IIT Madras and Harvard University completed a landmark study of impact of PSP on project outcomes

Updated on: Thursday, August 22, 2013

In a joint effort, IIT Madras and Harvard University has completed a landmark study on the impact of private sector participation (PSP) in infrastructure.

PSPs have been increasingly used for infrastructure development all over the world. However, impact of PSP on project outcomes is still unclear.

The study is an analysis of the evidence on the impact of PSP on access and quality in electricity, telecom, and water supply. In addition to determining the nature of impact, this review also traces the mechanisms that explain the impact of changes in access and quality.

Thillai Rajan, IIT Madras was the principal investigator for this project. Other members of the team included Prof. Ashwin Mahalingam (IIT Madras) and Prof. Akash Deep (Harvard University).

According to the study, implementation of PSP should not be done in isolation but as a part of a broader reform strategy that includes regulatory reform and introduction of competition. PSP is not very effective in achieving the desired outcomes without corresponding changes in the market, institutional and governance structures.

Higher improvements can be achieved in outcomes if incentives for improvements are inbuilt into PSP contracts.

In the absence of financial support from the government, PSP does not lead to improvements in access for rural and poor consumers.

There should be strong clarity on the objectives of implementing PSP given the potential trade-offs between different outcomes.

Other findings of the study were, PSP on its own does not seem to have a significant impact on improvements in access and quality.

Considering synchronously with other reform components, PSP is associated with more positive than negative outcomes.

Without financial support from the government, access to poor and rural consumers are affected as a result of PSP.

Identifying the objectives of PSP would help in appropriately handling the potential trade-offs between outcomes, the study revealed.

IIT Madras and Harvard University completed a landmark study of impact of PSP on project outcomes

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