A Method to Analyse the Viability of Private Sector Participation in New Infrastructure Projects in Sri Lanka

In view of the Government of Sri Lanka’s (GOSL) aims to finance new infrastructure projects through private sector participation, this study outlined a methodology based on financial and risk analyses that could be used by the GOSL or a government utility to analyze the viability of private sector participation in new infrastructure projects. The method is complementary to the price, tariff or toll measure of viability that is adopted at present, and it forces utilities to compare the benefits of projected consumption growth with the cost of incremental supply before rejecting private sector participation in new infrastructure projects. The water supply projects in Sri Lanka are used as the case study. The suggested method addresses some of the key issues that arise in Sri Lanka regarding private sector participation in new infrastructure projects. To reap benefits from private sector participation in new infrastructure projects in the water supply sector, the GOSL should review its policy on water pricing with reasonable increases in tariffs.