government of india’s · sanitation, primary education, healthcare rural dev., housing. panel of...

Public Private Partnership CellDepartment of Economic AffairsMinistry of Finance

Aparna Bhatia

Director

PPP Cell

Department of Economic Affairs

Ministry of Finance

Government of India

Government of India’s

Initiatives for

Accelerating PPPs


Maximizing investment and addressing budgetary constraints

Mobilization of private capital by leveraging public investments

Introducing cost reducing technologies

Improved time & cost management in construction

Targeted service provision for the poor

Risks allocated to parties best able to manage them

Focus on efficiencies- better operations and provision of efficient

services

Focus on lifecycle costs

Improved maintenance and management of assets

Affordable prices through regulation and greater competition

Government commitment to PPP mode- core infrastructure,

Urban sectors and social sectors


(Rs. In Billions at 2006-07 price)

Estimated share of investment to GDP:

Private: 2.89%

Public : 6.45%

Total : 9.34%

Sector Rs. in Billions US $ in BillionsShares

%

Electricity (incl. NCE) 6,665.25 166.63 32.42

Roads & Bridges 3,141.52 78.54 15.28

Railways (Incl. MRTS 2,618.08 65.45 12.73

Ports 879.95 22.00 4.28

Airports 309.68 7.74 1.51

Telecommunications 2,584.39 64.61 12.57

Others 4,362.63 109.07 21.21

Total 20,561.50 514.04 100.00


Period Target/Actual/Estimates

Amount % of GDP

X Plan (2002-07) 9,06,074 5.08%

XI Plan (2007-2012) 20,54,205 7.6%

First 3-years of XI Plan (2007-10) 10,65,828 7.1%

XII Plan (2012-2017) 41,00,000 9.95%

GCF in ` crore, 2006-07 prices


-

50,000

1,00,000

1,50,000

2,00,000

2,50,000

3,00,000

3,50,000

4,00,000

4,50,000

10th Plan [2002-07] 11th Plan (2009-12) 12th Plan

1.8x

2.4x

96,007

172,502

409,924

Average annual investments in infrastructure by private sector


The USD 500 bn/ 1 tn

challenge.

Limitations of public

finance are recognised.

Momentum triggered

in sectors that have a

large demand

(Highways and Power

generation)

Irrespective of the need

for private finance, the

need for scaling up

makes a compelling

argument.

Highways

Urban transport

Power equipment

Mining

Housing for poor

Private sector

accountability is

necessary to improve

service levels.

Power distribution

Water supply

Health

Education

Private Finance Scaling up Service focus


Key challenges:

1. Enabling policy/regulatory framework

2. Financing: Long Term Equity & Debt

3. Credible, bankable infrastructure projects on offer to private

sector

4. Capacity in public institutions and officials to manage PPP

process

5. Capacity in the private sector : Developer/ investor and

technical manpower.

6. Advocacy efforts to create greater acceptance of PPPs by

the Stakeholders


Policy and Regulatory

Financing Capacity building

Shelf of bankable projects

Advocacy

• Regulatory

Institutions

• Foreign direct

investment

• Fiscal

incentives

• Appraisal

forum for PPP

Projects

• Standard

contract

documents

• Infrastructure

related laws

in States

• Viability gap

funding

scheme

• IIFCL

• IIFC(UK) Ltd

• India infra

fund initiative

• Country

specific funds

• Multilateral

funding

through rupee

bonds, swap

• PPP cells in

States

• ‘Training of

trainers’

• PPP Nodal

officers round

table

• Regular

workshops on

related issues

risk, finances,

pre-bid

grading etc

• Skill

Development

Mission

• India

Infrastructu

re Project

Dev Fund

• Panel of

transaction

advisors

• Pilot

Projects

Initiative

• Website of

Ministry of

Finance

• ‘On line’

database of

PPP Projects

• Communi-

cation

strategy for

PPPs


Andhra Pradesh Infrastructure

Development Enabling Act, 2001

Assam Policy on Public Private

Partnership in Infrastructure

Development

Bihar Infrastructure Development

Enabling Act, 2006

Gujarat Infrastructure Development

Act, 1999 and Gujarat

Infrastructure Development

(Amendment) Act, 2006

Karnataka State Infrastructure

Development Enabling Act, 2001

Orissa Public Private Partnership

Policy 2007

Punjab Infrastructure (Development

& Regulation) Act 2002

Goa Policy on Public Private

Partnership

Guidelines for Public Private

Partnership Projects in the State of

Madhya Pradesh

Rajasthan Social Sector Viability

Gap Funding Scheme


Larger number of PPP projects on offer

25

45

5764

8896

0

20

40

60

80

100

120

2004 2005 2006 2007 2008 2009

PPP at the RfQ Stage: Yearly

Request for Qualification- Date-wise


PPP projects awarded have been increasing but more

is required

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

0

10

20

30

40

50

60

70

2007 2008 2009 2010 (Annualised)

No. of Projects involved Project Value (Rs Cr)

Projects Awarded by State & Central Government Number Amount


...but progress has been chequered

Value of PPP projects under development / operational

Value of projects by state

0

5

10

15

20

25

30

35

40

45

Total Value of PPP ContractsIn '000 Rs. Crores


Value of PPP projects under development / operational

Value of projects by sector (Rs Cr)

19111

93.32

17195.59

66498.95

1601.56

102004.78

2467.08

15288.47

0

20000

40000

60000

80000

100000

120000

...but progress has been chequered


Transaction Advisers

Development

PPP Project

ImplementationProcurement

Capacity Mainstreaming

PPPs at States /Central Ministries

VGF

IIFCL

Training, Toolkits & Handbook

PPPAC

Sector focus & Pilot Projects

Information dissemination IIPDF

State level/sectoral policies

Standardiseddocuments


PPPAC- for

Central

Sector PPPs

GO

AL

AC

TIV

AT

ING

INS

TR

UM

EN

T

GE

NE

SIS

,

OB

JE

CT

IVE

OU

TC

OM

E/

IMP

AC

T

Quality control and

due diligence

•Uniform practices

across sectors

•Accelerated

clearance process

•Cap contingent

liabilities

•Standardisation of

practices

Equity Support for

project viability

•Public sector Grant

funding, as capital

grant to enhance

project viability

•Funding of up to 20%

of Project Cost.

Additional 20% by the

sponsoring authority

Long term debt and

refinancing of bank

loans.

•Lending up to 20% of

project cost

•Lowering Long term

debt cost due to

sovereign guarantees

•Undertake takeout

financing

174 projects approved

in Roads, Ports, etc

Standardisation of

procurement documents

Best practices

established

62 PPP projects

approved

168 National Highways

projects

121 projects

approved

Viability Gap

Funding

(VGF)

India

Infrastructure

Finance

Company Ltd


• Usually spread over the construction period, ideally disbursed based on progress of

the project

• It reduces the initial capital cost to developer

• Directed towards encouraging private investment in infrastructure

• In projects where construction grant is given, ideally it is the bidding parameter

Construction

periodOperations period

Capital

expenditure

required

Construction

subsidy/VGF

Effective capital

expenditure of

private

developer Operational expenditure


• Grant paid during the operation of the asset

• Directed towards supporting the operating costs

• Used when the user charges are not adequate to cover the operating cost or

need to be kept low for social considerations

Construction

periodOperations period

Capital

expenditure

requiredOperational subsidy (to meet the

Rev & Exp gap)

Effective capital

expenditure of

private

developer

Effective Operational expenditure


• Provides funding in the form of grant to meet gap for making a PPP project commercially viable

• Funding of up to 20% of Project Cost. Additional 20% can be given by the sponsoring authority

• Empowered Institution /Committee set up for quick processing of cases

Seeks to cover PPPs where

• Private sector creates public infrastructure assets and provides infrastructure services for a fee / user charges under a concession agreement

• Concession granted on the basis of a transparent bidding process

• Bidding parameter is the capital grant (VGF) sought

• Bidder is assured of a stable environment through a concession agreement


Eligible sectors

• Transport, tourism, urban, urban infrastructure, energy

• Any other sector could be considered with prior approval

Eligibility Criteria

• Project to be implemented for the project term byPrivate Sector firm selected by sponsoring publicauthority through process of open competitive bidding;for railway projects provision for relaxation.

• Project should provide a service against payment of a pre-determined tariff or user charge

• Sponsoring public authority to certify, with reasons:

That tariff/user charge cannot be increased;

That project term cannot be increased; and

That capital costs are reasonable and based on the standards and specifications normally applicable


Project

Development

Fund - IIPDF

GO

AL

AC

TIV

AT

ING

INS

TR

UM

EN

TO

UT

CO

ME

/

IMP

AC

T

Supporting Project

development costs

•Upto 75% of project

development cost

supported under

IIPDF

•Encourage

transparent

procurements

• Ensure well

structured projects

Ensure transparency

& accountability

Streamline

procurement, enable

fast access, provision of

quality transaction

management services

from qualified firms

having skills and

experience to provide

commercial/ financial

and legal services

25 project proposals

granted in-principle/final

approval with total project

development cost of

Rs.27.18 crore and IIPDF

assistance of Rs. 20.38

crore

Encouraged wide

spread development

of PPPs in diverse

sectors by state and

local level

governments.

Over 30 projects

Initial projects across key

sectors

Water Supply &

Sanitation, Primary

Education, Healthcare

rural dev., housing.

Panel of

Transaction

Advisers

Encouraging PPPs in

challenging Sectors

ADB- Government of India

Initiative

Support entire cost of project

development

Ensures administrative push

for projects in challenging

sectors

Hand-hold and advise public

entity in structuring projects

Success in first few projects

will trigger demand pull

Pilot

Project

Initiative

GE

NE

SIS

,

OB

JE

CT

IVE


• Available to Central Ministries, States, Municipal/Local

bodies to source a portion of the PPP transaction costs,

thereby reducing impact of such costs on their budgets

• Clearance by Empowered Institution

• Support up to 75% of the project development cost.

Balance 25% to be co-funded by sponsoring authority

• On successful completion of the bidding process, the

project development expenditure would be recovered

from the successful bidder. In the case of failure of bids,

loan would be converted into grant.


• The IIPDF available for PPP projects for meeting the

project development costs including for: feasibility

studies, environment impact studies, financial

structuring, development of project documentation etc.

required for acheiving technical close f the projects

• Available to finance appropriate portion of costs

incurred on hiring consultants/Transaction Advisors

where such consultants/TAs are appointed through a

transparent system f procurement.

• Does not cover expenses of the Sponsoring Authority on

its own staff.


• PPP projects have mostly been in roads, ports

• Direct ADB/DEA structuring for challenging sectors

Quick response modality

Complete hand holding of project sponsors

from concept to structuring to bid closure

ADB + IIPDF (25%/75%)

Expert transaction advisory teams in place with

considerable experience

• Initial projects across key sectors

Water Supply & Sanitation

Primary Education

Healthcare

Urban Transport

Other

•Massive Response

For Direct Assistance

• Over 60 Projects in Pipeline of

which many are in structuring

Phase

• Commenced in 2008

•Tremendous Need for

Developing PPP Models

•Initial aim was for only 23

Projects to be developed !

•In the absence of sector wide enabling frameworks,

initial projects need strong administrative push

IIPDF has a catalytic impact and nudges

projects on track

•First few successes will trigger demand pull


SN Project

1Establishing 165 New Senior Secondary School in Rajasthan

Cost Rs crore:2000, Cost US $m: 416.7

2Achieving Non-Revenue Water reduction (24 x 7) in Bhopal

Cost Rs crore:30, Cost US $m:6.25

3Achieving Non-Revenue Water reduction (24 x 7) in Indore


4Achieving Non-Revenue Water reduction (24 x 7) in Gwalior


5Development of PPP project in water Supply (Aurangabad)


6Development of diagnostic centres at Pithoragarh (Uttarakhand)


7

Development of PPP project for extending water supply on 24 x 7 for coastal towns of

Karnataka,


8 Kolhapur PPP Project

9Ministry of Rural Development proposals on development of urban amenities in rural

areas.


SN Project

1 Gwalior Healthcare PPP Project, Cost Rs crore:20, Cost US $m:4.2

2 Water Supply operations in Nashik (Maharashtra) , Cost Rs crore:500, Cost

US $m:104.2

3 Gwalior City Environmental Connectivity Project (Multi-level car Parking)

4 Establishing Green field hospitals at Delhi, Cost Rs crore:600, Cost US

$m:125

5 Development of Half Way Homes/Assisted living facilities for the mentally

ill and (2) creating a network of night shelters and community kitchens to

cater to the needs of people living on the streets.

6. Implementation of 24/7 Water Supply Distribution System in KUDCEMP

towns on a PPP basis

7 Hydrabad water supply & sewerage project: Water Supply for three zones of

greater Hydrabad. Cost Rs crore: 808, Cost US $m: 168.3


SN Project

1IIPDF assistance for Tuivai Hydro Electric Project (210 MW) in Mozoram

2Mega Housing Project for the Central Paramilitary Forces through PPP

3 NRW reduction for Goa

4Development of New PHQ Building at Parliament Street and development of Police

Residential Complex at Dheerpur

5

Establishment of 1500 Industrial Training Institutes (ITIs) across India and

Establishment of 5000 Skill Development Centres in PPP


6 Setting of 10 degree level Engineering colleges (Bihar)

7.

Development of Navodaya Vidyalayas (quality education for meritorious under

privileged students) in 50 schools. Cost Rs crore:1000, Cost US $m:208.3

8.Developing girls hostels in MP through PPP framework. Cost Rs crore:50, Cost US

$m:10.4


INSTITUTIONAL CAPACITIES

• No focal point to aggregate PPPopportunities

• Inadequate capacity to managePPP transaction

– Financial structuring

– RFQ: eligibility, evaluation

– Contractual/ legaldocumentation

– Bid process

– Oversight of construction/implementation

• Single point decision makingsystem not available

• Managing partnership over 15-30years

– Government remains thecustodian of public interest

INDIVIDUAL CAPACITIES

• Advocacy issue

– Understand why PPPs ?

– Understand market failures

• Identification of good PPPprojects

– Bad projects often selected

– Good projects being left out

– Value for Money

• Accountability(Regulation) +Incentive (Discipline ofthe market)- for valuefor money

• Project Development

– How to use consultants

– Structuring

– Documentation

• Ability to enforce contracts

– In the future: Managingpartnership over 15-30years


Establishing and Strengthening PPP Cells at States and Central

Ministries Building capacity at State , CLM level

Supporting pilot projects

Building enabling frameworks: Advocacy, Policy development, developing templates for

urban sector, infrastructure need gap studies

Development of websites and project databases

Framework of MIS

Capacity building initiatives – policy makers, departments and municipalities

Sectoral studies and status papers

National Programme on Capacity Building for PPPs

Developing Online sector specific toolkits, Standard templates, risk

frameworks, contingent liability framework

Framework for monitoring and contract management

Communications and advocacy

Training programmes, sector specific workshops and experience sharing


• DEA initiative supported through

ADB TAs (4993,4890) for

strengthening PPP Cells in the

Centre and States

• PPP Cells in 16 states, 6 centralministries and DEA.

• 21 PPP specialists

• 18 MIS experts

• Legal Panel of 10 law firms

• Activities and emerging outcomes:Due diligence for projects

Development of websites and project

databases

Framework of MIS

Capacity building initiatives – policy

makers, departments and

municipalities

Advocacy – Maharashtra, Orissa,

TN + Kerala, Uttarakhand

Policy – Uttarakhand, Chhatisgarh,

MP, Maharashtra

Other studies – developing templates

for urban sector, infrastructure need

gap studies

Sectoral studies and status papers


• Making PPPs part of the annual

training calendar / curriculum at

State & Central Training

Institutes and LBSNAA

• Developing capacity and

ownership at State/municipal

level

• Developing one centre of

excellence

National Training Programme on

PPPs

Training Needs’Assessment,

Development of course content,

Training of Trainers (ToT) and

Roll-out.

Two levels (basic and advanced )

4 functional modules(i) financial and economic analysis;

(ii) bid process structuring and contract

management;

(iii) legal due diligence; and

(iv) Strategic planning and policy formulation

for programmatic

development of PPPs

Building capacities of

public functionaries at

Sectoral, State, para-

statal and local levels

to structure and

implement PPP

projects

Supported by KfW and World Bank/ PPIAF


Case StudyCase StudyCase StudyCase Study

Basic

PPP

Course

Advanced

PPP

Course

Policy

PPP

Course

Introducing

PPP

Introducing

PPP

Conception and

Organisation

Analyse and

Structure

Tendering and

Contracting

Implementation

and monitoring

PPP Life Cycle

PPP Life CyclePolicy and

ProgrammingCase Study

Sector specific case studies will

enable tailoring of the course to a

specific sector.

We will prepare case studies for

1- 2 sectors as sample.


• Developing Toolkits for

structuring projects and

due diligence framework

• MIS framework for

contract management and

monitoring

• PPP Manual

Web based Online Toolkits available

through www.pppinindia.com

Cover the life cycle of PPP projects:

identification, assessment, development,

procurement and monitoring of PPP

projects

Focus on five infrastructure sectors:

State highways, ports, urban water supply

and sanitation, solid waste management,

and urban transport.

4 major components : step by step

process guide, excel templates for key

decision making tools, templates of key

documents and resource link

Study of 15 projects/case studies.

Building capacities of

public functionaries at

Sectoral, State, para-

statal and local levels to

structure and implement

PPP projects

Supported by World Bank/ PPIAF

http://www.pppinindia.com/






33


36


• A need-gap analysis to identify the

existing constraints that exist at

PPP Cell and suggest roadmap for

acquiring the relevant skill-sets.

• A sample of 15 PPP projects

would be examined to study the

allocation of risks, risks faced, and

approach adopted to address

these risks.

• Develop framework for risk

analysis

Developing a risk

framework with a legal and

financial firms

Online toolkit : vfm, psc ,

risk framework

Due diligence in project

appraisal most critical role

of the PPP Cell:

Clearance of central

sector projects

Grant of VGF

Grant of IIPDF

assistance

(providing inputs for

development of model

PPP documents)

Handholding/advising

other entities for

formulating and

implementing PPP

projects.


• Communication Needs

Assessment

• Development of

Communication Strategy

• Communication Manual

• Roll Out

Communication Objectives

Expand Awareness and

Acceptability of the PPP

Concept

Undertake Project Level

Stakeholder Engagement

Knowledge and Perception of

PPP Definition

Sector and Projects

Benefits of PPP

Limitations of PPP

Opportunities for PPP

Challenges to PPP

Stakeholders

Elected representatives

Government

Debtors / Investors

Project Developers

Media/ NGOs/Trade Unions

Public at Large

Supported by World Bank/ PPIAF


www.pppinindia.com –

exclusively devoted to PPP

policies/ programmes/ initiatives in

the States and Central Ministries.

An online database

www.pppindiadatabase.com

provides information on over 450

PPP projects in the country.








http://www.pppindiadatabase.com/






Thank you

For details:

www.pppinindia.com

[email protected]

[email protected]


mailto:[email protected]

mailto:[email protected]


PPP means an arrangement between a government orstatutory entity or government owned entity on oneside and a private sector entity on the other, for theprovision of public assets and/ or relatedservices for public benefit, through investments beingmade by and/or management undertaken by theprivate sector entity for a specified time period,where there is a substantial risk sharing with theprivate sector and the private sector receivesperformance linked payments that conform (or arebenchmarked) to specified, pre-determined andmeasurable performance standards.

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