Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

PPP to EPC: Will it help economy?
Wed, 19 Mar Pre-Open

Here is another example of private sector's weak sentiments about the Indian economy. Public Private Partnership (PPP) model, an arrangement between the Government and private sector is losing relevance these days because the private developers do not want to take the risks associated with getting clearances, funding etc, related to such projects, especially in the times of economic slowdown. This has not only stalled the infrastructural investment and development in the country but has badly impacted infrastructure companies as well. As per an article in Economic Times, of a total of 2000 kilometer project target of National Highway Authority of India (NHAI), just 123 Km was awarded last November.

As a result, the focus is now shifting to awarding projects as cash contracts or EPC (Engineering, procurement and construction) contracts, as widely known. Unlike PPP model where the investments are made and/or management is undertaken and significant risks are borne by the private sector entity, cash contracts or EPC model shifts such risks to the Government. Under EPC model, key issues like funding, etc lie with the Government. While this will put a lot of burden on the Government, the shift might be positive for infrastructure companies which will be able to focus on core business and issues. Already, most infrastructure companies are cash constrained and struggling because of lack of new orders. Hopefully, this will speed up infrastructural activity which is vital to economic growth of the country.

As per the EPC arrangement, the contractors get the contract on the basis of the bids or the cost of construction which is completely funded by the government. Every project has an estimated project cost and the contractor who proposes to complete the project at the lowest cost stands a good chance to get the contract. After a muted activity, chances are that the developers will be aggressive with their bids. As such, the Government will need to ensure that the contractors do not make unrealistically low bids and that the project remains financially viable. Further, issues regarding clearances and land acquisition will need to be quickly sorted so that the development work does not get affected. While the shift from PPP to EPC will transfer risks from Private players to the Government, whether the model works or not will depend on how well Government tackles these risks, something only time will tell.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary

What else is happening in the markets today? Dig in...

Equitymaster requests your view! Post a comment on "PPP to EPC: Will it help economy?". Click here!


Views on News

My Latest Stock Recommendation (Fast Profits Daily)

Oct 9, 2020

How I picked an exciting stock using trends from both the commodity and equity markets.

Data is the New Oil but It's Also the New Sugar. Here's How to Fight it (Profit Hunter)

Jun 1, 2020

Is too much data hurting your quest for market beating returns?

Quantum Mutual Fund: Hum woh nahi hain (The Honest Truth)

Apr 29, 2020

Ajit Dayal on how the mutual fund industry robs you of your wealth.

This One Trigger Could Turnaround Yes Bank's Stock Price (The 5 Minute Wrapup)

Oct 16, 2019

If Yes Bank manages to do this, it could be the start of a much-needed turnaround for the bank.

Gold could Hit 40,000 Sooner Than Expected (Profit Hunter)

Aug 16, 2019

Domestic gold prices are firing on both engines now. Gold prices could touch 40,000 faster than you could imagine.

More Views on News

Most Popular

It's the Beginning of a New Bull Phase in Smallcaps (Profit Hunter)

Feb 24, 2021

Last time the smallcap index crossed 19k a big correction followed. Here's what makes it different this time.

Intraday Trading for a Living (Fast Profits Daily)

Feb 15, 2021

In this video, I'll cover your queries on intraday trading and also share my view on how to decide stop losses and target prices.

Top 5 Stocks Mutual Funds Bought and Sold in January 2021 (Sector Info)

Feb 16, 2021

A look at what India's top equity mutual funds bought and sold in January 2021.

I Would Recommend this Small-cap Stock Over Tesla (Profit Hunter)

Feb 16, 2021

Do you enjoy reading Tesla and Bitcoin stories? Here's a not so famous small-cap stock to profit from the rise of EVs.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms