infrastructural project for India to connect with other countries. Public private partnership is new way for private investment in port infrastructure project. Central Ministries would oversee implementing the projects listed under the Sagarmala programme mostly in a private or PPP approach. In public private partnership model some issues may arise during whole life cycle of port project. Some of the problems include financial, legal, social, land acquisition as well as construction time delay. The aim of this paper is to investigate risk parameter associated with public private partnership project and further modelling the risk. Monte Carlo simulation is used in the Net Present Value (NPV) @RISK model to mitigate risk. Various risk parameter associated with port project are found out by previous literature survey. The two risks that have the most effects on public-private partnership projects are discount rate and capital cost. The application of this paper helps to identify which sources of risk affect more. The proposed model can be used as decision making for investment by private investors and gives profitability of the project. This will be more helpful for public authorities to identify parameter which have largest impact on investment. It helps to apply corresponding strategy to minimize the financial risk during preconstruction stage.