Advanced Management Program for Infrastructure

Indian School of Business

Infrastructure Economics and Regulation

Residency 2, 2018-2019

Instructor
Sisir Debnath
Office telephone: TBA
Location: TBA
Email: sisir_debnath@isb.edu
Office hours: By appointment

Teaching Assistant
Vijayetta Sharma
Office telephone: -------
Location: -----------------
Email: vijayetta_sharma@isb.edu
Office hours: By appointment

Course Objectives
This course studies the economic aspects of infrastructure using the tools of economic analysis in
deciding the optimal level of infrastructure provision, the role of public and private sector in their
provision and operation and shows the policy implications of the deregulation process that has
taken place in infrastructure markets in recent years. The emphasis of the course is empirical,
with detailed examples and case studies to show the economic consequences of alternative policy
designs.
This is a course meant for those interested in improving the design and economic management of
infrastructure projects. It will be most useful for those who aspire to be thought leaders in
infrastructure management. We believe that students do not have to work in the government to
improve design and implementation of public policies. This course is also suited for those who
plan to join an advisory business (public, private or international organizations).

Learning Goals:
The course is intended to teach you the process of critical and integrative thinking. Assessment
will be through attendance, in-class quizzes, home works, and a final exam.

Methodology:
Towards meeting the learning goals, the course introduces you to the economist’s way of thinking
about problems and making decisions. A central component of economics methodology
involves running controlled thought experiments called models. These are toy versions of real
situations in which the less critical aspects of the problem are stripped away to focus on
understanding the primary issue under consideration. Beyond appreciating this technique,
learning economics necessarily entails engagement and arguments with the logic. Most
importantly, we do NOT offer a laundry list of facts to be learnt by rote – otherwise, there
would be no need for a course.

Course Material
Each class has a prescribed set of readings from the popular press. These are available on the
course webpage. You are expected to access that material and be familiar with it prior to the
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Handouts, if any, for each lecture will be handed out in class. They will also be available on the
course webpage after the lecture.

Required Textbook
None.

Course Schedule
(Note that content and dates may change to accommodate the pace of the class. Such changes will
be announced.)
Here is an approximate outline of what is intended for each class. You would be expected to
familiarize yourself with the readings before each lecture.

Date Topics and Readings

Session 1 (July 17): Infrastructure and Economic Growth

 Economic growth and factors affecting it
 Effect of infrastructure on growth
Required Readings:
 “Building BRICs of growth”, The Economist, June 5, 2008
 “Sunk Infrastructure”, The Economist, August 13, 2007

Session 2 (July 18): Infrastructure as a Public Good

 Public goods and demand
 Provisioning public goods
Required Readings:
 “Crowdfunding public radio”, The Economist, Aug. 9, 2012
 “Why Japan leads the world in high-speed trains”, The
Economist, June 10, 2014

Session 3 (July 18): Network Infrastructures

 Types of network industries
 Network effects and manipulating the market
Required Readings:
 “Knowledge is power: Do we need a new competition policy for the
new economy?” The Economist, September 21, 2000
 “A Look Back At Why Blockbuster Really Failed And Why It
Didn't Have To” Forbes, September 5, 2014

Session 4 (July 19): Auctions in Infrastructure

 Auctions and their advantages
 Types of auctions
Required Readings:
 “Infrastructure Concessions: To Auction or Not to Auction?”
Klein, Michael, Viewpoint, World Bank, 1998

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Session 5 (July 19): Economics of Public Private Partnership
 Theory of Public Private Partnerships
 Problems in Public Private Partnerships
Required Readings:
 “How and when to use private money in infrastructure projects”
The Economist, April 22, 2017
 “World Offers Cautionary Tale for Trump’s Infrastructure Plan”
The New York Times, June 16, 2017

Session 6 (July 20): Economic Cost-Benefit Analysis of Infrastructure Projects

 Economic costs v/s financial costs
 Economic decision criteria
Required Readings:
 “Cost-benefit analysis of high speed rail”, Henri Dijkman, Carl
Koopmans and Martin Vromans

Session 7 (July 20) Economic Impact of Government Regulations

 Market efficiency and distortions
 Types of regulatory distortions
Required Readings:
 “Do Rent Controls Work?”, The Economist, Aug. 30, 2015
 “Paying with our Sins”, The New York Times, May 16, 2009

Sessions 8-9 (July 21): Regulations in Infrastructure – I & II

 Types of Regulatory Models
 Infrastructure regulation in India and abroad
 Regulatory issues and reforms
Required Readings:
 “In the Name of Privatisation”, Financial Express, Nov. 1, 2010
 “Privatising India's Water Is a Bad Idea”, The Wire, Oct. 17, 2016
 “Regulator as Threat: Delhi’s Power Scene”, Livemint, Feb. 5,
2014
 “Tata Bid to Rescue Mundra”, The Telegraph, Jun. 23, 2017

Session 10 (July 22): Dabhol Case Study

 Focus:
o Consumers and their objectives
o Market entry strategy
o Power purchase agreement
o What went wrong?
Mandatory Reading:
 “Enron Development Corporation: The Dabhol Power Project in
Maharashtra, India (A).” Rangan, V. Kasturi, Krishna G. Palepu,
Ahu Bhasin, Mihir A. Desai, and Sarayu Srinivasan, Harvard
Business School Case 596-099, May 1996. (Revised July 1998.)

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Grading

The details of the grading components for this course are as below:

Date of Submission/ Submiss

Component Deadline ion of Final Coding Scheme
Grade

At the beginning of
In-class Quiz 1 In-class Hardcopy 4N
Session 3 10%

At the beginning of
In-class Quiz 2 In-class Hardcopy 4N
Session 5 10%

Class Participation All Sessions In-class - 10%

8:30 am on the
Individual
final day of the Take-home Hardcopy 2N-b
H omework 25%
residency

End-term Exam Details TBA In-class Hardcopy 45% 4N

Online Course Management

All presentations and other relevant material used in class will be placed on LMS at least a day
before class discussion. In addition, copies of presentations to be discussed in class during
residency will be provided to students. This will ensure that students spend most of their time in
class listening, discussing and understanding, and little time in extensive note taking.

Attendance, Punctuality and Classroom Conduct

Students will be expected to be prepared for all classes. This includes having done the readings
and being prepared to answer questions/participate in discussions. Students should arrive in class
on time, not leave the class during the session, and not perform any other activity that is unrelated
to the course during class-time.
The only way to learn is to be prepared for classes by reading the material before each class. It is
useful to ask questions and actively participate in class. There are numerous opportunities and
options outside the classroom made available for students. Students should make use of instructor
office hours as well as those of academic assistants (AAs) assigned to the course.

Learning is an interactive process. ISB students are admitted partly based on the experiences they
bring to the learning community and what they can add to class discussions. Therefore,
attendance is an important aspect of studying here. You have to be present in all the classes,
including in the technology-assisted learning sessions. Absence is only appropriate in cases of
extreme personal illness, injury, or close family bereavement. Late arrival is disruptive to the
learning environment; so you have to be in class before the scheduled time.
Last but not the least, it is IMPERATIVE, that we treat all stakeholders in the classroom (and
possibly those outside the classroom too, though we have little control over that) with respect.
Learning is not about putting others down as much as being attentive to others’ perspectives.
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Academic Integrity and Honor Code
You are expected to maintain the highest levels of integrity and honesty in all your academic
endeavors at the ISB. This includes, but is not limited to, not copying material verbatim from
any source under any circumstances, citing external sources properly when allowed to refer to
external sources and not colluding or sharing information when the course faculty has explicitly
told you not share information. Failure to maintain academic integrity and honesty will result in
severe penalties, including possibly permanent expulsion from the ISB.

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