Unit costs of public and PPP road projects: Evidence from India

There has been an overall increase in the level of private-sector investment for the road sector in many developing countries during the past decade. However, there has been limited research on the effect of such increased private-sector participation on road costs. By using data from 521 public and private road projects in India, it was found that there are significant differences between public and private-sector projects. Public - private partnership (PPP) roads have a longer length, a higher project cost, and lower unit costs than public projects. Although regression analysis indicated that private-sector investment tended to increase unit costs, lower unit costs were achieved for PPP road projects because developers could take advantage of economies of scale. It was also found that the presence of foreign sponsors in the private consortium and prevalence of corruption increased unit costs. Results from a logistic regression analysis indicated that states that were more developed and had lower levels of corruption could be more successful in attracting private-sector investment for road projects.