Public Private Partnerships in Tamil Nadu: Experiences and Outlook

CONFRONTING INDIAs INFRA BOTTLENECK: Practical, Collaborative Solutions to Increasing Flow & Success of PPP Projects in Gujarat, Tamil Nadu & Uttar Pradesh

Roadmap

1. Existing Institutional Environment for PPPs 2. Recent PPP Experiences 3. Upcoming PPP Projects 4. Issues for Discussion

Collaboratory for Research on Global Projects

Institutional Environment - Enablers

While there is no specific law or policy framework for PPP in TN, private sector participation is being sought in select sectors like SEZs, AEZs, agricultural marketing, tourism, housing and urban services Drivers GOI policies (e.g. terminal markets, viability gap funding) and public sector capacity issues Institutional elements TNUIFSL and NTADCL kind of organizations Political climate not averse to PPPs in certain areas Mixed success stories Alandur sewerage project, Tirupur water supply project, Coimbatore bypass, East Coast Road, SWM privatization in Chennai
Collaboratory for Research on Global Projects

Institutional Environment - Bottlenecks

Absence of a specific PPP enabling law or policy Political indifference to PSP Bureaucratic distrust of private sector; unwilling to share risk, leading to unbalanced terms Legacy of witch-hunting Lack of capacity to engage private sector (e.g. in preparing bid documents, drafting contracts and enforcement); e.g. tourism project No shelf of projects; lack of clarity on how to deal with unsolicited proposals (say through Swiss-challenge) or what PPP model to apply Crowding out effect of robust state finances and huge capital investments Propensity for grant based funding in contrast to more efficient financing models; e.g. roads infrastructure project Multiplicity of agencies impinging on a project; absence of single-window approach Bitter experiences of past PPP contracts; e.g. Karur toll bridge, Coimbatore bypass

Collaboratory for Research on Global Projects

Recently Completed Project 1 : Alandur Underground Sewerage

Sector: Sanitation Underground sewerage treatment Size: 12 MLD Location: Alandur (outskirts of Chennai) Cost/Value: Rs.34 cr, including STP for Rs.8 cr. Duration: 5 years; concession period 13 years Key Players: Concessionaire (IVRCL), ULB (Alandur), MA&WS deptt, TUFIDCO and TNUDF PPP model adopted: BOT for STP Outcome: Working, with some outstanding dispute

Collaboratory for Research on Global Projects

ALANDUR UNDERGROUND SEWERAGE SCHEME

Collaboratory for Research on Global Projects

Recently Completed Project 1 : Alandur Underground Sewerage

Project Cost : Rs.34 cr Initial tariff Rs.150 per house per month TNUDF organized peoples participation through deposits @ Rs.5000 per house and generated Rs.14 cr STP bid out on BOT arrangement With this, tariff reduced to Rs.75 per house per month Crucial role of Project Champion in the form of the Chairman, Alandur Municipality Support from Government The Alandur model is being adopted with some modifications (DBOT) and learnings (providing h/s connections as part of project) in other towns Contract structuring important (e.g. decision to entrust collection system EPC to same BOT operator for STP)
Collaboratory for Research on Global Projects

Recently Completed Project 2 : Karur Toll Bridge

Sector: Road (Bridge) Size: < 1 km Location: Karur Cost/Value: Rs.16 cr Duration: About 2 years; Concession period 13 years Key Players: Concessionaire (ECCI), ULB (Karur Municipality), MA&WS deptt, TNUDF PPP model adopted: DBOT Outcome: Failed

Collaboratory for Research on Global Projects

Recently Completed Project 2 : Karur Toll Bridge

TNUDF facilitated the first toll bridge contracted by a ULB in India cost Rs.16 crore under DBOT arrangement TN State Toll Act amended to facilitate ULB to enter into DBOT contract stable regulatory framework Predictable cash flows ensured project structuring However, damage to bridge approach road during rains gave pretext to Government to terminate contract without compensation

Collaboratory for Research on Global Projects

Upcoming Project 1 : Energy-saving using ESCOs

Sector: Energy Existing Situation: High energy costs in street lighting and water pumping Proposed Solution: Implementation of energy-saving measures Government Agencies Involved: Commissioner of Municipal Administration, Urban Local Bodies, TNUDF Size: 29 towns Cost/Value: Indeterminate PPP model envisaged: DBOOT through Energy Saving Companies (ESCOs) Shared savings model
Collaboratory for Research on Global Projects

Upcoming Project 1 : Energy-saving using ESCOs

Structuring the project IGA and bid evaluation criteria a challenge, given limited past experience (first of its kind) Benefit of a partner NGO (Alliance to Save Energy) Now a BEE manual for bid process put in place ULBs buy-in took time; several rounds of discussions including 4 pre-bid meetings Contentious issues raised by ESCOs, especially on bid evaluation parameters and baseline IGA may reveal non-implementability Complaints on performance may derail the project, despite clear performance indicators and 3rd party oversight
Collaboratory for Research on Global Projects

Upcoming Project 2 : Old Prison Land Project

Sector: Real Estate Existing Situation: Old Prison land vacated and proposed to be handed over to Chennai Metro Rail Ltd for commercial exploitation to augment capital Proposed Solution: Lease out to private sector for creating commercial complex, MLCP and public park Government Agencies Involved: Special Initiatives deptt, Prison deptt, CMRL, TNUIFSL Size: 12 acres approx. Cost/Value: Around Rs.600 crore PPP model envisaged: DBOOT
Collaboratory for Research on Global Projects

Old Prison Land - Chennai

Collaboratory for Research on Global Projects

Upcoming Project 2 : Old Prison Land Project

Government commitment and political support Competing demands from other agencies (e.g. Health department for expansion of Govt Hospital) Locational factors like access to land, proximity to slums and river/canal (CRZ, pollution) Market demand and bid price Design of project being subject to Govt clearance CMDA regulations under Master Plan/DDP Upcoming transportation projects like Chennai Metro, Port Connectivity corridor, Central-Egmore railway link Competence of the concessionaire to complete project as per schedule and market / maintain it for the duration
Collaboratory for Research on Global Projects

Issues for Discussion

What kind of a PPP model should be adopted in this case? How should this project be structured? How can we go about gathering stakeholder and political commitment? What are the perceived bottlenecks to this project? What other international / national experiences can we draw upon? How to ensure transparency in the bidding procedure? How to select a competent bid process manager and how to fund its cost? What are the safeguards that need to be built in into the project to secure the legitimate interests of the agency and the private sector operator / concessionaire?

Collaboratory for Research on Global Projects

Thank You

Collaboratory for Research on Global Projects