Accelerating PPP in India

"##$%$&'()*+
,-.%)# ,&)/'($
,'&(*$&01),0 )* 2*3)'
FICCI
l am happy Lo share wiLh you Lhe FlCClL&Y ReporL on !""#$#%&'()* ,,, () -).(& Lo be
released aL Lhe lndia PPP SummiL 2012 orqanized by FlCCl.
lndian inlrasLrucLure secLor is qoinq Lhrouqh a siqnilcanL LranslormaLion. lnvesLmenL
in inlrasLrucLure is envisaqed Lo be doubled Lo US S 1 Lrillion durinq Lhe 1wellLh Five
Year Plan and abouL hall ol Lhis is LarqeLed Lo be achieved Lhrouqh privaLe secLor
invesLmenL.
lndian CovernmenL has Laken a number ol sLeps Lo encouraqe privaLe invesLmenL in
inlrasLrucLure Lhrouqh publicprivaLeparLnerships. However, iL has been observed
LhaL while PPP pro|ecLs in some secLors have displayed qood proqress, several oLhers
achieved only limiLed success. lssues relaLinq Lo pro|ecL implemenLaLion, moniLorinq
and dispuLe resoluLion are amonq Lhe key concerns ol Lhe inlrasLrucLure developers.
1o discuss some ol Lhe criLical issues, FlCCl is orqanisinq Lhe lndia PPP SummiL 2012 in New Delhi. 1he summiL will
also locus on procedural boLLlenecks adversely impacLinq Lhe abiliLy Lo implemenL inlrasLrucLure pro|ecLs and Lime
bound execuLion ol PPP pro|ecLs.
As 'Knowledqe ParLner' lor Lhe evenL, LrnsL & Younq has prepared a comprehensive Backqround Paper coverinq a
larqe number ol imporLanL areas. 1he reporL has been prepared Lhrouqh deLailed analysis ol several criLical lacLors
inluencinq PPP pro|ecLs in lndia. l Lake Lhis opporLuniLy Lo Lhank Lhem lor Lheir ellorLs.
AL Lhe summiL, Lhe speakers, experLs and deleqaLes would discuss a wide ranqe ol Lopics perLaininq Lo Lhis imporLanL
area. l hope you will lnd Lhis reporL uselul and as always, your suqqesLions and leedback are welcome.
Hemant Kancria
Chairman
FlCCl NaLional CommiLLee on lnlrasLrucLure
Foreword
lndia has wiLnessed a hiqh economic qrowLh in lasL lew years. However, laLely
iL has been lacinq sLronq headwinds wiLh qrowLh raLe declininq lrom 9 plus Lo
around 77. Many reasons have been aLLribuLed Lo Lhe slowdown in Lhe economy
and lack ol adequaLe and qualiLy inlrasLrucLure is undoubLedly one ol Lhem. BoLh
lederal and provincial qovernmenLs have been Lakinq number ol measures wiLh
varied success. Public PrivaLe ParLnership lormaL, wiLh iLs mixed success across
Lhe qlobe, has been acknowledqed as an essenLial Lool lor locused privaLe secLor
invesLmenLs in economic and social inlrasLrucLure pro|ecLs.
1he lndian PPP sLory has been a mixed baq so lar. NaLional Hiqhway DevelopmenL
Proqram, despiLe iLs many challenqes in meeLinq iLs LarqeL, has been successlul in
aLLracLinq huqe privaLe secLor invesLmenLs. However, Lhere exisLs huqe unLapped
poLenLial lor PPPs in secLors like Railways, Power 1ransmission and DisLribuLion,
LducaLion, HealLh and Urban inlrasLrucLure. 1he deqree ol use ol PPP lormaLs and consequenLly amounL ol
privaLe secLor invesLmenLs in inlrasLrucLure pro|ecL shows huqe variaLions across various sLaLes. 1he lnancinq
ol PPPs is also emerqinq as a challenqe as commercial banks are reachinq Lheir secLor exposure norms. lndian
privaLe secLor also have capaciLy consLrainLs Lo lund qiqanLic equiLy requiremenLs hence necessiLaLinq hiqher FDl
and more loreiqn players.
CovernmenL in order Lo propel PPPs, which are expecLed Lo brinq in abouL 507 ol Lhe inlrasLrucLure spend ol USD
1000 billion in 1wellLh Five Year Plan (201217) is Lakinq sLeps Lo lurLher sLreamline PPP processes by dralLinq
naLional PPP policy and developmenL ol corporaLe Bond markeLs. Many sLaLe qovernmenLs, like KarnaLaka and
Andhra Pradesh have puL in place an insLiLuLional lramework lor encouraqinq PPPs whereas oLher sLaLes are in
process ol doinq so.
lndia PPP SummiL 2012, beinq orqanized by FlCCl, is a plaLlorm Lo brinq LoqeLher policymakers, requlaLory
auLhoriLies, indusLry experLs and business leaders lrom Lhe inlrasLrucLure secLor Lo |oin hands in dealinq wiLh
issues perLaininq Lo implemenLaLion, moniLorinq and lnancinq ol PPP pro|ecLs in Lhe counLry.
1his paper locuses on proqression ol PPPs over Lhe years, exisLinq lrameworks and challenqes lor PPPs in lndia,
sLaLe level experience and secLor relaLed opporLuniLies, pracLices lollowed in oLher counLries, lundinq opLions lor
lnancinq PPPs and recommendaLions lor spearheadinq Lhe usaqe ol PPPs in lndia.
l am privileqed Lo presenL Lhe FlCClLrnsL & Younq ReporL, !""#$#%&'()* ,,, () -).(&, which especially locuses on
various aspecLs ol promoLinq PPPs in lndia.
Abhaya Krishna AarwaI
LxecuLive DirecLor and NaLional Leader Public PrivaLe ParLnerships
CovernmenL & 1ransacLion Advisory Services
Ernst & Young
AcceIeratin pubIic private partnerships in !ndia | 4
1.Public privaLe parLnership in lndia 07
1.1 LvoluLion ol PPPs 07
1.2 CurrenL sLaLus ol PPPs in lndia 07
1.3 Common lorms ol PPP models in lndia 08
1.^ PPP policy lramework 09
1.5 Challenqes in PPP in lndia 11
1.6 SLaLelevel experience 12
1.6.1 Andhra Pradesh 12
1.6.2 KarnaLaka 1^
1.6.3 Cu|araL 15
1.6.^ Jharkhand 16
1.6.5 ChhaLLisqarh 16
1.7 lnLernaLional experience 17
1.7.1 UniLed Kinqdom 17
1.7.2 AusLralia 18
1.7.3 Brazil 19
1.7.^ Philippines 20
2. Fundinq inlrasLrucLure Lhrouqh public privaLe parLnerships 23
2.1 Overview 23
2.2 MeeLinq Lhe 1wellLh Five Year Plan LarqeLs 23
Contents
{ AcceIeratin pubIic private partnerships in !ndia 5
2.3 Means ol inlrasLrucLure lundinq 2^
2.3.1 Commercial lendinq 25
2.3.2 Bonds 28
2.3.3 LxLernal commercial borrowinqs 28
2.3.^ Foreiqn invesLmenL lundinq 29
2.3.5 Foreiqn lnsLiLuLional lnvesLmenL (Fll) 29
2.3.6 MulLilaLeral aqencies lendinq 29
2.3.7 lnsurance/pension lunds 23
2.^ CranLs 31
2.5 PrivaLe secLor capabiliLies 31
3. Key lndusLries/secLors lor PPP 35
3.1 Hiqhways 35
3.2 Railways 36
3.3 Power 37
3.^ Urban inlrasLrucLure 38
^. RecommendaLions ^1
^.1 Policy recommendaLions ^1
^.2 Pro|ecL developmenL recommendaLions ^1
^.3 Financinq recommendaLions ^2
AcceIeratin pubIic private partnerships in !ndia |
"PPP pro|ects take much less
time to complete and the
Covernment does not have to
bear cost overruns. This will
not only enable us to leverage
our limited public resources
but also improve eIhciency oI
service delivery."
Shri Manmohan Sinqh,
Honorable Prime MinisLer ol lndia
Source: PM inauqural address aL Lhe Conlerence on
Public PrivaLe ParLnership in NaLional Hiqhways
A public privaLe parLnership (PPP) is an aqreemenL beLween Lhe qovernmenL and privaLe secLor lor Lhe purpose
ol provisioninq ol public services or inlrasLrucLure. WiLh a common vision in place, Lhe public and privaLe secLor
brinq Lo Lhe Lable Lheir own experiences and sLrenqLhs resulLinq in accomplishmenL ol muLual ob|ecLives.
1he CovernmenL ol lndia (Col) has been locusinq on Lhe developmenL ol enablinq Lools and acLiviLies Lo encouraqe
privaLe secLor invesLmenLs in Lhe counLry Lhrouqh Lhe PPP lormaL. PrivaLe invesLmenLs amounLinq Lo USS150
billion is expecLed Lo bridqe Lhe inlrasLrucLure qap ol USS500 billion over Lhe period 20072012
1
. As a parL ol
meeLinq Lhis lnancinq qap, Lhe PPP model is increasinqly been seen as a means ol harnessinq privaLe secLor
invesLmenL and seekinq operaLional ellciencies in Lhe provision ol public asseLs and services.
1he exLenL Lo which Lhe Col envisaqes a siqnilcanL role played by PPP in improvinq Lhe level and qualiLy ol
economic and social inlrasLrucLure services is increasinqly evidenL lrom Lhe qrowinq reliance on Lhe PPP model in
Lhe recenL pasL.
1.1 Evolution oI PPPs
2
1.2 Current status oI PPPs in India
1he PPP lndia daLabase (DeparLmenL ol Lconomic Allairs, MinisLry ol Finance) indicaLes LhaL 758 PPP pro|ecLs
cosLinq lNR3,833 billion
3
is awarded/underway sLaLus (i.e., in operaLional, consLrucLional or in sLaqes wherein aL
leasL consLrucLion/implemenLaLion is imminenL). 1here exisLs siqnilcanL unLapped poLenLial lor Lhe use ol Lhe PPP
model in eqovernance, healLh and educaLion secLors.
1 "lnvesLmenL in lnlrasLrucLure in lndia," !%'("$# /&0# 1#/0('#, hLLp://www.arLiclesbase.com/invesLinqarLicles/invesLmenL
ininlrasLrucLureinindia^585328.hLml, accessed 23 December 2011
2 "FaciliLaLinq PPP lor AcceleraLed lnlrasLrucLure DevelopmenL in lndia," MinisLry ol Finance & Asian DevelopmenL Bank,
December 2006
3 PPP lndia DaLabase as ol 31 July 2011
1.
Public private partnership in India
Source: PPP in lndia websiLe
Few noLable PPPs could be lound as early as
19Lh cenLury:
1he CreaL lndian Peninsular Railway
Company (1853)
1he Bombay 1ramway Company's Lramway
services in Mumbai (187^)
PPP models were Lhere in power qeneraLion
and disLribuLion in Mumbai and KolkaLa in
Lhe early 20Lh cenLury
Only 86 PPP pro|ecLs worLh
lNR3^0 billion were awarded
Lill 200^ (World bank sLudy ol
13 sLaLes in 2005)
MosL ol Lhe pro|ecLs were in
bridqes and roads secLor
Larqescale privaLe lnancinq
has been limiLed Lo
VishakapaLnam and 1irupur
lncreasinq accepLance ol PPP
model due Lo lavorable policy
relorms and innovaLive PPP
sLrucLures
CrowLh in PPP lrom ^50
pro|ecLs cosLinq lNR 2,2^2
billion in November, 2009 Lo
758 PPP pro|ecLs cosLinq
lNR3,833 billion in July 2011
!"#$% '(
19Lh cenLury and
early 20Lh cenLury
!"#$% ''(
1991 2006
!"#$% '''(
AlLer 2006
KarnaLaka, Andhra Pradesh and Madhya Pradesh are Lhe leadinq sLaLes in Lerms ol number and value ol PPP
pro|ecLs. AL Lhe cenLral level, Lhe NaLional Hiqhway AuLhoriLy ol lndia (NHAl) is Lhe leadinq user ol Lhe PPP model.
ln order Lo selecL a provider/award a conLracL a compeLiLive biddinq process (eiLher naLional or inLernaLional) are
lollowed. lnLernaLional compeLiLive biddinq pro|ecLs accounLed lor 357 ol LoLal invesLmenL lollowed by domesLic
compeLiLive biddinq (267).
1.3 Common Iorms oI PPP models in India
While Lhe prelerred lorms ol PPP model is Lhe one in which Lhe ownership ol underlyinq asseL remains wiLh Lhe
public enLiLy durinq Lhe conLracL period and pro|ecL qeLs Lranslerred back Lo public enLiLy on conLracL LerminaLion,
Lhe lnal decision on Lhe lorm ol PPP is deLermined usinq Lhe Value lor Money Analysis.
PPP prcjects in !ndia by sectcr
(TctaI number cf prcjects: 75)*
Source: PPP lndia daLabase, `As ol July 31, 2011
AirporLs,
0.77
LducaLion,
2.27
Lnerqy,
7.^7
HealLhcare,
1.17
PorLs, 8.07
Railways,
0.57
Roads,
53.^7
1ourism,
6.67
Urban
DevelopmenL,
20.17
PPP prcjects by vaIue cf ccntracts
(TctaI vaIue cf ccntracts: !NR3,33 biIIicn)*
Based on lNR 100 crore,
2.57
BeLween lNR 100 Lo
lNR 250 crore,
5.27
BeLween lNR 251 Lo
lNR 500 crore,
1^.^7
More Lhan lNR 500 crore,
77.97
BDT (buiId-cperate-transfer) mcdeIs
1he BO1 lorm ol model and iLs varianLs is Lhe
mosL common lorm ol PPP model used in lndia
accounLinq lor almosL LwoLhirds ol PPP pro|ecLs
in Lhe counLry. 1he Lwo ma|or lorms ol BO1
models are:
!"#$%&## ()"#* +,- ./*#01 Commonly
used in medium Lo larqescale PPPs lor Lhe
enerqy and LransporL subsecLors (road,
porLs and airporLs).
2334567%()"#* +,- ./*#01 Commonly used
in secLors/pro|ecLs noL meanL lor cosL
recovery Lhrouqh user charqes such as
rural, urban, healLh and educaLion secLors
PPP mcdeIs
suppcrted
by the
Ccvernment
Mcdihed desin-buiId (turnkey)
ccntracts
1he desiqnbuild conLracLs yield
benelLs in Lhe lorm ol Lime and cosL
savinqs, ellcienL risksharinq and
improved qualiLy. 1he Lurnkey
approach wiLh milesLonelinked
paymenLs and penalLies or
incenLives can be linked Lo such kind
ol conLracLs.
Perfcrmance based
manaement/maintenance ccntracts
1he PPP models LhaL lead Lo improved
ellciency are encouraqed in an
environmenL LhaL is consLrained by Lhe
availabiliLy ol economic resources. 1he
secLors meanL lor such lorm ol PPP
models include waLer supply, saniLaLion,
solid wasLe manaqemenL, road mainLe
nance eLc.
While Lhere do exisL buildownoperaLe (BOO) models, Lhey are noL supporLed by Lhe Col due Lo iLs lniLe resources
and Lhe complexiLies in imposinq penalLies in case ol nonperlormance and esLimaLion ol value ol underlyinq asseLs
in case ol early LerminaLion. Also, Lhe Col does noL recoqnize Lhe enqineerinqprocuremenLconsLrucLion (LPC)
conLracLs and asseL divesLiLures as PPPs.
1.4 PPP policy Iramework
4
SiqnilcanL qrowLh in Lhe number ol PPPs in Lhe pasL 15 years has made lndia one ol Lhe leadinq PPP markeLs in Lhe
world. As a resulL, a proper PPP ecosysLem comprisinq insLiLuLion, developers, lnanciers, equiLy providers, policies
and procedures has emerqed.
ln Lhe liqhL ol qrowinq PPP Lrends and policy/insLiLuLional inLervenLion, Lhe Col leels iL is imperaLive Lo have in
place a broad policy lramework. Followinq Lhe Finance MinisLers' budqeL 201112 speech Lo come up wiLh a
comprehensive policy, Lhe MinisLry ol Finance dralLed a NaLional PPP policy lor soliciLinq suqqesLions. 1he dralL
NaLional PPP Policy proposes Lo locus on assisLinq CenLral and sLaLe CovernmenL aqencies and privaLe invesLors by:
UnderLakinq PPP pro|ecLs Lhrouqh sLreamlined processes and principles
Lnsurinq adopLion ol value lor money approach Lhrouqh opLimizaLion ol riskreLurn allocaLion in pro|ecL
sLrucLurinq
ALLaininq apL public oversiqhL and moniLorinq ol PPP pro|ecLs
Developinq qovernance sLrucLures Lo laciliLaLe compeLiLiveness, lairness and Lransparency
Prominent Ieatures oI the proposed National PPP policy:
1he Col plan Lo lormalize PPPs as prelerred implemenLaLion models based on Lhe exisLence ol sLronq Lrack
record lor Lhose models. lL has laid down sLronq procedures Lo procure a PPP pro|ecL. ln order Lo insLill
Lransparency in PPP, iL will publish separaLe mandaLory disclosures and lair pracLices, seL up dedicaLed dispuLe
resoluLion mechanism, develop new markeLbased producLs (e.q., prebid raLinq), and explore possibiliLies ol
seLLinq up webbased PPP markeL place.
^ "NaLional Public PrivaLe ParLnership Policy DralL lor consulLaLion," MinisLry ol Finance, SepLember 2011
!"#$% '$()*+ ",- ),./)/0/)$,"( ),)/)"/)12. /"32,4
"#$$%&' () *+ ,,, -))./%0/1 2*33%$$## $* 0$.#/31%&#
/))./%0/1 /&4 /)).*5/1 *+ ).*6#7$0
,.#)/./$%*& *+ ,,, 8**19%$ $* %3).*5# ,,, 4#7%0%*& 3/9%&'
).*7#00
:0$/;1%0<3#&$ *+ $./&0)/.#&$ /&4 7*3)#$%$%5# ;%44%&'
).*7#00#0 $<.*('< 3*4#1 ;%44%&' 4*7(3#&$0
LxLendinq lnancinq supporL Lhrouqh developmenL lunds,
VCF, user charqe relorms, eLc.
=&0$%$($%*&0 >#5#1*)#.0
?%&/&7%#.0 :@(%$A ).*5%4#.0
Need fcr pcIicies
and prccedures in
PPP eccsystem
1he PPP process should comprise lour phases:
1he Col is likely Lo esLablish MlS lor conLinuous moniLorinq ol Lhe perlormance ol PPP pro|ecLs.
1he developmenL ol a susLainable PPP proqram requires a sLronq and well delned insLiLuLional sLrucLure:
SupporLinq Lhe creaLion ol nodal aqencies such as PPP Cells aL Lhe sLaLe or secLor level.
Layinq down ol appraisal mechanism lor PPP pro|ecLs by Lhe PPP Appraisal CommiLLee (PPPAC)
!!!
identihcaticn stae
!"#$%$&$ "( $&)*&+,%-
./*##%#,0 .)"1+-&
.)+(+*$%2%/%&3 *#*/3$%$0
4*/5+ (") 6"#+3
*#*/3$%$0 777 $5%&*2%/%&3
-8+-9$0 *#: %#&+)#*/
-/+*)*#-+$ &" .)"-++:
;%&8 777 :+<+/".=+#&
Prccurement stae
!"#$%$&$ "(
.)"-5)+=+#& *#:
.)"1+-& *;*):
PPP ccntract
manaement and
mcnitcrin stae
!"#$%$&$ "( .)"1+-&
%=./+=+#&*&%"# *#:
="#%&")%#, "<+) &8+
/%(+ "( 777 .)"1+-&
DeveIcpment stae
!"#$%$&$ "( .)"1+-&
.)+.*)*&%"# >%#-/5:%#,
&+-8#%-*/ (+*$%2%/%&3 *#:
lnancial viabiliLy analysis),
.)"1+-& $&)5-&5)%#,0
.)+.*)*&%"# "( -"#&)*-&5*/
:"-5=+#&$ *#: "2&*%#%#, "(
.)"1+-& -/+*)*#-+$ *#:
*..)"<*/
CreaLinq enablinq environmenL lor PPPs:
Col has a proqressive lnancial supporL sysLem lor PPP pro|ecLs. Some ol Lhe key iniLiaLives include lndia
lnlrasLrucLure Pro|ecL DevelopmenL Fund (llPDF), ViabiliLy Cap Fundinq (VCF), resources lor annuiLies/
availabiliLybased paymenLs, lonq Lenor lendinq, relnancinq laciliLy, inlrasLrucLure debL lunds, eLc. 1he Col
will provide leqislaLive and policy supporL Lo develop equiLy, debL, hybrid sLrucLures and appropriaLe crediL
enhancemenL sLrucLures.
1he Col will underLake capaciLy buildinq inLervenLions Lo develop orqanizaLional and individual capaciLies lor
idenLilcaLion, procuremenL and manaqinq PPPs.
1he PPP Cell in DeparLmenL ol Lconomic Allairs will have prolessionals who provide compeLencies and
Lechnical supporL Lo Lhe minisLries and oLher auLhoriLies developinq PPPs.
1.5 Challenges in PPP in India
5
While mosL ol Lhe above challenqes are beinq worked upon by Lhe Col, Lhe limiLed availabiliLy ol sources ol lundinq is
Lhe biqqesL boLLleneck lor Lhe success ol Lhe PPP model.
5 lnlrasLrucLure Challenqes in SouLh Asia: 1he Role ol PublicPrivaLe ParLnerships, ADB, SepLember 2007
1ransparency in PPP proqramme, 23# 4()&)"(&$ 567%#00, OcLober 27 2011
lndian lnlrasLrucLure Challenqes, lDFC, SepLember 2010
1here is no independenL PPP requlaLor as ol now. ln order Lo aLLracL more
domesLic and inLernaLional privaLe lundinq ol Lhe inlrasLrucLure, a more robusL
requlaLory environmenL, wiLh an independenL requlaLor is essenLial.
Pegulatory
environment
1he PPP proqram lacks a comprehensive daLabase reqardinq Lhe pro|ecLs/sLudies
Lo be awarded under PPP. An online daLa base, consisLinq ol all Lhe pro|ecL
documenLs includinq leasibiliLy reporLs, concession aqreemenLs and sLaLus ol
various clearances and land acquisiLions will be helplul Lo all bidders.
Lack oI inIormation
1he pro|ecL developmenL acLiviLies such as, deLailed leasibiliLy sLudy, land
acquisiLion, environmenLal/loresL clearances eLc., are noL qiven adequaLe
imporLance by Lhe concessioninq auLhoriLies. 1he absence ol adequaLe pro|ecL
developmenL by auLhoriLies leads Lo reduced inLeresL by Lhe privaLe secLor,
mispricinq and many Limes delays aL Lhe Lime ol execuLion.
Pro|ect development
1he limiLed insLiLuLional capaciLy Lo underLake larqe and complex pro|ecLs aL
various CenLral minisLries and especially aL sLaLe and local bodies level, hinder Lhe
LranslaLion ol LarqeLs inLo pro|ecLs.
Lack oI
institutional capacity
1he privaLe secLor is dependenL upon commercial banks Lo raise debL lor Lhe PPP
pro|ecLs. WiLh commercial banks reachinq Lhe secLoral exposure limiLs, and larqe
lndian lnlrasLrucLure companies beinq hiqhly leveraqed, lundinq Lhe PPP pro|ecLs
is qeLLinq dillculL.
Financing availability
1. 5tatelevel experience
1he scenario in each sLaLe is dillerenL in Lhe conLexL ol inlrasLrucLure developmenL as each sLaLe has Lhe riqhL Lo
promulqaLe leqislaLions in Lhe areas covered in Lhe sLaLe lisL ol Lhe ConsLiLuLion ol lndia. However, cerLain sLaLes
have Laken subsLanLial sLeps Lo encouraqe PPP acLiviLy. 1hey have creaLed leqal lrameworks lor parLicipaLion ol
privaLe secLor in Lhe sLaLe.
1..1 Andhra Pradesh
7
Andhra Pradesh is Lhe leadinq sLaLe in Lerms ol PPP pro|ecLs by number ol conLracLs (96) and value (lNR669 billion).
lL accounLs lor around 17.57 ol Lhe LoLal value
8
ol PPP conLracLs in lndia.
1he sLaLe has been drawinq inLeresL lor PPP pro|ecL invesLmenL in secLors such as urban developmenL (297), enerqy
(2^7), roads (227), eLc.
6 PPP lndia DaLabase as on 31 July 2011
7 "PPP Cell ol Andhra Pradesh," ,,, 8#$$ !, 1#/0('#, hLLp://ppp.cqq.qov.in/Loqin.aspx,
accessed 16 December 2011
8 PPP lndia DaLabase as ol July 31, 2011
!"#$%$&
'&&$% )%$*+,-
./*-%$ )%$*+,-
0$-$%$,-&%$
1$%/$&$2$
States cf !ndia and PPP
1he Lop lve sLaLes accounL lor 58.37 ol LoLal

value ol PPP in lndia.
1he ma|or secLors beinq LarqeLed lor PPP lormaL
by leadinq sLaLes are roads, porLs and airporLs.
MaharashLra, KarnaLaka and Cu|araL averaqe
around 117 ol Lhe LoLal value ol PPP ol Lhe
counLry.
1he boLLom 10 sLaLes represenL only 3.57 ol
Lhe LoLal value ol PPP indicaLinq dillerences in
aLLracLiveness ol invesLmenL by privaLe secLor.
Prcminent prcjects undertaken
Hl1LC CiLy, Hyderabad
Ra|iv Candhi lnLernaLional AirporL
Canqavaram PorL
KrishnapaLnam PorL
Hyderabad lnLernaLional ConvenLion CenLer & an
lnLeqraLed 1ownship
108 Mobile Lmerqency Response Service and
10^ Mobile HealLh Service
PPP prcjects in pipeIine
Hyderabad's meLro rail pro|ecL
Bridqe across River Codavari aL Ra|ahmundry
MachilipaLnam PorL aL MachilipaLnam
DevelopmenL ol lour qreenleld airporLs
Bus Rapid 1ransiL SysLem in Hyderabad and
Vi|ayawada
DiaqnosLic cenLers in hospiLals aL
VishakapaLnam, Kurnool, Kakinada and Waranqal
1he sLaLe has seL up various insLiLuLions Lo promoLe inlrasLrucLure:
Andhra Pradesh lndusLrial lnlrasLrucLure CorporaLion (APllC) provides esLaLe inlrasLrucLure lor Lhe
developmenL ol indusLrial areas (l1 parks, lood processinq zones, SLZs, eLc.)
AP lnvesL promoLes Andhra Pradesh as Lhe lavored desLinaLion
AP 1ourism DevelopemenL CorporaLion provides Lourism inlrasLrucLure Lo aLLracL LourisL inlow
lnlrasLrucLure CorporaLion ol Andhra Pradesh (lNCAP) deals wiLh pro|ecLs LhaL are ol criLical imporLance
Lo Lhe sLaLe's proqress
AP Road DevelopmenL procures road pro|ecLs in Lhe sLaLe
AP Urban Finance & lnlrasLrucLure DevelopmenL CorporaLion provides lnancial assisLance, Lechnial
assisLane and oLher quidance
SLaLe PPP cell acLs as a nodal aqency lor all PPP pro|ecLs lor supporLinq Lhe sLaLe's PPP iniLiaLives
Institutional support
Andhra Pradesh was Lhe lrsL sLaLe Lo enacL Lhe AP lnlrasLrucLure DevelopmenL Lnablinq AcL, 2001
applicable Lo all inlrasLrucLure pro|ecLs implemenLed by Lhe sLaLe. 1he acL lays down quidelines lor
developer selecLion, illusLraLes various PPP Lypes, and ranqe ol sLaLe supporL Lo inlrasLrucLure pro|ecLs
Policy reIorms
1he CovernmenL ol Andhra Pradesh exLends supporL in Lhe lollowinq lorms:
DirecL lnancial supporL in Lhe lorm ol sLaLe's share ol viabiliLy qap lundinq (VCF) Lo promoLe economically
viable pro|ecLs
LxempLions in Lerms ol sales Lax, sLamp duLy and seiqnioraqe lees
AsseLbased supporL Lo provide CovernmenLowned land aL concessional lease charqes, providinq linkaqe
inlrasLrucLure Lo pro|ecLs
AdminisLraLive supporL Lo qeL clearances, underLake rehabiliLaLion and reseLLlemenL, supply power and
waLer aL pro|ecL siLe, land requiremenLs
Funding initiatives
Case sLudy: Ma|or bridqe across Codavari
Ma|or bridqe across river Codavari cosLinq lNR8.1 billion, is Lhe lrsL lour lane bridqe in Asia under Lhe PPP
mode. 1he scope ol Lhe pro|ecL is Lo desiqn, build, consLrucL, lnance, operaLe and mainLain ma|or bridqe
across Lhe river Codavari wiLh a LoLal pro|ecL lenqLh ol 15 kms. While Lhe consLrucLion lor Lhe bridqe is
on, Lhe pro|ecL qoL iLs lnancial closure in May 2009 and Lhe land acquisiLion Lo an exLenL ol 907 is also
compleLe. 1he pro|ecL is likely Lo beqin iLs commercial operaLions in May 2012 and is expecLed Lo yield
siqnilcanL benelLs in Lhe lorm ol reduced disLance beLween Lluru and Ra|ahmundry, reduced Lime ol Lravel,
lower Lravel cosLs Lhan earlier and deconqesLion ol Lrallc.
PPP model 1he pro|ecL is on BO1 Loll basis wiLh Lhe developer beinq selecLed Lhrouqh compeLiLive biddinq
process lor a concession period ol 25 years. 1he pro|ecL will have qranL ol lNR2.1 billion and Lhe remaininq
shall be raised in Lhe lorm ol equiLy provided by Lhe developer and debL lrom Lhe Fls.
1..2 Karnataka
9
Accordinq Lo Lconomic Survey 2010, KarnaLaka is amonq Lhe Lop sLaLes in PPP in inlrasLrucLure pro|ecLs. 1he
sLaLe has 10^ PPP pro|ecLs ol value lNR^^7 billion
10
. As Lhe knowledqe hub ol lndia, iL has immense poLenLial lor
invesLmenL in Lhe areas ol inlormaLion Lechnoloqy, bioLechnoloqy, LexLiles, sLeel and cemenL.
ln 2008, Lhe LransporLaLion secLor baqqed Lhe maximum invesLmenL on a PPP basis in Lhe sLaLe. However, Lhe
CovernmenL ol KarnaLaka is now LarqeLinq new areas lor PPP. lL has Labled a Bill in LeqislaLive Assembly Lo develop
all porLs in Lhe sLaLe on a PPP basis and is lormulaLinq an inLeqraLed enerqy policy LhaL aims Lo promoLe PPP
pro|ecLs in Lhe enerqy secLor.
9 CeerL Dewull, Ashwin Mahalinqam, and SLephan JoosLe, "1he 1ransiLion 1owards a SusLainable PPP Reqime," AuqusL 2011
"KarnaLaka Special Ppp On FasL 1rack," 2^ OcLober 2011, Pro|ecL MoniLor, via FacLiva, 2011 Lconomic Research lndia
PvL. LLd., disLribuLed by ConLily.com
-)9%&0'%:"':%# ;#<#$=7>#)' .#7&%'>#)' 1#/0('#, hLLp://idd.kar.nic.in/pppqo.hLml, accessed 12 December 2011
1he SLaLe CovernmenL has esLablished Lhe lnlrasLrucLure DevelopmenL DeparLmenL in 1996. lL aims Lo
aLLracL privaLe secLor parLicipaLion in Lhe developmenL ol inlrasLrucLure pro|ecLs.
1he SLaLe CovernmenL has seL up a PPP cell in Lhe lnlrasLrucLure DevelopmenL DeparLmenL Lo boosL PPP
in Lhe sLaLe. PPP cell aims aL idenLilcaLion, concepLualizaLion and creaLion ol a shell ol pro|ecLs LhaL can
be considered lor implemenLaLion Lhrouqh Lhe PPP rouLe.
1he sLaLe's New lnlrasLrucLure Policy, 2007 aims Lo provide a lair and LransparenL policy lramework lor
promoLion ol PPP in Lhe inlrasLrucLure secLor in Lhe sLaLe. 1he policy has Lhe provision lor consideraLion ol
implemenLinq Lhe pro|ecL lrsL Lhrouqh PPP lor all new invesLmenLs in inlrasLrucLure.
1he SLaLe CovernmenL decided Lo esLablish a sinqle window Lo laciliLaLe Lhe speedy approval ol Lhe pro|ecLs.
Policy reIorms
1he SLaLe CovernmenL has seL up a lund called KarnaLaka lnlrasLrucLure Pro|ecL DevelopmenL Fund Lo
provide lnancial assisLance Lo sLaLe aqencies Lakinq on inlrasLrucLure pro|ecLs under PPP mode. 1he lund
LarqeLs invesLmenL in railways, airporLs, porLs, roads, urban inlrasLrucLure, enerqy, Lourism and indusLrial
inlrasLrucLure.
Funding initiatives
Case sLudy: Banqalore lnLernaLional AirporL
1he "Creenleld" Banqalore lnLernaLional AirporL, Lhe lrsL PPP airporL in Lhe counLry, is developed on a
PPP model wiLh LoLal invesLmenL ol lNR19.3 billion. lL is Lhe |oinL venLure beLween Lhe AirporLs AuLhoriLy ol
lndia (AAl), KarnaLaka SLaLe lndusLrial lnvesLmenL and DevelopmenL CorporaLion LLd. (KSllDC) and privaLe
promoLers. 1he airporL is builL on inLernaLional lines wiLh world class laciliLies alonq wiLh Lhe capaciLy Lo
handle ^0 million passenqers on lurLher developmenL.
PPP model 1he Banqalore lnLernaLional AirporL is beinq builL on BOO1 lormaL wiLh CovernmenL ol
KarnaLaka and AirporLs AuLhoriLy ol lndia (AAl) each havinq 137 equiLy shares and developer beinq selecLed
Lhrouqh compeLiLive biddinq process lor a concession period ol 30 years (provision ol 30 years exLension).
1he lNR19.3 billion lnancinq beinq done as equiLy lNR31.5 million, sLaLe supporL lNR3.5 billion and debL
lNR12.65 billion.
1..3 Cu|arat
11
With around 3 pro|ects valued at INP39 billion
12
,
Cu|arat is among the leading states witnessing high
level oI PPP activity especially in the sectors oI
ports and power. Cu|arat's vision 2010 envisioned
development oI robust inIrastructure in the state
primarily through the PPP mode. 5imilar planning exercise has been undertaken Ior Iuture pro|ects in the Iorm
oI "Blueprint Ior InIrastructure, Cu|arat2020." It envisages investment oI INP120 trillion by 2020 across
inIrastructure sectors.

11 "1he 1ransiLion 1owards a SusLainable PPP Reqime," CeerL Dewull, Ashwin Mahalinqam, and SLephan JoosLe, AuqusL 2011
Ma|or lniLiaLives, Cu|araL Ollcial SLaLe PorLal, hLLp://www.qu|araLindia.com/index.hLm, accessed 11 December 2011
Public PrivaLe ParLnership, ?:@&%&' ()9%&0'%:"':%# ;#<#$=7>#)' A=&%. 1#/0('#, hLLp://www.qidb.orq/, accessed 12 December
2011
Cu|araL is Lhe lrsL sLaLe Lo build a requlaLory lramework lor PPP Lhrouqh Lhe passinq ol Cu|araL
lnlrasLrucLure DevelopmenL AcL in 1999. lL delnes quidelines lor Lhe privaLe secLor parLicipaLion in
lnancinq, consLrucLion, mainLenance and operaLion ol inlrasLrucLure pro|ecLs underLaken on a PPP basis
in Cu|araL.
Cu|araL lnlrasLrucLure DevelopmenL Board (ClDB) was seL up in 1995 Lo underLake PPP iniLiaLives in
Lhe sLaLe. Cu|araL lnlrasLrucLure DevelopmenL (ClD) AcL 1999 provides a mechanism lor selecLion ol
developers Lo encouraqe privaLe secLor parLicipaLion.
ClDB has developed model concession aqreemenLs lor cerLain secLors such as porLs, urban LransporL, road
and waLer.
ln addiLion, secLorspecilc policies ol Lhe sLaLe provide lor uLilizaLion ol PPP.
Policy reIorms
1he SLaLe CovernmenL has lormulaLed viabiliLy qap lundinq scheme Lo provide lunds lor essenLial PPP
pro|ecLs. Under Lhis scheme, Lhe SLaLe CovernmenL provides lnancial supporL up Lo 207 ol Lhe cosL ol
PPP pro|ecL. 1he lundinq is provided in Lhe lorm ol a capiLal qranL aL Lhe sLaqe ol pro|ecL consLrucLion.
Funding initiatives
Case sLudy: Dahe| LNC 1erminal
Cu|araL's Dahe| LNC 1erminal is Lhe lrsL LNC Lerminal in lndia, spread over ^8 hecLares and is currenLly
"under operaLion" sLaqe. Owned by PeLroneL LNC LLd. and locaLed aL Dahe| in Bharuch disLricL ol Cu|araL,
Lhe PPP pro|ecL is esLimaLed Lo cosL lNR23 billion.
PPP model Dahe| LNC 1erminal PPP is in a BOO1 lormaL wiLh conLracL awarded by Lhe NeqoLiaLed MoU
meLhod lor 30 years. 1he equiLy was conLribuLed by lndian oil companies, a Francebased company and
Asian DevelopmenL Bank. 1he pro|ecL had a debLequiLy raLio ol 71:29.
(Source: PPP in lndia and hLLp://www.qidb.orq/cms.aspx?conLenL_id=106)
Cu|araL and PPP
Cu|araL's ^0 minor privaLe secLor porLs handle
approximaLely 807 ol carqo handled by all
privaLe porLs in lndia.
Cu|araL possesses lrsL ever privaLe porL
pro|ecL in Lhe counLry.
1he only chemical porL and Low LNC
1erminals have been developed in Lhe PPP
lormaL.
1wo air sLrips have been developed by
privaLe developers.
1..4 Jharkhand
Jharkhand wiLnessed relaLively low PPP acLiviLy in inlrasLrucLure pro|ecLs. 1he sLaLe has underLaken nine PPP
conLracLs cosLinq lNR17 billion
13
. 1he BO1 has been Lhe prelerred lorm ol PPP Lype applicable in Lhese pro|ecLs.
1he secLors such as urban developmenL and roads have drawn more aLLenLion Lowards PPP in Lhe sLaLe. 1he
dralL Jharkhand lndusLrial Policy, 2011 lays down siqnilcanL emphasis on implemenLaLion ol Lhe concepL ol PPP
in indusLrializaLion especially in inlrasLrucLure developmenL/indusLrial area developmenL/indusLrial park/ human
resource developmenL/service secLor eLc.
1^
1..5 Chhattisgarh
1he sLaLe ol ChhaLLisqarh recorded relaLively low PPP acLiviLy in inlrasLrucLure pro|ecLs wiLh only lour PPP conLracLs
cosLinq lNR8 billion
15
. All Lhe pro|ecLs have been underLaken in Lhe roads secLor uLilizinq Lhe BO11oll PPP Lype.
ChhaLLisqarh lormulaLed an indusLrial policy lor Lhe period ol 2009201^ Lo locus on PPP. lL allows Lhe indusLrialisL
Lo lorm Lheir own privaLe indusLrial park lor an area ol up Lo 75 acres resulLinq in speedy acquisiLion ol land. 1he
sLaLe qovernmenL acLively supporLs Lhe PPP meLhod lor developmenL ol Lourism and inlrasLrucLure.
1^ "Jharkhand lndusLrial Policy 2011," B3&%C3&). -).:0'%D 1#/0('#, |harkhandindusLry.qov.in/Jharkhand720lndusLrial720
Policy720201172013.9.11.doc, accessed 19 December, 2011
NaLional Cames Housinq Complex aL Ranchi
CovernmenL ol Jharkhand (CoJ) envisaqed developmenL ol a sellconLained Lownship aL Ranchi wiLh qualiLy
inlrasLrucLure in Lhe sLaLe, supporLinq and complimenLinq Lhe 3^Lh NaLional Cames. 1he pro|ecL enLailed
developmenL, consLrucLion, sale ol dwellinq uniLs, operaLion and mainLenance (O&M) ol around 1,600
dwellinq uniLs equipped wiLh all uLiliLies and laciliLies. 1he Phasel ol Lhe pro|ecL (1,200 houses) were Lo be
compleLed by July 2007, Phasell (600 houses) by March 2008. 1he esLimaLed cosL ol Lhe pro|ecL is lNR25
billion.
PPP model DeparLmenL ol ArLs, CulLure, SporLs & YouLh Allairs, ol Jharkand leased 56.^^ acres ol land lor
lve years in lieu ol consLrucLed dwellinq uniLs. Naqar|una Urban lnlrasLrucLure Company LimiLed (NUlCL)
has been involved in developmenL, consLrucLion, sale and operaLion and mainLenance (O&M) ol Lhe dwellinq
uniLs.
(Source: PPP DaLabase hLLp://www.pppindiadaLabase.com/Screens/lrmView.aspx?PROJLC1lD=R2qxVb12/
erl=&AU1HORlSLDUSLR=N )
Upcominq PPP pro|ecLs in Jharkhand's social inlrasLrucLure
PPP fcr mcdeI ccIIees
1he sLaLe ol Jharkhand announced iLs plans Lo
develop model colleqes under Lhe PPP mode Lo
provide beLLer educaLion and increase Lhe qross
enrolmenL raLio.
(Source: hLLp://www.Leleqraphindia.com/1101206/|sp/
|harkhand/sLory_13263505.|sp)
Jharkhand anncunces pIan fcr PPP hcspitaI
1he sLaLe ol Jharkhand announced iLs plans Lo
operaLe Lhe newly builL 500bed Sadar HospiLal aL
Ranchi in PPP mode wiLh Lhe view Lo avail qualiled
and specialisL docLors and Lrained nursinq and
paramedical sLalls.
(Source: hLLp://www.iqovernmenL.in/siLe/|harkhandmooLs
pppmodeqovLhospiLals)
16
1.7 International experience
1.7.1 United Kingdom
PPP acLiviLies in Lhe UK sLarLed qaininq momenLum in Lhe 1980s, in a bid by Lhe UK CovernmenL Lo reduce Lhe
economy's dependence on public secLor lnancinq.
17
WiLh Lhe supporL ol various iniLiaLives over Lhe years, Lhe PPP
model has evolved lrom a channel Lo ollseL Lhe consLrainLs on public secLor expendiLure, Lo Lhe prelerred model Lo
deliver superior qualiLy services.
Accordinq Lo Lhe UK Lreasury daLa, 698 privaLe lnance iniLiaLive (PFl) pro|ecLs have been siqned Lo be delivered
Lhrouqh Lhe PPP rouLe, in various secLors such as educaLion, healLh, delense, publichousinq, l1 and LransporL.
18
1he PPPs in Lhe UK have been hiqhly successlul, wiLh several counLries around Lhe world Lryinq Lo emulaLe Lhe UK
model. Accordinq Lo BriLish NaLional AudiL Ollce (NAO) an assessmenL ol Lhe UK PPP policy in 2009 shows LhaL 657
ol Lhe conLracLs were delivered on Lime and wiLhin Lhe aqreed budqeL.
19
16 "ChhaLLisqarh," E()(0'%D =9 4=%#(*) !99&(%0F G()*.=> =9 23&($&). 1#/0('#, hLLp://www.mla.qo.Lh/inLerneL/documenL/6691.
pdl, accessed 19 December 2011
"World class educaLion in ChhaLLisqarh," ;&($D/3&0C&%H"=> 1#/0('#, hLLp://daily.bhaskar.com/arLicle/MPRAlsoonworld
classeducaLioninchhaLLisqarhiiiLlikelyLoopeninsLaLe21^2187.hLml, accessed 19 December 2011
17 "PublicPrivaLe ParLnerships, CovernmenL CuaranLees, and Fiscal Risk," lnLernaLional MoneLary Fund, April 2006, p. 7276
18 "Pro|ecL DaLabase," ,,,4=%:> 1#/0('#, hLLp://www.ppplorum.com/pro|ecLs, accessed 1^ December 2011
19 "1heorizinq PublicPrivaLe ParLnership Success: A MarkeLBased AlLernaLive Lo CovernmenL," Paper lor Lhe Public
ManaqemenL Research Conlerence aL Syracuse UniversiLy, June 2011, p. 16
Upcominq PPPs
16
Settin up cf Cems & JeweIIery SEZ cn PPP
ChhaLLisqarh SLaLe lndusLrial DevelopmenL
CorporaLion LimiLed plans Lo seL up a Cems and
Jewellery SLZ coverinq 70 acres. 1he pro|ecL
will be developed on a PPP basis wiLh M/s Ramky
lnlrasLrucLure LLd. 1he pro|ecL is expecLed Lo be
compleLed by 201^ aL a cosL ol lNR17.^2 billion.
Spcrts City in Naya Raipur
Naya Raipur DevelopmenL AuLhoriLy is seLLinq up a
sporLs ciLy wiLh laciliLies lor aquaLic, Lennis and indoor
sLadium on PPP in Naya Raipur over 137 Acres. 1he
privaLe player will build Lhe sporLs laciliLies and hand iL
back Lo Lhe auLhoriLy. A 93 acre residenLial land parcel
will crosssubsidize Lhe sporLs laciliLies.
InIrastructure
UK (IUK)
2007
Partnerships
UK (PUK)
2000
Treasury
taskIorce
1997
PFI
1992
1.7.2 Australia
20
1he AusLralian PPP markeL is one ol Lhe mosL well developed markeLs lor PPP. 1he iniLial phase ol PPP perLained
Lo inlrasLrucLure pro|ecLs LhaL were modeled on Lhe BO1 and BOO1 Lypes. However, Lhe locus ol PPP shilLed Lo
social inlrasLrucLure in 2000s. 1he pro|ecLs are diverse and relaLe Lo hospiLals and schools. 1he markeL lor social
inlrasLrucLure is expecLed Lo conLinue Lo develop as Lhere is need lor waLer and enerqy inlrasLrucLure Lo meeL
AusLralia's luLure susLainabiliLy requiremenLs.
AusLralia is wiLnessinq siqnilcanL qrowLh in inlrasLrucLure. 1he inlrasLrucLure markeL is esLimaLed Lo procure
invesLmenLs worLh USS101 billion by 2016. ln addiLion, Lhe devasLaLion caused by Lhe loods in norLhern AusLralia
exacerbaLes Lhe massive Lask ol rebuildinq damaqed inlrasLrucLure. 1hus, Lhere is requiremenL ol privaLe
invesLmenL in Lhe counLry.
20 "Case SLudies ol 1ransporLaLion PublicPrivaLe ParLnerships around Lhe World," Ollce ol Policy and CovernmenLal Allairs,
July 2011
Public PrivaLe ParLnerships, -)9%&0'%:"':%# !:0'%&$(& 1#/0('#, hLLp://www.inlrasLrucLureausLralia.qov.au/public_privaLe/,
accessed 11 December 2011
High level oI political commitment: 1imely relorms
have been inLroduced by Lhe CovernmenL Lo ensure
developmenL ol Lhe PPP markeLs. 1his includes
sLeps such as PFl, and empowerinq Lhe NaLional
AudiL Ollce (NAO) Lo independenLly oversee PPPs.
5trong policy Iramework: A proper leqal and
insLiLuLional lramework aL naLional, reqional and
municipal levels is in place, which acLs as a salequard
lor poLenLial parLners. lL is ensured LhaL Lhe
CovernmenL spendinq is reqularly scruLinized and
published lor Lhe qeneral public.
Key
success
Iactors
1
2
3
4
5pecialized bodies: 1he creaLion ol specialized
bodies such as ParLnerships UK (PUK) and Lhe
1reasury 1asklorce has insLiLuLionalized and
qave sLrucLure Lo Lhe PPP acLiviLies, which has
been criLical lor Lhe success ol a PPP proqram
in such a larqe scale.
Utilization oI taxpayer's money: A proper evaluaLion
Lool, alonq wiLh a proqram manaqemenL process, has
been puL in place. 1his screeninq opLimizes Lhe
pro|ecL risk, and ensures LhaL Lhey are delivered on
Lime wiLhouL compromisinq on Lhe qualiLy.
Case sLudy: AdvanLaqe PPP A55 Llandeqai Lo Holyhead 1runk Road
1he 101 million A55 Llandeqai Lo Holyhead Lrunk road has been desiqned, lnanced and builL by UK
Hiqhways A55, a consorLium ol Carillion Lainq and Hyder and is Lhe lrsL Lrunk road builL in Wales under Lhe
PrivaLe Finance lniLiaLive. lL is a key inLernaLional hiqhway linkinq Dublin and lreland more qenerally wiLh
Wales and Lnqland and Lhe ma|or markeLs ol Lurope. 1he pro|ecL proved Lo be a ma|or achievemenL lor Lhe
concessionaire as iL delivered Lhe pro|ecL 6 monLhs ahead ol Lime despiLe Lhe weLLesL winLers and luel crisis.
!"#$%&'$()'($* ,(&'$%-.%
!"#$%$"#$"& (&)&*&+,- )#./(+,- 0+*"0/1 2/&3 45 6$67$,(
8,+6 9+.$,"6$"& )"# %,/.)&$ ($0&+,
,(&'$%-.%" /// (".'
:(&)71/(3$# 7- ;$%),&6$"& +8 </")"0$ )"# =#6/"/(&,)&/+" &+
%,+./#$ 9*/#)"0$ &+ 9+.$,"6$"& )9$"0/$( +" *($ +8 >>>
0%'.1"%- /// 21$(3
<)0/1/&)&$( 0++%$,)&/+" )0,+(( =*(&,)1/)" ,$9/+")1
?*,/(#/0&/+"( 8+, /"8,)(&,*0&*,$ %,+?$0&( &3,+*93 >>>
Key naticnaI
entities fcr PPP
1.7.3 Brazil
21
PrivaLe invesLmenL Lo build inlrasLrucLure has exisLed in Brazil lor a lonq Lime. ln lacL, iL was Lhe main lorm in which
ma|oriLy ol Lhe counLry's oriqinal inlrasLrucLure were developed. 1he lrsL railroads ol Lhe counLry were builL by
privaLe players under Lhe sLaLe licenses. Brazil has one ol Lhe lonqesL hiqhway neLwork under privaLe concessions
22

in Lhe world indicaLinq coexisLence ol public and privaLe enLiLies.
PPP acLiviLies are requlaLed under Lhe Concessions Law (1995) and Lhe Public PrivaLe ParLnerships Law (200^). 1he
main drawback ol Lhe concession law has been LhaL Lhe users (especially drivers on Loll roads) are unwillinq Lo pay
lor Lhe use ol a previously lree road. Under Lhe law Lhe conLracL duraLion can vary beLween 5 Lo 35 years and Lhe
conLracL value should be aL leasL USS11 million.
1he adopLion ol Lhe Lwo model sLrucLure in Lhe PPP law has proven Lo be ellecLive because:
1he PPP law allows Lhe paymenLs Lo be parLly or LoLally lunded by Lhe CovernmenL. 1his has helped in aLLracLinq
privaLe invesLmenLs in pro|ecLs LhaL cannoL be susLained by Lhe lees charqed lrom Lhe users.
1he CovernmenL has Lo esLablish a lund Lo provide warranLy ol iLs obliqaLions under Lhe aqreemenL.
1he law also provides lor Lhe use ol alLernaLive mechanisms lor dispuLes resoluLion, includinq arbiLraLion.
21 "Brazilian PPP Proqram, Lessons and Challenqes," A%&I($ E()(0'%D =9 ,$&))()* 1#/0('#, hLLp://esLaLico.buenosaires.qov.ar/
areas/hacienda/pdl/8_mesapanel_vanialucia_lins_souLo.pdl, accessed 12 December 2011.
"An Overview ol Concessions and PublicPrivaLe ParLnerships in Brazil," !>#%("&) A&% !00="(&'(=) 1#/0('#, March 2011.
,:/$(" ,%(<&'# ,&%')#%03(7 J)(' 1#/0('#, www.ppp.mq.qov.br, accessed 12 December 2011
"PrivaLizaLion and PublicPrivaLe ParLnership," A&%/=0&F EK00)("3 L !%&*M= !.<=*&.=0 1#/0('#, 2008, p. ^
22 A concession is Lhe riqhL Lo operaLe public services or laciliLies lor a lxed period ol Lime, aL Lhe concessionaire's risk.
Case sLudy: AdvanLaqe PPP Sydney Harbor Lunnel
1he level ol Lrallc beLween NorLh Sydney and Lhe Sydney CenLral Business DisLricL led Lo Lhe developmenL
ol Lhe Lunnel on PPP model (BOO1). 1he New SouLh Wales CovernmenL selecLed Lhe Sydney Harbor 1unnel
Company PLy. LLd. as Lhe prelerred consorLium in 1987. 1he PPP model wiLh ownership ol privaLe secLor
led Lo siqnilcanL alleviaLion ol conqesLion in Lhe area and proved Lo be successlul.
lnvesLmenL is recovered lrom Lhe revenues collecLed lrom Lhe users in Lhe
Lerms ol concession (Revenue source = user Larills)
ldeal lor lonqLerm susLainable pro|ecLs
The Concession
Law
Sponsored concession sLaLe is allowed Lo complemenL concessionaire's
revenues (Revenue source = user Larills + public)
AdminisLraLive concession CovernmenL is responsible lor Lhe privaLe
parLner's remuneraLion (Revenue source = public paymenLs)
The Public Private
Partnership Law
Scope lor improvemenL: DespiLe cerLain advanLaqes, lew PPP pro|ecLs have been conLracLed in Lhe counLry. Many
CovernmenL ollcials are noL comlorLable wiLh Lhe idea ol payinq Laxpayers' money Lo privaLe invesLors and are
hesiLanL in implemenLinq such conLracLs. 1here are ma|or issues are in Lhe areas ol policy lormulaLion, requlaLion
and supervision ol conLracLs. Accordinq Lo Lhe law, Lhe CovernmenL cannoL make any paymenL unLil Lhe privaLe
parLner provides Lhe service Lo Lhe users. 1his creaLes lnancinq dillculLies as Lhe privaLe invesLor may have Lo
make huqe invesLmenLs in buildinq laciliLies wiLhouL receivinq any cash low. Brazil launched Phase Lwo ol iLs CrowLh
AcceleraLion Proqram, which esLimaLes Lo incur public and privaLe invesLmenLs worLh USS526 billion Lo upqrade Lhe
counLry's inlrasLrucLure in Lhe period 2011 Lo 201^.
1.7.4 Philippines
23
CovernmenL ol Philippines has been promoLinq parLicipaLion ol privaLe secLor noL only in LradiLional inlrasLrucLure
pro|ecLs such as power, LransporLaLion and waLer secLors, buL also in nonLradiLional inlrasLrucLure and developmenL
secLors such as inlormaLion and communicaLions Lechnoloqy, healLh and properLy developmenL since 1987. PPP
enabled resolvinq ol Lhe power crisis in Lhe early 1990s and helped improve road neLwork qualiLy, LransporL linkaqes
and social services in Lhe counLry. PPP iniLiaLives have baqqed approximaLely USS19.5billion in Lhe counLry.
1he counLry's PPP proqram is a viLal componenL ol iLs developmenL plan. 1he PPP cenLer is aL Lhe helm ol allairs ol
Lhe PPP proqram. lL provides various services and assisLance Lo implemenLinq aqencies (lAs), qovernmenLowned
and conLrolled corporaLions (COCCs), sLaLe universiLies (SUCs), local qovernmenL uniLs (LCUs) and Lhe privaLe
secLor in Lhe developmenL and implemenLaLion ol criLical inlrasLrucLure pro|ecLs. ln addiLion, Lhe counLry's BO1 law
recoqnizes Lhe role ol privaLe secLor in Lhe developmenL ol Lhe counLry by providinq various incenLives such as Lax
exempLions. PPP cenLer serves as an ellcienL nodal aqency lor PPP pro|ecLs ol Lhe counLry. Pro|ecL DevelopmenL
and MoniLorinq FaciliLy (PDMF) ol Lhe cenLer provides lunds lor PPP acLiviLy.
CovernmenL is proacLive in Lakinqs sLeps Lo build up supporL lor PPP pro|ecLs. lL has allocaLed USS6.8 million in Lhe
2011 budqeL Lo enable sLrucLurinq and preparaLion ol PPP pro|ecLs. ln addiLion, iL is developinq an inLerim scheme
Lo provide access Lo lonqLerm lnancinq lor PPP pro|ecLs unLil a dedicaLed inlrasLrucLure lnance laciliLy can be
esLablished.
23 "Public PrivaLe ParLnership Pro|ecLs," Republic ol Philippines, March 2011
"1he Philippine PPP Proqram," PPP uniL, December 2008
Case sLudy: PPP in Brazil MC050 hiqhway
1he recovery, expansion and mainLenance ol Lhe MC050 hiqhway was Lhe lrsL hiqhway pro|ecL in Brazil Lo
be execuLed Lhrouqh PPP. 1he 372km lonq hiqhway enLails invesLmenL worLh USS650 million Lill 2032. 1he
pro|ecL is beinq execuLed as sponsored concession and Lhe privaLe player has been qranLed a quaranLee by
Lhe sLaLeowned Minas Cerais Lconomic DevelopmenL Company.
Case sLudy: AdvanLaqe PPP NorLh Luzon Lxpressway (NLLX)
ln 1990s, Lhe CovernmenL ol Philippines inviLed Lhe privaLe secLor Lo underLake Lhe rehabiliLaLion,
expansion, and modernizaLion ol NLLX. 1he LoLal cosL ol Lhe pro|ecL amounLed Lo USS252.2 million. 1he
privaLe secLor underLook Lhe responsibiliLies ol lnancinq Lhe pro|ecL wiLhouL Lhe CovernmenL's quaranLee,
buildinq Lollway and assuminq consLrucLinq risk. lL resulLed in developmenL ol Lhe reqional aqriculLure and
indusLry besides providinq access Lo norLhern and cenLral Luzon.
2.1 Cverview
1he developmenL ol a qood physical and social inlrasLrucLure is characLerized by siqnilcanL invesLmenL
requiremenLs, low operaLinq cosLs wiLh repaymenLs lrom revenues qeneraLed lrom Lhe pro|ecL. 1he Col has
LradiLionally been Lakinq Lhe onus ol lnancinq, implemenLaLion, operaLions and mainLenance ol Lhese pro|ecLs.
However, Lo avoid cosL and Lime overrun and benelL lrom innovaLive pro|ecL sLrucLurinq and implemenLaLion
sLraLeqies, privaLe secLor parLicipaLion in developmenL ol inlrasLrucLure is exLremely criLical.
1he Col, coqnizanL ol Lhe lacL, is seLLinq Lhe LarqeLs lor iLs 1wellLh lve year plan such LhaL LhaL 507 ol Lhe inlra
spendinq is meL by Lhe privaLe secLor.
2.2 Meeting the TwelIth Five Year Plan targets
1he LlevenLh Five Year Plan (FYP) period ol 20072012 is abouL Lo end soon and Lhe Col is currenLly dralLinq Lhe
1wellLh FYP. 1hus, while Lhe lnal 1wellLh lve year plan is yeL Lo see Lhe liqhL ol day, Lhe Approach Paper lor Lhe
1wellLh FYP LarqeLs an inlrasLrucLure spendinq requiremenL ol lNR^0,992 billion (up lrom inlrasLrucLure spendinq
levels ol lNR9,061 billion and lNR20,5^2 billion durinq Lhe 1enLh and LlevenLh FYPs respecLively) in order Lo aLLain
a share ol 107 ol Lhe counLry's CDP. Around 507 ol such invesLmenL is esLimaLed Lo come lrom Lhe privaLe secLor,
aqainsL Lhe averaqe 35.87 conLribuLion LhaL was esLimaLed in Lhe LlevenLh FYP.
1he Approach Paper
2^
Lo Lhe 1wellLh FYP lurLher sLaLes LhaL while public invesLmenL in inlrasLrucLure is needed lor
Lhe overall socieLal developmenL and wider reach, Lhe PPPbased developmenL needs Lo be encouraqed in all leasible
areas. For Lhis, Lhe insLiLuLional mechanisms Lo supporL Lhis kind ol invesLmenL deserve sLronq supporL.
As a resulL, Lhe Col has already Laken various measures Lo enhance availabiliLy ol lunds and meeL increased level ol
privaLe secLor parLicipaLion. 1he nexL secLion describes in deLail each ol Lhe lundinq sources and Lhe measures Laken
by Lhe Col Lo encouraqe Lhe use ol such source lor inlrasLrucLure lnancinq.
2^ "FasLer, susLainable and More inclusive CrowLh An approach Lo Lhe 1wellLh FYP," Planninq Commission, Col
2.
Funding inIrastructure through
public private partnerships
!nfrastructure spendin estimates acrcss
the varicus FYPs (in !NR biIIicn)
Source: Planninq Commission pro|ecLions ol lnvesLmenL in inlrasLrucLure durinq Lhe 1wellLh Five Year Plan
PIanned year-wise infrastructure spendin
durin the TweIfth FYP (in !NR biIIicn)
6,809
13,113
20,^96
2,252
7,^29
20,^96
5,000
10,000
15,000
20,000
25,000
30,000
35,000
^0,000
^5,000
1enLh Plan
(AcLual)
LlevenLh Plan
(Revised)
1wellLh Plan
(Pro|ecLed)
Public invesLmenL PrivaLe invesLmenL
FY2013,
6,19^
FY201^,
7,127
FY2015,
8,095
FY2016,
9,181
FY2017,
10,395
2.3 Means oI inIrastructure Iunding
1he lollowinq Lable broadly indicaLes Lhe various means ol lundinq lor an inlrasLrucLure pro|ecL.
Scurces cf funds fcr PPP
25
Fcrms Dcmestic scurces ExternaI scurces
Debt DomesLic commercial banks
DomesLic Lerm lendinq insLiLuLions
DomesLic bond markeLs
Specialized inlrasLrucLure lnancinq
insLiLuLions
lnLernaLional commercial banks
LxporL crediL aqencies
lnLernaLional bond markeLs
MulLilaLeral aqencies
Equity DomesLic developers
Public uLiliLies
OLher insLiLuLional invesLors
lnLernaLional developers
LquipmenL suppliers lunds
OLher inLernaLional equiLy invesLors
MulLilaLeral aqencies
Bank credit: Commercial banks are lacinq dillculLies as Lhey have already reached Lheir lendinq exposure limiLs
lor Lhe inlrasLrucLure secLor and lace Lhe problems ol concenLraLion risks and ALM mismaLches.
Bcnds: 1he bond markeL in lndia is hiqhly underdeveloped. 1he raLe aL which Lhe bond markeL in lndia is
qrowinq is considerably slow in comparison Lo Lhe raLe ol qrowLh needed by Lhe Col Lo build iLs inlrasLrucLure.
ExternaI CcmmerciaI Bcrrcwins (ECBs): LCB lendinq is hiqhly dependenL on Lhe inLeresL raLe scenario.
ProminenL inlrasLrucLure companies such as L&1 have been increasinqly evincinq inLeresL in LCBs as an opLion
lor inlrasLrucLure lundinq.
MuItiIateraI aencies: 1he World Bank and Lhe Asian DevelopmenL Bank have launched proqrams supporLinq
PPP pro|ecLs in lndia. 1he insLiLuLions provide Lechnical and lnancial assisLance Lo laciliLaLe inlrasLrucLure
developmenL.
1he inlrasLrucLure secLor has been wiLnessinq risinq debL equiLy raLios in Lhe recenL years. 1he senior debL is
conLribuLed by boLh commercial banks and public secLor banks. 1he use ol subordinaLed debL is limiLed and is used
parLicularly in Lhe road secLor.
AparL lrom lendinq in lorm ol debL lnancinq, Lhe qovernmenL qranLs are devised Lo supporL economically unviable
buL leasible pro|ecLs. 1he domesLic bank crediL has been Lhe prime source ol debL lnancinq in case ol inlrasLrucLure
pro|ecLs.
25 Proposed MulLiLranche Financinq FaciliLy lndia: lndia lnlrasLrucLure Pro|ecL Financinq FaciliLy, Asian DevelopmenL Bank,
November 2007
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2.3.1 Commercial lending
Commercial lenders are Lhe prominenL lnancers lor Lhe inlrasLrucLure secLor ol Lhe counLry. 1he lollowinq Lable
indicaLes LhaL inlrasLrucLure lendinq ol commercial banks qrew lrom lNR1,128 billion in 2006 Lo lNR5,266 billion in
2011 reqisLerinq a qrowLh ol approximaLely 367. ln addiLion, Lhe share ol bank lnance exLended Lo inlrasLrucLure
secLor as a percenLaqe ol qross bank crediL has increased lrom 2.27 in 2001 Lo around 13.^7 in 2011.
26
Bank credit tc the infrastructure sectcr
in !NR biIIicn 200 2007 200 2009 2010 2011
lnlrasLrucLure secLor 1,128 1,^33 2,051 2,699 3,798 5,266
Primarily comprisinq
Power 601 731 950 1,2^^ 1,878 2,691
1elecommunicaLion 18^ 19^ 380 503 593 1,00^
Roads and PorLs 196 2^9 3^5 ^70 735 925
Source: Handbook ol SLaLisLics on lndian Lconomy 201011
However, many lndian banks are now on Lhe verqe ol reachinq Lheir maximum limiLs lor lendinq Loward Lhe
inlrasLrucLure secLor. WiLh siqnilcanL number ol hiqh invesLmenLs proposals in Lhe pipeline lor Lhe inlrasLrucLure
secLor, Lhe banks are lndinq iL dillculL Lo lnance inlrasLrucLure pro|ecLs. One ol Lhe key problems laced by banks is
Lhe asseLliabiliLy mismaLch problem, Lypically ol inlrasLrucLure pro|ecLs.
27
ChaIIene cf asset-IiabiIity mismatch and reachin infrastructure expcsure Iimits
1he asseLliabiliLy mismaLch problem arises due
Lo Lhe lacL LhaL lonqer duraLion loans required by
Lhe inlrasLrucLure pro|ecLs need Lo be lnanced by
shorLer duraLion borrowinqs. 1he lendinq banks are
lndinq iL increasinqly dillculL Lo provide lnancinq
Lo hiqhvalue pro|ecLs wiLh repaymenLs schedules ol
up Lo 15 years in comparison wiLh deposiLs ranqinq
in maLuriLy period ol one Lo Lhree years. WiLh ALM
and concenLraLion risks, Lhe loans are noL compleLe
relecLion ol Lhe pro|ecL risk and loan pricinq conLrols
(lor liquidiLy shorLlall and relnancinq risk). 1he low
deposiL raLes have lurLher aqqravaLed Lhe siLuaLion
as Lhe deposiLors are unwillinq Lo commiL Lhemselves
Lo lonqLerm maLuriLies
28
.
26 RBl Annual ReporL 201011, pq51
27 "LoandeposiL mismaLch may hiL bank lendinq Lo inlra secLor," N(<# E()' 1#/0('#, hLLp://www.liveminL.
com/2011/02/0822^328/LoandeposiLmismaLchmayhiL.hLml, accessed on ^ January 2012
28 "Bank lace asseLliabiliLy mismaLch on inlra lendinq," A:0()#00 O'&).&%. 1#/0('#, hLLp://www.businesssLandard.com/india/
news/bankslaceasseLliabiliLymismaLchinlralendinq/393085/, accessed 29 December 2011
"InIrastructure loans are oI 1015
years duration, while most bank
deposits have tenure oI onetwo
years. In the last hnancial year,
not much disbursement took place,
and now every bank is sitting
on huge sanctions waiting to be
disbursed. This is going to create
a ma|or problem, as we won't have
deposits oI equal maturity,"
Chairman and Manaqinq DirecLor ol a
public secLor bank
(Source: Business SLandard)
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1he dillerence beLween liabiliLies and asseLs varies accordinq Lo Lheir maLuriLy prolle buckeLs. 1he Lable indicaLes
LhaL as Lhe maLuriLy Lime period increases, Lhe liabiliLies (deposiLs and borrowinqs) surpass Lhe asseLs (loan and
advances and invesLmenLs). lL resulLs in asseL liabiliLy mismaLch lor banks.
1he problem accenLuaLes wiLh inlrasLrucLure lendinq as inlrasLrucLure loans are lonqLerm in naLure.
TabIe: Maturity prchIe cf seIected items cf IiabiIities and assets cf fcur pubIic sectcr banks (in !NR miIIicn) as
cn 31 March 2011
5BI Bank oI India Pun|ab
National Bank
Canara Bank Total
Deposits
Over 5 years 1,571,656 538,719 71^,^26 523,^6^ 377,587
Borrowings
Over 5 years ^09,693 98,139 101,781 ^3,550 77,986
Loan and Advances
Over 5 years 1,360,20^ 363,307 26^,986 355,125 287,161
Investments (at book value)
Over 5 years 1,600,123 5^3,33^ 579,^36 597,985 37^,098
DiIIerence
Over 5 years 97,898 26,978 2,822 38,610 20,569
ln Lhe absence ol a developed corporaLe bond markeL, use ol relnancinq laciliLy has been suqqesLed Lo miLiqaLe
ALM mismaLches. Under Lhis laciliLy, Lhe lonqLerm lunds will be borrowed and used Lo relnance inlrasLrucLure
loans ol banks and specialized NBFCs.
"Many banks are close to
exhausting their internal limits
set Ior inIrastructure hrms..
We may not see the same
pace oI expansion, in terms
oI credit disbursement to the
inIrastructure sector, in the next
two years that we have seen in
the past two years"
R. Ramachandran, Chairman and
Manaqinq DirecLor ol Andhra Bank
"Maximum loan proposals are
coming Irom this (inIrastructure)
sector. All are bigticket
proposals.Banks will have to
see their loan book and see what
their headroom available Ior
lending"
P.K. Anand, LxecuLive direcLor ol
Pun|ab and Sind Bank
(Source: LiveminL)
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Take-cut hnancin as a scIuticn: 1he LakeouL lnancinq scheme has been developed Lo deal wiLh issues ol hiLLinq
secLoral limiLs, concenLraLion risk and asseLliabiliLy mismaLch. 1he LakeouL lnancinq scheme involves Lhree parLies
pro|ecL company, lendinq company and Lakinq over insLiLuLion (bank/consorLium ol banks/Fl). Under Lhe scheme,
Lhe Lakinq over insLiLuLion enLers an aqreemenL by which Lhe lender Lranslers a parL/whole ol Lhe ouLsLandinq Lo Lhe
Lakinq over insLiLuLion on a predeLermined basis. 1he concepL ol LakeouL lnancinq has been accepLed as a qlobal
pracLice Lo release lonqLerm lunds lor lnancinq inlrasLrucLure pro|ecLs.
llFCL, an SPV lormed lor Lhe purpose ol lendinq lunds Lo inlrasLrucLure pro|ecLs and supplemenL oLher loans lrom
banks and lnancial insLiLuLions, has been recoqnized as a special aqency Lo exLend LakeouL lnance scheme in 2010.
A LriparLiLe aqreemenL was siqned in SepLember 2011 beLween llFCL, LlC and lDFC which allows LakeouL lnancinq
Lo an exLenL ol 507
29
ol Lhe pro|ecL cosL.
llFCL has lurLher increased LakeouL lnancinq disbursemenL LarqeL by lNR50 billion as a resulL ol which Lhe banks
and inlrasLrucLure developers are expecLed Lo qeL aLLracLive LakeouL lnancinq deals. Under Lhe new concession
in PPP pro|ecLs, Lhe LakeouL lnancinq raLe is likely Lo vary lrom 9.907 Lo 10.857. 1he banks will now be able Lo
seek ouL LakeouL lnancinq immediaLely alLer Lhe commercial operaLion daLe. Also, Lhe BO1 pro|ecLs ol NHAl will be
eliqible lor Lhe scheme. 1hese chanqes will enable banks reduce exposure Lo exisLinq borrowers and lree up Lheir
capiLal and operaLe wiLhin Lhe exposure limiLs.
30
Measures Laken by Lhe RBl
31
AddiLionally, Lhe Reserve Bank ol lndia (RBl) has Laken a number ol requlaLory concessions lor
inlrasLrucLure lnance:
PermiLLinq banks Lo enLer LakeouL lnancinq arranqemenL
Freedom Lo issue lonq Lerm bonds by banks
RelaxaLion ol sinqle and qroup borrower limiL lor addiLional crediL exposure in Lhe inlrasLrucLure secLor
FlexibiliLy Lo invesL in unraLed bonds ol companies enqaqed in inlrasLrucLure acLiviLies wiLhin Lhe overall ceilinq
ol 107
Lxcludinq Lhe promoLers' shares in Lhe SPV ol an inlrasLrucLure pro|ecL Lo be pledqed Lo Lhe lendinq bank lrom
Lhe banks' capiLal markeL exposure
PermiLLinq banks Lo exLend lnance Lo lund promoLer's equiLy where Lhe proposal involves acquisiLion ol share
in an exisLinq company enqaqed in implemenLinq or operaLinq an inlrasLrucLure pro|ecL in lndia.
FurLher, Lhe cenLral bank recenLly eased Lhe norms by allowinq banks Lo lend 207 ol iLs capiLal lunds Lo
lnlrasLrucLure Finance Companies (lFCs).
29 "llFCL, LlC, lDFC enLer inLo MoU lor LakeouL lnancinq," 5"=)=>(" 2(>#0 1#/0('#, hLLp://arLicles.economicLimes.indiaLimes.
com/20110919/news/30175667_1_LakeouLlnancinqiilclindiainlrasLrucLurelnance, accessed 2 January 2012
30 "llFCL raises LakeouL ln bar by Rs5,000 crore," ;P! 1#/0('#, hLLp://www.dnaindia.com/money/reporL_iilclraisesLakeouL
lnbarbyrs5000crore_1627878, accessed 20 December 2011
31 "K C ChakrabarLy: lnlrasLrucLure lnance experiences and Lhe road ahead," BlS Review, February 2010
2.3.2 Bonds
1he bond markeL in lndia comprises issuances by
boLh CenLral and sLaLe qovernmenLs, public secLor
underLakinqs, oLher qovernmenL bodies, lnancial
insLiLuLions, banks and corporaLes. However,
Lhe corporaLe bond markeL currenLly is hiqhly
underdeveloped and lacks liquidiLy and depLh.
32
1he corporaLe debL markeLs have been consLrained by deLailed primary issue quidelines, lenqLhy processes, and
absence ol lonqLerm invesLors.
1he bond markeL primarily luncLions as a privaLe
placemenL markeL as Lhe public issues ol bonds have
been lound Lo be dillculL, slow, expensive as well as
risky. A debL privaLe placemenL amounL ol lNR5.^ billion
was raised in Lhe inlrasLrucLure secLor durinq FY09 up
lrom lNR^.3 billion in FY08.
33

lndian companies are allowed Lo issue bonds in lndian
currency lor Lradinq on Lhe corporaLe bond markeL in Lhe
counLry accordinq Lo Lhe exisLinq requlaLions. Foreiqn
insLiLuLional invesLors are permiLLed Lo invesL in Lhese
bonds up Lo lNR935 billion collecLively, wiLh a "carve
ouL" ol lNR23^ billion lor inlrasLrucLure pro|ecLs.
3^

2.3.3 External commercial borrowings
LxLernal commercial borrowinqs (LCBs) can also serve as an imporLanL means ol lundinq debL requiremenLs ol Lhe
inlrasLrucLure pro|ecL. 1he number ol LCBs exLended depends on inLeresL raLes in Lhe counLry. Over Lhe years, Lhey
have become cheaper and developers are increasinqly viewinq Lhem as an alLernaLe source.
Some ol Lhe requlaLory chanqes implemenLed Lo make LCBs an imporLanL means ol lundinq include:
ln May 2011, Lhe RBl permiLLed lFCs Lo raise lunds Lhrouqh LCBs ol up Lo 507 ol neLowned lunds wiLhouL
approval.
35
ln SepLember 2011, Lhe limiLs Lo avail LCB under Lhe auLomaLic rouLe has been liberalized as qiven below:
36
CorporaLes in real secLor/indusLrial secLor/inlrasLrucLure secLor lNR35 billion or equivalenL as compared Lo
Lhe currenL limiL ol lNR23.3 billion or equivalenL
32 "lndia Lo seL up vibranL bond markeL: Mukher|ee," 5"=)=>(" 2(>#0 1#/0('#, hLLp://economicLimes.indiaLimes.com/markeLs/
bonds/indiaLoseLupvibranLbondmarkeLmukher|ee/arLicleshow/73209^^.cms, accessed 20 December 2011
33 "ProducL lnnovaLions lor Financinq lnlrasLrucLure: A SLudy ol lndia's DebL MarkeLs", Asian DevelopmenL Bank, OcLober 2011
3^ "lndia Lo seL up vibranL bond markeL: Mukher|ee," lndoAsian News Service, 19 January 2011, via FacLiva 2011 H1 Media
LimiLed.
35 LCB norms liberalized lor inlrasLrucLure lnance lrms, Live minL, May 2011
36 "LxLernal Commercial Borrowinqs (LCB) RaLionalisaLion and LiberalisaLion," RBl, SepLember 2011
India plans to develop a vibrant
bond market to Iacilitate
inIrastructure hnancing, as
the source oI nearly onethird
oI the targeted $1 trillion
investment in the sector during
the TwelIth plan period is not
known yet..."We want to
develop and set up a vibrant
bond market in the country
to Iacilitate inIrastructure
hnancing."
Pranab Mukher|ee
Hon'ble Finance MinisLer ol lndia
(Source: Lconomic 1imes)
" The success oI government's
very ambitious inIrastructure
programme hinges on
developing an adequate bond
market "
D.H.Pai Panandiker, PresidenL, RPC FoundaLion
(Source: Business Week)
L
e
n
d
e
r
s
'

p
e
r
s
p
e
c
t
i
v
e
CorporaLes in speciled service secLors such as hoLel, hospiLal and solLware lNR9.3 billion or equivalenL as
aqainsL Lhe currenL limiL ol lNR^.6 billion or equivalenL
1he corporaLe enLiLies in Lhe inlrasLrucLure secLor can now avail ol LCBs lor inLeresL durinq consLrucLion (lDC)
as a permissible enduse, under Lhe auLomaLic/approval rouLe, as Lhe case may be, sub|ecL Lo lDC beinq a parL ol
pro|ecL cosL and is capiLalized.
1he Col approved lund raisinq worLh lNR609.5 billion by companies Lhrouqh exLernal commercial borrowinq (LCB)
or loreiqn currency converLible bonds (FCCB) lor inlrasLrucLure pro|ecLs in Lhe lasL Lwo lnancial years.
37
Companies such as L&1 Finance are mullinq Lhe LCB rouLe lor iLs expansion. L&1 lnlrasLrucLure Finance raised
lNR^.2 billion Lhrouqh Lhe LCB window Lhis lscal and is aiminq Lo raise more lunds Lhrouqh Lhis rouLe.
38
2.3.4 Foreign investment Iunding
Foreiqn direcL invesLmenL (FDl) FDl ol up Lo 1007 is permiLLed in qreenleld inlrasLrucLure pro|ecLs under Lhe
auLomaLic rouLe. ln Lhe case ol exisLinq pro|ecLs, FDl under Lhe auLomaLic rouLe is permiLLed up Lo 7^7 and FlPB
approval is required beyond 7^7. FDl qained a prominenL role in inlrasLrucLure lnancinq in Lhe recenL years. 1oLal
FDl increased lrom USS5.03 billion in 200203 Lo USS27.02 billion.
39
Over Lhe nexL Lwo years, lndia could aLLracL
FDl worLh USS80 billion. 1he inlrasLrucLure secLor as a percenLaqe ol LoLal FDl increased siqnilcanLly lrom around
^7 in 200203 Lo around 16.77 in 201011.
^0
Coinq by Lhese Lrends, FDl could siqnilcanLly conLribuLe Lo lnancinq
inlrasLrucLure in lndia.
2.3.5 Foreign Institutional Investment (FII)
1he Col is reporLedly in Lalks wiLh Lhe requlaLory auLhoriLies Lo allow inlrasLrucLure lnance companies Lo issue bonds
Lo loreiqn invesLors lor Lhe purpose ol raisinq inlrasLrucLure lnance in Lhe counLry. 1he Col had earlier raised Lhe
limiL on Fll invesLmenL in corporaLe bonds ol duraLion ol more Lhan lve years issued by companies in Lhis secLor.
^1
2.3. Multilateral agencies lending
lnsLiLuLions such as Lhe World Bank and Lhe Asian DevelopmenL Bank also provide lunds Lo lnance PPP
inlrasLrucLure pro|ecLs.
Asian DevelopmenL Bank
^2
1he Col sLarLed a PPP iniLiaLive called "MainsLreaminq PPPs in lndia" in collaboraLion wiLh ADB. lL commenced in
2007 Lo enable PPPs by locusinq on all acLiviLies relaLinq Lo various parameLers such as process sLandardizaLion,
secLor Lools, developmenL lunds and pro|ecLs developmenL.
^3
ADB also provides supporL Lo lndia in sLrucLurinq ol poLenLial PPP Lhrouqh iLs supporL in Lhe lorm ol 1echnical
AssisLance (1A).1he supporL provided by Lhe insLiLuLion is in Lhe lollowinq lorms:
Public secLor loans Lo sLaLes or municipaliLies lor lnancinq qranLs/equiLy supporL
Public secLor loans Lo llFCL LhaL lurLher qranL lunds lor pro|ecL companies
PrivaLe secLor loans Lo pro|ecL companies
Provision ol quaranLee Lo commercial lenders.
37 hLLp://www.pro|ecLsinlo.in/News.aspx?nld=LqS7Olvq+Oa2alymaloMpq==
38 "L&1 lnlra launches Laxlree bonds; mulls LCB rouLe lor lunds," A:0()#00 N()# 1#/0('#, hLLp://www.Lhehindubusinessline.
com/indusLryandeconomy/bankinq/arLicle2656^96.ece, accessed 22 December 2011
39 DeparLmenL ol lndusLrial Policy and PromoLion, lndia FDl FacL SheeL April 2011 Pq^
^0 RBl Annual ReporL 201011 pq70
^1 "hLLp://www.moneyconLrol.com/news/business/qovLaimsLoeaselienLryinlralnancebondssources_579707.hLml
^2 CounLry OperaLions Business Plan, ADB, December 2010
^3 "1heoreLical Framework," !;A 1#/0('#, hLLp://www.adb.orq/lndia/PPP/abouL.asp, accessed 2 January 2012
ADB's 1A supporL lor Lhe lndian PPP proqram idenLiled more Lhan 30 piloL pro|ecLs across challenqinq secLors such
as urban, healLh, educaLion, power disLribuLion and Lhe rural secLor. lL is supporLinq approximaLely ^52 PPP pro|ecLs
across Lhe counLry Lhrouqh Lhe PPP cells.
World Bank
World Bank supporL inLends Lo increase Lhe availabiliLy ol lonqLerm lnancinq lor inlrasLrucLure PPP pro|ecLs
in lndia. lL will help llFCL Lo sLimulaLe Lhe developmenL ol a lonqLerm local currency debL lnancinq markeL lor
inlrasLrucLure in lndia.
1he lnLernaLional Bank lor ReconsLrucLion and DevelopmenL (lBRD) has provided a Line ol CrediL (LoC) ol lNR58
billion Lo llFCL lor inlrasLrucLure pro|ecLs.
ln addiLion, World Bank pro|ecL (20092015) reqardinq llFCL supporL is expecLed Lo brinq around 150 new PPPs
Lo lnancial closure, resulLinq in a lourlold increase in Lhe amounL ol privaLe capiLal available. Such a lnancinq will
supporL a number ol PPP pro|ecLs, mainly in Lhe roads, power and porLs secLors.
2.3.7 Insurance/pension Iunds
Pension lunds can serve as an alLernaLe source ol lnance lor inlrasLrucLure pro|ecLs as Lhey provide lonqLerm
sLreams ol income, consLancy, predicLable cash lows, lower delaulL raLes, diversilcaLion ol pro|ecL and socieLal
benelLs. 1he Col plans Lo allow inlrasLrucLure companies Lo raise lnances lrom boLh domesLic and loreiqn insurance
and pension lunds by launchinq inlrasLrucLure debL lunds (lDFs). lDFs can be seLup as a LrusL or a company. 1o
aLLracL oll shore lunds inLo lDFs, Lhe MinisLry ol Finance proposed LhaL wiLhholdinq Lax on inLeresL paymenL on
borrowinq by lDFs will be reduced lrom 207 Lo 57. Also income ol lDFs will also be exempL lrom income Lax.
"The government clears policy
impediments to enable liIe
insurance companies and
pension Iunds, which have Iunds
Ior 2030 years at their disposal,
to invest in the inIrastructure
sector."
SuqqesLed by KC ChakrabarLy, DepuLy Covernor, RBl
(Source: 1he 1imes ol lndia)
SeLLinq up ol lndia inlrasLrucLure debL lund
1he Col has laid down Lhe lormaL lor lNR500 billion inlrasLrucLure debL lund wiLh 507 parLicipaLion lrom
loreiqn banks and mulLilaLeral aqencies and Lhe remaininq beinq conLribuLed by Lhe sLaLeowned Fls. 1he lund is
expecLed Lo lend Lo any inlrasLrucLure pro|ecL, which is based on PPP.
2.4 Crants
CranL is Lhe amounL, which a pro|ecL awardinq auLhoriLy provides Lo Lhe pro|ecL sponsor in order Lo supporL Lhe
lnancial viabiliLy ol a pro|ecL. Pro|ecLs LhaL are noL commercially viable on Lheir own require a lund supporL lrom Lhe
Col. 1he Col inLroduced "ViabiliLy Cap Fund" Lo provide caLalyLic assisLance and supporL, especially lor reqions and
secLors where PPPs are dillculL.
2.5 Private sector capabilities
PrivaLe secLor is slaLed Lo play an imporLanL role in providinq lunds lor developmenL ol inlrasLrucLure in Lhe counLry.
lL is expecLed Lo lnance 507 ol invesLmenL ol USS1 Lrillion in inlrasLrucLure pro|ecLs in Lhe counLry durinq Lhe period
201217. 1he Planninq Commission sLaLes LhaL aparL lrom Lhe hiqhway and power secLors, Lhe lollowinq areas can
also leveraqe lndia's privaLe secLor capabiliLies durinq Lhe 1wellLh FYP.
^^
Civil aviation: PrivaLe secLor conLribuLed Lo Lhe modernizaLion ol airporL inlrasLrucLure. 1he new Mumbai
airporL is expecLed Lo be developed on PPP model. PrivaLe secLor capabiliLies can also be leveraqed lor
developmenL ol oLher airporLs in Lhe counLry.
Higher education: PrivaLe secLor qrowLh in hiqher educaLion needs Lo be laciliLaLed Lhrouqh uLilizinq innovaLive
PPP models.
5kill development: Upqradinq ol l1ls Lhrouqh Lhe PPP model and parLicipaLion ol privaLe secLor in lnancinq,
service delivery, and Lraininq ol Lrainers.
Housing: Scope ol allordable housinq lor weaker secLions can be expanded Lhrouqh parLicipaLion ol privaLe
secLor.
^^ An Approach Lo 1wellLh Five year plan, Planninq Commission, OcLober 2011
ViabiliLy Cap Fundinq
Financing:
Providinq 207 ol pro|ecL cosL
AddiLional 207 can be allowed by Lhe sponsorinq auLhoriLy, il required
Eligible sectors:
1ransporLaLion (rail, roadways, seaporL, hiqhways)
Power/ Lnerqy
Urban inlrasLrucLure (waLer supply, sewaqe, solid wasLe manaqemenL)
1ourism (inLernaLional convenLion cenLers)
Special Lconomic Zones
Current status:
1he LoLal ViabiliLy Cap Fundinq (VCF) ouLlay lor Lhe LlevenLh Five Year Plan (20072012) had been esLimaLed aL
lNR69.73 billion. ln Lhe FY1011 alone, lNR^.80 billion was provided as VCF. 1he LoLal approvals lor VCF qranL
Lill now are lNR82.89 billion lor pro|ecLs LhaL have been qranLed "lnprinciple/lnal approval". 1he acLual level ol
VCF amounL ol Lhese proposals will be known once Lhe biddinq process is compleLed.
(Source: OuLcome budqeL FY1112, MinisLry ol Finance, pq 3)
1he coveraqe ol VCF scheme is also beinq considered lor expansion in case ol educaLion and healLh secLors.
Also, Lhe sLaLe qovernmenLs (such as UP CovernmenL) are underLakinq developmenL pro|ecLs Lhrouqh VCF Lo
make Lhem prolLable lor promoLers.
Urban inIrastructure: 1here are siqnilcanL opporLuniLies lor privaLe secLor in Lhe lelds ol urban renewal and
manaqemenL, drinkinq waLer supply, wasLe waLer recyclinq, LreaLmenL ol municipal seweraqe wasLaqe and
LreaLmenL or urban seweraqe.
Health care services: PPP arranqemenLs can be uLilized Lo lnance healLh care services and Lo sLrenqLhen Lhe
secondary and LerLiary healLh care sysLems in Lhe counLry.
ln lndia, ma|oriLy ol equiLy in inlrasLrucLure pro|ecLs is conLribuLed by pro|ecL developers, wiLh Lhe nexLlarqesL
conLribuLor beinq Lhe public secLor. 1he privaLe secLor consorLium alonq wiLh public aqency conLribuLes equiLy
dependinq on Lhe Lerms ol conLracL while debL is sourced lrom an ouLside aqency.
Accordinq Lo World Bank's PrivaLe ParLicipaLion in lnlrasLrucLure daLabase, lndia sLands second only Lo China in
Lerms ol number ol PPP pro|ecLs and is second Lo Brazil in Lerms ol invesLmenLs.
PPP pro|ecLs in lndia require a minimum shareholdinq commiLmenL lrom sponsors ol pro|ecLs amounLinq Lo 517
ol Lhe equiLy up Lo second year ol commencemenL ol operaLions. 1he equiLy capiLal is enLirely provided by pro|ecL
sponsors ouL ol Lheir exisLinq balance sheeLs. 1here is also placemenL ol minoriLy equiLy sLakes wiLh Lnqineerinq
ProcuremenL and ConsLrucLion (LPC)/O&M conLracLors besides sLraLeqic invesLors who are likely Lo benelL lrom Lhe
pro|ecL's operaLions.
A privaLe player in a PPP pro|ecL can be a privaLe company, a consorLium ol privaLe inLeresLs or a Non CovernmenL
OrqanizaLion (NCO). PrivaLe secLor plays Lhe role ol desiqninq, consLrucLion, operaLion and mainLenance ol Lhe
pro|ecL. PrivaLe players are also responsible lor providinq equiLy ol Lhe PPP pro|ecL. 1hey, in Lurn, can Lap Lhe
primary markeL Lo raise capiLal via an lPO issue.
However, privaLe developers have limiLed amounL ol capiLal, Lied up lor lonq Lerm in inlrasLrucLure pro|ecLs. 1hey
rely on privaLe equiLy invesLors Lo decrease promoLer's risk. PrivaLe equiLy wiLnessed around 2^1 deals worLh
lNR266 billion in Lhe inlrasLrucLure secLor in 1H11.
TabIe: CapitaI raisin cf infrastructure ccmpanies and PE investments in infrastructure
!PD/FPD PE
Number oI issues INP billion Number oI deals INP billion
200^05 ^ 62 7 ^
200506 9 ^6 10 28
200607 12 66 ^0 115
200708 21 206 77 3^1
200809 3 10 ^8 18^
Source: Financinq lnlrasLrucLure, lDFC Series
1he invesLmenL is conLribuLed by boLh domesLic and loreiqn players. However, Lhe domesLic players dominaLe Lhe
scenario ol PPP pro|ecLs in lndia.
TabIe: Prcminent private pIayers in !ndian !nfrastructure
Domestic players Investment
(INP billion)
Number oI
pro|ects
Ma|or domesLic players
Larsen & 1urbo 1ransporLaLion lnlrasLrucLure LLd. 35 10
Small domesLic players
DS ConsLrucLions 3 ^
Sadbhav Lnqineerinq LimiLed 21 11
MSK Pro|ecLs (lndia) LimiLed 2 15
1oLal 65 ^0
Source: Shodhqanqa
3.1 Highways
Road secLor (^05 pro|ecLs valued aL lNR1,767 billion) accounLs lor 537 ol Lhe LoLal number and ^67 ol Lhe LoLal
value ol PPP pro|ecLs in lndia
^5
. 1he road neLwork in lndia comprises naLional hiqhways (65,569 km), sLaLe hiqhways
(1,30,000 km) and disLricL/rural/urban road (31,^0,000 km)
^6
. 1he conLracLs have primarily been awarded by
compeLiLive biddinq and are larqely in Lhe BO1 lormaL (Loll or annuiLy basis).
Ccmmcn fcrms cf PPP in naticnaI hihways
PPP Iormat Pro|ects Value (in INP billion)
BO1 Loll ^8 93.3
BO1 annuiLy 8 23.5
Special Purpose Vehicle Pro|ecLs 2^ ^6.8
Source: MinisLry ol Road 1ransporL & Hiqhways
NaticnaI hihways: SiqnilcanL proqress has been made in Lhe lnancinq ol ambiLious NaLional Hiqhway
DevelopmenL Proqram (NHDP) coverinq a LoLal lenqLh ol ^5,97^ km and invesLmenL ol lNR2,200 billion up Lo
2012.
Status cf State Hihways
Pro|ect status No. oI pro|ects
CompleLed pro|ecLs 73
Pro|ecLs under implemenLaLion 62
Pro|ecLs in Lhe bid process ^1
Pro|ecLs where leasibiliLy sLudy has commenced ^^
Pro|ecLs in pipeline lor 201112 38
1oLal 258
Source: Compendium ol PPP pro|ecLs in sLaLe hiqhways, -)9%&0'%:"':%# 1#/0('#
State hihways: WiLh siqnilcanL proqress beinq made by Lhe NHDP (in case ol naLional hiqhways) in which
approximaLely 857 ol pro|ecLs are proposed Lo be under Lhe PPP mode, qrowLh model lor sLaLe hiqhways also
holds poLenLial. 1he sLaLe qovernmenLs ol Andhra Pradesh, Cu|araL, KarnaLaka, MaharashLra, Ra|asLhan and
Madhya Pradesh are Lakinq iniLiaLives Lo promoLe PPPbased sLaLe hiqhways.
^5 PPP lndia daLabase as ol 31 July 2011
^6 MinisLry ol Road 1ransporL & Hiqhways
3.
Key industries/sectors Ior PPP
Several qovernmenL iniLiaLives Lo enhance privaLe secLor parLicipaLion
(includinq PPP) in roads secLor:
ViabiliLy Cap Fundinq in Lhe lorm ol capiLal qranLs subsidy ol up Lo ^07 ol pro|ecL cosL
1007 Lax exempLion in any consecuLive 10 years ouL ol 20 years
DuLylree imporL ol cerLain idenLiled hiqh qualiLy consLrucLion planLs and equipmenL
Allowinq FDl up Lo 1007 in Lhe secLor and relaxed LCB norms
Lonq concession period ol up Lo 30 years
RiqhL Lo collecL and reLain Loll
Model concession aqreemenLs lor sLaLe hiqhways
SLandardizinq ol model biddinq documenLs
!nvestment requirements: 1he naLional hiqhways consLiLuLe |usL 27 ol Lhe enLire road neLwork buL carry
approximaLely ^07 ol LoLal road Lrallc indicaLinq exisLence ol siqnilcanL poLenLial Lo be unleashed. 1he invesLmenLs
worLh lNR^,902 billion have been planned as a parL ol Lhe 1wellLh FYP (compared Lo lNR2,786 billion lor Lhe
LlevenLh FYP). 1he conLribuLion ol privaLe secLor is likely Lo ranqe lrom lNR1,667 billion Lo lNR2,^51 billion durinq
Lhe 1wellLh FYP (based on an esLimaLed 3^7 ol privaLe spendinq in Lhe LlevenLh FYP and envisaqed 507 privaLe
spendinq in Lhe 1wellLh FYP).
3.2 Pailways
1he railways secLor |usL experienced ^ PPP conLracLs valued aL lNR15.7 billion
^7
. 1he pro|ecLs have been conLracLed
eiLher by domesLic compeLiLive biddinq or Lhrouqh neqoLiaLed MOUs. Due Lo Lhe larqe size ol Lhe pro|ecLs, Lhe PPP
pro|ecLs in railways have Lo be supplemenLary or an exLension Lo an exisLinq larqe railway neLwork.
1he recenL PPP daLa
^8
indicaLes around nine pro|ecLs beinq conLracLed so lar in Cu|araL (^), Orissa (2),
Haryana (1), Andhra Pradesh (1) and KarnaLaka (1). 1he nine pro|ecLs have BO1 (or iLs varianLs) lormaL
(includinq one on DBFO1) PPP as Lhe prelerred BO1 model. 1he lNR9 billion meLro links lrom Delhi MeLro
lrom Sikanderpur Lo NH 8, Curqaon has Lhe hiqhesL value ol PPP railway conLracL so lar.
1he PPP experience in Lhe railways secLor has proven Lo be a mixed baq so lar. ln pro|ecLs wiLh clear cuL
demarcaLion ol responsibiliLies, Lhe model has proven successlul such as in Lhe case ol lasL mile porLconnecLiviLy
(For insLance, lasL mile connecLiviLy Lo Mundra porL wiLh PalanpurCandhidham railway line; and rail link lrom
Bhadrak Lo new porL aL Dhamra in Orissa). On Lhe oLher hand, Lhe railways has been lacinq problems in usinq Lhe
PPP rouLe lor manulacLurinq rollinq sLock and locomoLives (Lwo meqa railway pro|ecLs manulacLure ol LlecLric
locomoLives aL Madhepura and Diesel LocomoLives aL Marhorwa have been on hold).
!nvestment requirements: As reporLed, Lhe lndian railways (lR) require lNR5.2 Lrillion ol public invesLmenL durinq
Lhe 1wellLh FYP (201217) ol which Lhe lndian Railway CorporaLion will raise lNR1 Lrillion and Lhe balance needs Lo
be qeneraLed inLernally or Lhrouqh Lhe lorm ol PPPs. 1he lR announced iLs plans ol resLrucLurinq Lo aLLracL lundinq
ol lNR500 billion
^9
Lo meeL iLs expansion LarqeLs proposed lor Lhe 1wellLh FYP. ln order Lo carry ouL Lhis, Lhe railway
is currenLly workinq ouL sLraLeqies Lo desiqn and award PPP pro|ecLs. 1he railways minisLry has reporLedly, plans ol
awardinq pro|ecLs on locomoLive and coach lacLory and consLrucLion ol a corridor lor hiqhspeed rail in 1wellLh Plan
period Lo qeneraLe Lhe esLimaLed invesLmenL.
^7 PPP lndia DaLabase as on 31 July 2011
^8 "PPP daLa," PPP in lndia DaLabase, accessed 9 December 2011
^9 "ln Lrack chanqe, Rly eyes R50k cr pvL invesLmenL," 23# 4()&)"(&$ 567%#00 1#/0('#, hLLp://www.lnancialexpress.com/news/
lnLrackchanqeRlyeyesR50kcrpvLinvesLmenL/8^0860/ accessed 19 December 2011
Some ol Lhe PPP pro|ecL iniLiaLives underLaken by Lhe railways secLor include:
Container Corporation oI India Limited (CCNCCP) lor developinq mulLi modal LransporL loqisLics
inlrasLrucLure Lo supporL domesLic conLainer Lrallc
Pipavav Pailway Corporation Ltd. (PPCL) Lo provide broad qauqe rail link Lo PorL ol Pipavav in Cu|araL
Pail Vikas Nigam Limited (PVNL) lor PorL connecLiviLy works and improvemenL ol Lhe Colden
OuadrilaLeral Lo meeL luLure LransporLaLion needs
1he pro|ecLs proposed lor PPP lormaL
include:
Hiqh speed rail corridor
DedicaLed lreiqhL corridor
LocomoLive and coach lacLories
MulLimodal LoqisLics hubs
3.3 Power
1he Col has Laken several iniLiaLives over Lhe lasL lew years Lo promoLe parLicipaLion lrom privaLe players in Lhe
power secLor. WiLh a LoLal ol 56 pro|ecLs valued aL lNR672 billion, Lhe enerqy secLor accounLs lor 187 ol Lhe overall
value ol PPP conLracLs awarded in various secLors.
50
Pcwer eneraticn
51
: Power qeneraLion in lndia Lakes place primarily aL Lhe sLaLe level (^67) and CenLral
level (317), wiLh privaLe secLor accounLinq lor Lhe resL. ParLicipaLion ol privaLe players in Lhe power secLor is
cenLered on Lhermal power qeneraLion, larqely implemenLed Lhrouqh Lhe BOO and BOO1 models.

lnLroduced in 2005, nine UlLra Meqa Power Pro|ecLs (UMPPs) are expecLed Lo rope in an invesLmenL ol around
USS35^0 billion lrom Lhe privaLe secLor. 1o increase invesLor conldence, UMPPs are awarded Lhrouqh
compeLiLive Larillbased biddinq, and are beinq developed on a BOO basis.
Pcwer transmissicn: Since January 2011, Lransmission pro|ecLs have also been awarded Lhrouqh compeLiLive
biddinq under Lhe BOO model. For insLance, SLerliLe has already been awarded Lhree pro|ecLs (amounLinq Lo
USS^0 million) lor buildinq power Lransmission sysLems on a BuildOwnOperaLeMainLain ("BOOM") basis.
OpporLuniLies in Lhe power secLor
52
1he demandsupply qap has been wideninq aL an alarminq pace, primarily led by rapid qrowLh in populaLion and
manulacLurinq acLiviLies. 1he counLry is expecLed a power delciL ol around 107 durinq 201112 and by 2030,
Lhe LoLal demand lor elecLriciLy in lndia is expecLed Lo cross 950CW.
1he Planninq Commission pro|ecLed an invesLmenL ol USS171 billion in Lhe power secLor durinq Lhe period
201217, ouL ol which Lhe privaLe secLor is expecLed Lo conLribuLe around USS60 billion. CurrenLly, 1007 FDl is
permiLLed lor qeneraLion, Lransmission and disLribuLion Lhrouqh Lhe auLomaLic rouLe.
50 "PPP Pro|ecL SLaLus ReporL," Public PrivaLe ParLnerships lndia daLabase, 31 July 2011
51 "PosiLion paper on Lhe power secLor in lndia," DeparLmenL ol Lconomic Allairs, MoF (lndia), December 2009
52 "lndia plans 16 UlLra Meqa Power Pro|ecLs Lo enhance power qeneraLion," -).:0'%(&$ 9:#$0 &). 7=1#% 1#/0('#, hLLp://www.
ilandp.com/arLicle/0010818.hLml
"This time around, we will indeed make a
diIIerence when it comes to PPP pro|ects.
Pailways doesn't have enough resources
on its own and the government can't keep
Iunding our plans Ior ever. 5o, PPP is the
only way Iorward,"
Dinesh 1rivedi
Hon'ble Railway MinisLer ol lndia
Source: Financial Lxpress
(hLLp://www.lnancialexpress.com/news/inLrack
chanqerlyeyesr50kcrpvLinvesLmenL/8^0860/0)
Policy iniLiaLives and incenLives Lo encouraqe privaLe parLicipaLion:
lncreasinq loreiqn parLicipaLion up Lo 1007 under Lhe auLomaLic rouLe
New policy lramework LhaL includes: LlecLriciLy AcL, 2003, NaLional LlecLriciLy Policy 2006, 1arill Policy
2006, Rural LlecLrilcaLion Policy 2006, New Hydro policy 2008 and meqa power pro|ecLs 2008
lnLroducLion ol open access Lo Lransmission lines and disLribuLion sysLems by licensees or consumers or
qeneraLors
lnLroducLion ol compeLiLion/UMPPs
Renewable enerqy holds siqnilcanL opporLuniLies
in qeneraLion as well as manulacLurinq acLiviLies,
larqely due Lo underuLilized resources and lack ol
poliLical will. 1he Col has an ambiLious "Power lor
All" plan, which aims lor compleLe elecLrilcaLion
by Lhe end ol 2012. 1o implemenL Lhis iniLiaLive,
siqnilcanL parLicipaLion lrom Lhe privaLe secLor
is required. 1he opLion ol PPP in nuclear power
qeneraLion is also beinq explored, Lhouqh FDl in Lhe
secLor is noL permiLLed yeL.
3.4 Urban inIrastructure
1he urban inlrasLrucLure secLor wiLnessed a relaLively siqnilcanL number ol PPP conLracLs (152) valued aL lNR29^
billion
53
alLhouqh iL accounLs lor only 87 ol LoLal value ol conLracLs indicaLinq a larqe number ol PPP pro|ecLs wiLh
small conLracL value.
1he Col recoqnizes Lhe imporLance ol urban inlrasLrucLure in Lhe chanqinq dynamics ol lndian populaLion as iL is
expecLed LhaL urban populaLion will reach 600 million by 2031
5^
. 1he Col launched Lhe Jawaharlal Nehru NaLional
Urban Renewal Mission (JNNURM) Lo esLablish a lramework and provide incenLives Lo promoLe PPP Lo sLaLes and
urban local qovernmenLs.
However, Lhe secLor sLill wiLnesses obsLacles Lo aLLracL privaLe invesLmenL as Lhere is lack ol adequaLe leqal
lramework aL Lhe sLaLe and ciLy level and insLiLuLions and key sLakeholders do noL have Lhe capaciLy and knowledqe
Lo carry ouL pro|ecL on PPP basis.
53 As per PPP in lndia daLabase (as on 31 July, 2011)
5^ "ReporL on lndian Urban lnlrasLrucLure and Services," 1he Hiqh Powered LxperL CommiLLee (HPLC) lor LsLimaLinq Lhe
lnvesLmenL RequiremenLs lor Urban lnlrasLrucLure Services, March 2011, paqe XXl
"The scope Ior investment
in the power sector over the
next Iew years is well over
$300 billion and given our
large expansion programme
in this sector, we would
dehnitely need and welcome a
large amount oI Ioreign direct
investment."
Sushil Kumar Shinde
Hon'ble Union Power MinisLer
Source: lFANDP (daLed April, 2011)
(hLLp://www.ilandp.com/arLicle/0010818.hLml)
ProminenL PPP pro|ecL iniLiaLives in urban inlrasLrucLure:
24 X 7 water supply pro|ect Ior Nagpur city Lo provide uninLerrupLed waLer supply Lo consumers; model
slaLed Lo be emulaLed in many oLher ciLies
Water supply and sewerage pro|ect in Kolkata Lo develop waLer supplycumseweraqe lor Lhe Lownship ol
SecLorV ol SalL Lake
Integrated solid waste management pro|ect in Chennai Lo meeL Lhe requiremenLs ol solid wasLe
manaqemenL
City bus service oI 5urat Lo caLer Lo Lhe need lor public LransporL sysLem lor Lhe conqesLed ciLy ol SuraL
One ol Lhe mosL criLical issue in urbanizaLion is ellcienL LransporL sysLem and a recenL sLudy shows LhaL meLro
rail answers Lhe LransiL needs ol urban areas mosL ellecLively and has Lhe poLenLial Lo brinq all round benelLs Lo
business, Lo environmenL and mulLiple benelLs Lo people in all walks ol lile
55
.
A new meLro pro|ecL is beinq Laken up in Hyderabad lor 71.16 km., aL an esLimaLed cosL ol lNR123.32 billion,
besides Lhe onqoinq meLro pro|ecLs ol Banqalore, Chennai, KolkaLa (LasLWesL MeLro corridor) and Mumbai. Also,
meLro rail pro|ecLs have received in principle approval lorJaipur,PaLna, Pune, Kochi and Lucknow.
1he CenLral and sLaLe qovernmenLs will require lunds Lo lullll Lhe demand lor urban inlrasLrucLure. 1he delciL can
only be meL Lhrouqh involvinq privaLe players in Lhe secLor.
MinisLry ol Urban DevelopmenL's sLraLeqic plan sLaLes LhaL PPP can play a prominenL role in Lhe lelds ol solid
wasLe manaqemenL luncLions such as doorLodoor collecLion, sLreeL sweepinq, LransporLaLion and LreaLmenL;
eqoverenance and sLrenqhLeninq ol urban local bodies (ULBs).
1he minisLry also envisions seLLinq up ol a PPP urban
inlrasLrucLure lund Lo encouraqe PPP Lo supplemenL
qovernmenL ellorLs.
Source: "ReporL on lndian Urban lnlrasLrucLure and Services,"
1he Hiqh Powered LxperL CommiLLee (HPLC) lor LsLimaLinq Lhe
lnvesLmenL RequiremenLs lor Urban lnlrasLrucLure Services,
March 2011, paqe XXV
55 SLudy on Urbanizinq lndia & Meqa MeLro NeLwork Vision lor Lhe Lmerqinq CiLies ol lndia2030 "hLLp://www.assocham.orq/
arb/qeneral/MeLro SLudy_UpdaLe.pdl
Urban infrastructure investment requirement: !NR39,1 biIIicn (2012-31)
!!"
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"Covernment will encourage
PPP model Ior developing
inIrastructure like water supply
and municipal solid waste
management in the cities across
the country"
Kamal NaLh
Hon'ble Urban DevelopmenL MinisLer ol lndia
Source: 1he Hindu
(hLLp://arLicles.economicLimes.indiaLimes.com/2011
1220/news/305380^2_1_pppmodelsolidwasLe
manaqemenLurbanlocalbodies)
4.1 Policy recommendations
An independent institutional structure Ior handling oI PPP program: WiLh Lhe express ob|ecLive ol meeLinq
Lhe PPP LarqeLs, an independenL insLiLuLion should be seL up Lo acL as nodal aqency wiLh Lhe responsibiliLy
ol creaLion ol PPP daLa base, besL pracLices, model documenLs lor all secLors and coordinaLion wiLh all
deparLmenLs.
Development oI sectorspecihc regulatory mechanism: ln order Lo proLecL Lhe inLeresL ol users, privaLe
developers, Lhe social communiLy and lenders and secLorspecilc requlaLors should be esLablished. 1he
independenL requlaLors can make Lhe dispuLe resoluLion mechanism ellecLive especially in cases where public
auLhoriLy is also an operaLor, lor example in railway, where Lhe lndian Railway is Lhe concessioninq auLhoriLy
and aL Lhe same Lime compeLe wiLh privaLe Lrain operaLor (Lhrouqh Concor).
Dissemination oI inIormation on PPPs: 1here exisLs a need lor Lhe creaLion ol specilc inlormaLion policy
lor PPPs wherein all bid documenLs, leasibiliLy reporLs and currenL sLaLus ol Lhe pro|ecLs are published on a
dedicaLed conLracL porLal. 1he inLernaLional policy models such as ParLnerships VicLoria (AusLralia) can be
relerred Lo in Lhis case.
4.2 Pro|ect development recommendations
Capacity building measures Ior the government: 1here is a need lor capaciLy buildinq aL Lhe CenLre and
more parLicularly aL Lhe sLaLe qovernmenLs and local bodies level. 1he PPP nodal aqencies aL Lhe CenLre and
sLaLe level should Lake Lhe responsibiliLy ol creaLinq awareness abouL Lhe PPP proqram in all deparLmenLs and
wherever required, Lhe services ol Lhe Lechnical and lnancial consulLanL lor Lraininq ol Lhe sLall should be
Laken. 1he mulLilaLeral and bilaLeral aqencies can also provide Lechnical and lnancial assisLance lor Lhe PPP
pro|ecLs and Lo provide besL qlobal pracLices Lo be lollowed in PPPs.
Pole oI consultants: For developmenL ol PPP pro|ecL Lhe role ol Lechnical and LransacLion advisors is mosL
criLical. Hence, iL is imperaLive Lhe uLmosL care is Laken in appoinLmenL ol consulLanLs. Cenerally Lhe consulLanL
lee is a small proporLion ol Lhe pro|ecL cosL and Lhe value addiLion by a qood consulLanL could be much hiqher.
For Lhe success ol Lhe pro|ecL, consulLanL's qualiLy is more criLical as compared Lo Lhe cosL implicaLions. Hence,
Lhe prelerred model lor selecLion ol Lhe consulLanL should be eiLher "qualiLy based" or "qualiLycumcosL based"
wiLh hiqher weiqhLaqe Lo qualiLy.
4.
Pecommendations
PcIicy reccmmendaticns Prcject deveIcpment
reccmmendaticns
Financin reccmmendaticns
SeLLinq up independenL
insLiLuLional sLrucLure lor
handlinq PPP proqram
DevelopmenL ol secLorspecilc
requlaLory mechanism
DisseminaLion ol lnlormaLion
on PPPs
CapaciLy buildinq measures lor
Lhe CovernmenL
Role ol consulLanLs
Pro|ecL developmenL acLiviLies
OpLimal allocaLion ol risks,
auLhoriLy and accounLabiliLy
SelecLion ol privaLe secLor
parLner
Developinq corporaLe bond
markeL
Lncouraqinq parLicipaLion by
pension lunds and insurance
companies
SLimulaLinq PL invesLmenLs in
inlrasLrucLure secLor
Hedqinq mechanism lor
exLernal borrowinqs and
invesLmenLs
Pro|ect development activities: 1he lack ol pro|ecL preparaLion by Lhe relevanL developmenL auLhoriLy such
as, inaccuraLe scope delniLion, land acquisiLion, uLiliLies, environmenL clearance, no public consulLaLions eLc.
can resulL in poor bid response and also aL Lhe execuLion sLaqe delays in commencemenL ol consLrucLion,
compromises on Lhe desiqn qualiLy Lo reduce cosLs or aLLempL Lo chanqe scope resulLinq in abnormal increase in
pro|ecL cosL leadinq Lo dispuLes. 1he auLhoriLies should Lry Lo qeL all approvals and laLesL leasibiliLy reporLs wiLh
Lechnical scope ol work belore awardinq concessions.
Cptimal allocation oI risks, authority and accountability: 1here is a need lor ellecLive disLribuLion ol
responsibiliLy, cosLs and risks beLween Lhe public and privaLe secLor. ln many cases, due Lo lack ol proper
pro|ecL developmenL, public auLhoriLies are noL able Lo lullll Lheir responsibiliLies such as land acquisiLion,
environmenLal clearance, sLaLe supporL eLc., due Lo which pro|ecL qeLs delayed. However, even in cases where
qovernmenL is noL able Lo lullll iLs parL, Lhe privaLe secLor has Lo suller Lhe losses due Lo delay, as Lhere is no
appropriaLe lramework lor compensaLion.
5election oI private sector partner: 1o qeL besL Lechnical and lnancial oller, Lhe auLhoriLies should sLarL
inLeracLion wiLh privaLe secLor lrom Lhe pro|ecL developmenL acLiviLies sLaqe, and concerns ol Lhe privaLe
bidders should be Laken care ol in Lhe besL possible way. For selecLion ol privaLe parLners Lhere is an excessive
locus on hiqhesL lnancial bids. 1he speculaLive bids can hamper Lhe pro|ecL in Lhe lonq run, as Lhe developer
will lnd iL dillculL Lo qeL lundinq and service Lhe obliqaLions. 1he auLhoriLies should evolve a policy on Lhe
speculaLive bids and oLher selecLion meLhods such as compeLiLive dialoque process lor complex pro|ecLs should
also be used.
4.3 Financing recommendations
Developing corporate bond market: 1here is an immediaLe need Lo develop Lhe corporaLe bond markeL.
1he proposal Lo seL up lnlrasLrucLure DebL Funds (lDFs) is a sLep in Lhe riqhL direcLion. FurLher, in order Lo
|umpsLarL Lhe corporaLe bond markeL in inlrasLrucLure pro|ecLs, Lhe larqe lndian commercial banks while lundinq
Lhe pro|ecL can compulsorily lund some parL ol debL by subscribinq Lo bonds. 1hese bonds can be lisLed on
exchanqes. 1he larqe commercial banks and NBFCs can also play Lhe markeL makers in inlrasLrucLure bonds lor
iniLial years.
Encouraging participation by pension Iunds and insurance companies: Civen Lhe lacL LhaL Lhe commercial
banks are concerned abouL asseL liabiliLy mismaLches and concenLraLion risks, Lhe Col should alLernaLely
consider domesLic insLiLuLional invesLors lor invesLmenL in inlrasLrucLure. 1he Col should make Lhe invesLmenL
policies and requlaLory quidelines ol Lhe insurance companies and pension lunds more conducive and lexible
Loward invesLinq in Lhe inlrasLrucLure secLor. 1he requlaLions such as raLinq requiremenLs and LreaLmenL ol
invesLmenLs by insurance companies in inlrasLrucLure secLor can be reviewed.
5timulating PE investments in inIrastructure sector: Clobal and domesLic privaLe equiLy lunds have Lhe
capabiliLy Lo provide lnance lor inlrasLrucLure qrowLh in lndia. 1o aLLracL PL lunds lor biddinq in inlrasLrucLure
pro|ecLs, Lhe eliqibiliLy criLeria should be suiLably amended, and aparL lrom Lhe lnancial neLworLh, Lhe "Funds
under ManaqemenL" lor PL and VenLure CapiLal lunds should also be included.
Hedging mechanism Ior external borrowings and investments: 1he lndian companies have been raisinq
exLernal commercial borrowinqs lor inlrasLrucLure pro|ecLs. lDFs also aim Lo Lap inLernaLional insurance and
pension lunds lor invesLmenL in inlrasLrucLure in lndia. 1he hedqinq ol loreiqn currency exposure eaLs up a
larqe parL ol inLeresL raLe arbiLraqe Lhrouqh loreiqn lundinq. 1he Col can use a parL ol iLs loreiqn currency
reserves Lo qive a less expensive currency hedqinq mechanism lor loreiqn currency borrowinqs and invesLmenLs
in Lhe inlrasLrucLure space.
Notes
Abdul 5alam
DepuLy DirecLor
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a ranqe ol specialised services and qlobal linkaqes. lL
also provides a plaLlorm lor secLor specilic consensus
buildinq and neLworkinq. ParLnerships wiLh counLries
across Lhe world carry lorward our iniLiaLives in inclusive
developmenL, which encompass healLh, educaLion,
livelihood, qovernance, skill developmenL, eLc. FlCCl
serves as Lhe lirsL porL ol call lor lndian indusLry and Lhe
inLernaLional business communiLy.

Accelerating PPP in India

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