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Public Private Partnerships in

India
Why PPP?
China v/s India
China India
GDP US$ 5.02 Trillion US$ 1.3 Trillion
GDP Growth Rate 9% 7%
Infrastructure
Ports 27 major sea ports 11 major sea ports
Airports 147 airports 92 airports
(43 international) (12 international)
Plans: 244 airports in 2020
Highways Expressways: 65,000 km Expressways: 200 km
Highways: 3.73 mn km Highways: 70,548 km
Density: 39 km/100 sq km Density: 2 km/100 sq km
Urban areas / cities 160 cities with population > 1 43 cities with population > 1
million million
“Infrastructure gap in the country was holding
back economic growth by 1.5 – 2% every year ”

- Planning Commission
As per the 11th Five Year Plan
• Investments in Infrastructure:

• Investment by Centre: ` 7,656 billion

• Investment by States: ` 6,709 billion

• Balance Investment: ` 6,196 billion


▫ From Private Sector
▫ Including Public Private Partnerships
What is PPP?
Public Private Partnership
Government and a private corporation combine to
provide a public service through the creation and use of
new assets for a set time period

Private sector consortium forms a special company called


a ‘Special Purpose Vehicle’ (SPV) to develop, build,
maintain and operate the asset for the contracted period

Goal: To combine the best capabilities of the public and


private sectors for mutual benefit.

Result: Integration and cross-transfer of public and


private sector skills, knowledge and expertise
Risk Allocation

Public Shared Private

Land Acquisition Volume Risk Design


Connectivity Inflation Risk Construction
Permissions & Force Majeure Commissioning
Authorisations Operating Performance
Regulatory Risks Project Finance
Political Risk Technology obsolescence
Change in Laws
[Financial Support]
PPP Variants
Full
State’s Risk Divesture

Concession
Contracts
Lease
Contracts BOT, BTO, BOO,
Management
BOOT, DBO, LDOT,
Contracts
Affermage BDO etc..
Enhanced Affermage
Service
Contracts
Outsourcing
Investor’s Risk
Technical
Assistance
PPP Variants
• Build/Operate/Transfer (BOT) or Build/Transfer/Operate (BTO)
• Build-Own-Operate (BOO)
• Build-Own-Operate-Transfer (BOOT)
• Buy-Build-Operate (BBO)
• Design-Build (DB)
• Design-Build-Maintain (DBM)
• Design-Build-Operate (DBO)
• Developer Finance
• Lease/Develop/Operate (LDO) or Build/Develop/Operate (BDO)
PPP’s Imply
• Efficiency gains

• Efficient use of resources

• Availability of modern technology

• Better project design...... Leading to

• Faster implementation

• reduced life cycle costs and

• optimal risk allocation.


Advantages of PPP
• Frees limited Public Finances for other priorities

• Helps remove key economic bottlenecks

• Improved service delivery and efficiency

• Enables access to private sector resources, technology, and


managerial skills

• Access to long-term financing

• Shifts risk to the private sector


Government incentives for PPP
• Regulatory clearances by Government

• 100% FDI allowed through automatic route

• 100% tax exemption on income for certain years

• Allowing developers to charge user fees / tariffs

• Government Subsidies (VGF)

• Cheaper loans

• Allow commercial exploitation to generate revenue


Public Private Partnerships in India
Sector # Value
Projects (In
Crores)
Roads 271 102,005

Urban 73 15,288
450 projects Development
Ports 43 66,499

2,25,000 crores Tourism 29 2,467

Energy 24 17,110

Airports 5 19,111

Railways 4 1,601

Education 1 93
Some examples of PPP…
Urban Development Initiatives
Mumbai Metro
Rail Project
Metro Master Plan was prepared with
the help of DMRC, IIT Mumbai and TCS
in the year 2003
Phase I

Versova-Andheri-Ghatkopar
Charkop-Bandra-Mankhurd
Colaba-Mahim-Bandra
Phase III Phase II

Charkop - Dahisar
Ghatkopar – Mulund

BKC-Kanjur Marg via Airport


Andheri (E) – Dahisar (E)
Hutatma Chowk - Ghatkopar
Sewri – Prabhadevi

Total Length: 146.5 km


9 Corridors to be implemented in 3 Phases

Total Cost ` 47,092 Cr (US $10 bn)


Corridor 1: Versova Andheri Ghatkopar
• First PPP in BOOT framework

• Awarded to JV between
▫ Reliance Energy Limited,
▫ Veolia Transport, France and
▫ MMRDA
▫ JV called: Mumbai Metro One Pvt Ltd

• Designed to carry about 6 lakhs commuters per day initially

• Will reduce travel time from Versova to Ghatkopar from existing 90 minutes to about 21
minutes

• World class features, facilities and quality standards

• Highest levels of safety


Corridor 1: Versova Andheri Ghatkopar
• Consessioning Authority : MMRDA

• Fixed Concession period : 35 years

• Viability Gap : Bidding Criteria

• 12 elevated stations

• Project Cost: ` 2356 Cr ($ 501 M)

• Likely to be completed by March 2011

• Viability Gap Fund of ` 650 crores being provided by the


government
Other Similar Projects for Urban
Development
• Other projects undertaken in India under PPP

▫ Delhi Metro Rail Corridor (DMRC)

▫ Mumbai Metro: Balance 8 corridors

▫ Bandra Worli Sea Link etc…


Bangalore Airport

Delhi Airport Mumbai Airport

Airports in
India

Mumbai Airport Ahmedabad Airport


Hyderabad International
Airport Limited (HIAL)
• Greenfield Project
• Type of PPP: BOOT
• Concession period: 30 years
• Project period: 2005 - 2008
• Project cost: ` 2,478 crores
• Investment pattern:
Mumbai International
Airport Limited (MIAL)
• Brownfield Project
• Type of PPP: LDOT
• Concession period: 30 years
• Project period: 2004 - 2010
• Estd. Project cost: ` 5,800 crores
• Investment pattern:
Going Forward
• Development of 25 non-metro airports (Ahmedabad,
Amritsar, Agatti, Aurangabad, Agartala, Agra, Baroda, Bhopal, Bhubaneshwar, Chandigarh, Coimbatore,
Dehradun, Dimapur, Guwahati, Jaipur, Jammu, Khajuraho, Nagpur, Patna, Portblair, Pune, Rajkot, Ranchi,
Raipur, Goa, Imphal, Indore, Lucknow, Madurai, Mangalore, Trichy, Trivandrum, Udaipur, Visakhapatnam
and Varanasi)

Particulars Airport Indicative Cost


` crores
Restructuring/ Modernization for Delhi & Mumbai 15,000
world class airports Chennai & Kolkatta 5,000
Green Field Airports Bangalore, Hyderabad, Goa, Pune, Navi 10,000
Mumbai, Nagpur (Hub) and Greater Noida
Upgradation 25 selected airports 7,000
Modernization/ Improvement 55 airports 3,000

Greenfield Airports in north east 454

Total investment 40,454


PPP for Highways
Mumbai Pune Expressway
• Greenfield project
• Length of expressway: 95 km
• Type of PPP: BOT (30 years)
• GoM appointed MSRDC
• Project Cost: ` 1,630 crores
• Land acquisition: 1,030 Ha
• Contractors appointed:
▫ IJM / SCL Joint Venture
▫ Hindustan Construction Co. Mumbai
▫ Larsen and Toubro Ltd. Mumbai
▫ V.M. Jog Engineering Ltd. Pune
▫ Konkan Railway Corporation Ltd
• Operation & Maintenance:
▫ Ideal Road Builders (IRB)
• MSRDC exploring options for commercial utilisation of
land
NHDP Plan
• The main components of
NHDP include:

▫ Golden Quadrilateral (GQ)


Length :- 5,846 km
Connecting Delhi, Kolkata,
Chennai and Mumbai

▫ North-South & East-West


Corridors
Length :-7 ,300 km
Kashmir to Kanyakumari -4000
km (with a spur to Cochin) and
Silchar to Porbandar- 3300 km
Ports
Mundra Port
• Greenfield port
• Project cost: ` 2,151 crores
• Commenced operations in 1999
• Private partner: Gujarat Adani Port Ltd. (GAPL)
Issues in PPPs
• Slow decision making

• Selection Criteria – Revenue share

• Tariff Regulation

• Post selection alteration in scope of business

• PPPs must be thoroughly cultivated and managed in


terms of planning, monitoring, and acceptance of loss
of some control
Thank You