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India plans to create world-class infrastructure through the National Infrastructure Pipeline (NIP) and National Monetisation Pipeline (NMP). Both initiatives have a strong focus on transport, and will require substantial investment and technical expertise. To date, the public sector has been the main source of infrastructure spending. In our view, public authorities, with constrained fiscal resources, should seek higher levels of private sector participation and alternative financing mechanisms.
However, poor risk identification and mitigation is considered to have contributed to hitherto uninspiring returns for private sector investors, which in turn has slowed the development of new projects. Pre-feasibility studies are still seen as lacking a comprehensive risk overview, and selection criteria often overlook bidders' risk management capabilities. Insurance coverage for infrastructure risks is commoditised and fragmented. As a result, insurance arranged by contractors could lead to inadequate indemnification at the time of claim. Owner-controlled risk management can be more effective than delegating to contractors or sub-contractors.
The formulation and implementation of sector-specific risk management is also key to improving project risk profiles, and to encourage more public-private partnerships (PPP). A robust analysis of the risks of an infrastructure asset's entire lifecycle (from design to end-of-life demolition, refer Figure 1) can help decision-makers determine priorities and protect stakeholder value. This can facilitate timely project completion and minimise public sector funding.
Swiss Re has worked globally with public sector partners to develop insights and policy suggestions to de-risk transport infrastructure. The primary aim has been to contribute to the development of economically viable, risk resilient, as well as environmentally- and socially sensitive infrastructure projects. A key finding of this study is the value of public-private sector collaboration in developing required risk taxonomies and management frameworks. A structured risk-resilience framework can help address operational blind spots in infrastructure projects (refer Figure 2). These can help build investor confidence and attract funding for infrastructure projects.