It has been observed worldwide that it is difficult for the private sector to meet the financial requirements of infrastructure

in isolation at the same time tackling the risks inherent to building infrastructure. Therefore, the PPP model has come to represent a logical, viable and necessary option for the Government and the private sector to work together. Public Private Partnership (PPP pro!ect as per Government of India means a pro!ect based on a long term contract or concession agreement, between a Government or statutory entity on the one side and a private sector company on the other side, for delivering an infrastructure service on payment of user charges. The concession agreement is specifically targeted towards financing, designing, implementing and operating infrastructure facilities and the collaborative ventures are built around mutually agreed allocation of resources, risks and returns. These are collaborative efforts, between private and public sectors, with clearly identified partnership structures, shared ob!ectives, and specified performance indicators for delivery of services. India has seen real progress over the last "# years in attracting private investment into the infrastructure sectors. $ll levels of government are aiming to use public private partnerships (PPPs more intensively to help meet gaps in the provision of basic services. It involves the private enterprise (in the involvement of management e%pertise and&or monetary contributions in

the government pro!ects aimed at public benefit. The government remains actively involved throughout the pro!ect's life cycle. The private sector is responsible for the more commercial functions such as pro!ect design, construction, finance and operations. These schemes are sometimes referred to as PPP, P(, or P(.

"

In some types of PPP, the cost of using the service is borne e%clusively by the users of the service and not by the ta%payer. In other types (notably the private finance initiative , capital investment is made by the private sector on the strength of a contract with government to provide agreed services and the cost of providing the service is borne wholly or in part by the government. Government contributions to a PPP may also be in kind (notably the transfer of e%isting assets . In pro!ects that are aimed at creating public goods like in the infrastructure sector, the government may provide a capital subsidy in the form of a one)time grant, so as to make it more attractive to the private investors. In some other cases, the government may support the pro!ect by providing revenue subsidies, including ta% breaks or by

providing guaranteed annual revenues for a fi%ed period. Typically, a private)sector consortium forms a special company called a *special purpose vehicle* (+P, to develop, build, maintain and operate the asset for the contracted period. In cases where the government has invested in the pro!ect, it is typically (but not always allotted an equity share in the +P,.-". The consortium is usually made up of a building contractor, a maintenance company and bank lender(s . It is the +P, that signs the contract with the government and with subcontractors to build the facility and then maintain it. In the infrastructure sector, comple% arrangements and contracts that guarantee and secure the cash flows and make PPP pro!ects prime candidates for pro!ect financing. $ typical PPP e%ample would be a hospital building financed and constructed by a private developer and then leased to the hospital authority. The private developer then acts as landlord, providing housekeeping and other non)medical services while the hospital itself provides medical services.

Attribute
0esponsibility 2wnership 3ature of services

Public
Govt. Govt.&Public Govt.

Privatization
1ntrepreneur Private sector 4ecided by private operator

PPP
Govt. Govt. 5utual agreement

0isk 6 reward

Govt.&Public

Private sector

+hared between Govt.6 Private party

Characteristics of PPP

i PPPs do not mean reduced responsibility and accountability of the Government. ii The Government remains accountable for service quality, price certainty and cost) effectiveness (value for money of the partnership. iii Government7s role is one of facilitator and enabler by assuming social,

environmental and political risks8 private partner7s role is one of financier, builder and operator of the service or facility and it typically assumes construction and commercial risk. iv 0esources required by the pro!ect in totality along with the accompanying risks and rewards&returns are shared on the basis of a pre) determined, agreed formula, which is formali9ed through a contract. +ince the private sector assumes the risk of non)performance of assets and reali9es its returns if the assets perform, the PPP process involves a full scale risk appraisal. This results in better cost estimation and better investment decisions.

v PPPs deliver efficiency gains and enhanced impact of the investments. PPP pro!ects also lead to faster implementation, reduced lifecycle costs and optimal risk allocation. Private management also increases accountability and incentivi9es performance and maintenance of required service standards. :inally, PPPs result in improved delivery of public services and also promote public sector reforms. vi PPP does not involve outright sale of a public service or facility to the private sector. vii Private +ector ;ompany in a PPP means a company in which <"= or more of the subscribed and paid up equity is owned and controlled by a private entity. viii >orldwide most common partnership options are? a. +ervice ;ontract b. 5anagement ;ontract&@ease c. Auild 2perate Transfer d. ;oncession e. Boint ,entures f. ;ommunity based provision 5ost contracts take the form of 7concession7 and 74esign, Auild, :inance and 2perate7 contracts. These contracts are usually financed by user fees or tariffs or by government subsidies.

Risk & Revenue Sharing

;onstruction&implementation risk, arising from?

 delay in pro!ect clearance8 contractor default8 environmental damage

5arket risk, arising from? insufficient demand8 impractical user levies.

:inance risk, arising from? inflation8 change in interest rates8 increase in ta%es change in e%change rates.

2peration and maintenance risk, arising from? termination of contract8 technology risk8 labour risk.

@egal risk, arising from? changes in law8 changes in title&lease rights8 insolvency of developer&service provider8 change in security structure.

Public-Private Equilibrium

<

Public +ector

Private +ector

PPP Project Process

Objectives of PPP
Improving access to essential services Improving the quality of services 1%change of e%pertise 5obili9e additional resources for activities Improve efficiency Increasing scope and scale of services D

 Increasing community ownership of programs. 1nsuring optimal utili9ation of govt. investment and infrastructure Increase Investments Technical and 5anagement 1%pertise Improve Performance and 5onitoring

asics of PPP
Problem Profile of Partners Process of Auilding a partnership Profit E 5utual Aenefit Phase E start small 6 build Proliferate EGrow, 1%pand, 6 +ustain Priorities 6 Preferred group Policing E 5echanism of 5onitoring 6 Transparency Politics E Governance, $dministration, People's audit Protection&proof? $ security system Price? $ cost share in terms of money&kind Professional 3etwork Platform Pri9e? $cknowledgement&recognition

!actors "nfluencing PPP

;larity of Purpose

 ;reation of value ;ongruency of 5ission, +trategy and ,alues ;onnection with purpose and people ;ommunication between partners ;ontinual learning ;ommitment to the partnership

Straight a##roach to PPP

Identifying the +cope of partnership Identifying the appropriate Target Population +electing the 0ight Partners and 5odel 1nsuring $ccountability 1nsure active Involvement of the Govt. Generate +upport of stakeholders through I1;, advocacy and rapport building Gighlight achievements Auild Trust of all the partners and clients

A$vantages of #ublic sector%

Improvement is the primary ob!ective 1conomies of +cale 5ore 1quitable

A$vantages of #rivate sector%

 5arket&;hoice and $ccess 1fficiency :le%ibility

&EA'(&
Public)Private Partnership or PPP in the conte%t of the health sector is an instrument for improving the health of the population. PPP is to be seen in the conte%t of viewing the whole medical sector as a national asset with health promotion as goal of all health providers, private or public. The Private and 3on)profit sectors are also very much accountable to overall health systems and services of the country. Therefore, synergies where all the stakeholders feel they are part of the system and do everything possible to strengthen national policies and programmes needs to be emphasi9ed with aproactive role from the Government. +ome PPPs become a roaring success, while some bite the dust.+onal ,i! analyses factors that determine the fate of PPPs. >ith healthcare e%penditure of I+4 <( billion, India has one of the lowest healthcare e%penditures per capita amongst other emerging markets. Per capita healthcare e%penditure is e%pected to grow at "# per cent ;$G0 from I+4 C< in /##H to I+4 DD by /#"/.>ith an increase in e%penditure by the public sector, commitments by state and central Government, the PPPs are e%pected to act as catalysts for this sector. In /##H)#J, the central Government had set aside I+4 (.HD billion for healthcare in annual budget, an increase of "/.( per cent from the previous budget $lso, in $pril /##H, in order to reduce the overall burden of disease, the Government of India rolled out a healthcare insurance scheme for those living below the poverty line. 1ssential

medicines such as antibiotics and painkillers will be provided free of charge and an estimated "/ million individuals will benefit annually. Gighlighting the untapped potential in PPPs, Pradip Kanakia, 3ational Gead of 5arkets, KP5G India, e%plains, *$ssuming the G4P growth remains at seven per cent till /#"<, the G4P is likely to grow to 0s JH lakh crore and the total healthcare e%penditure at five per cent will grow to 0s C.J lakh crore. $ssuming that public healthcare e%penditure is at one per cent of the G4P (ie JH,### crore and the private and public health insurance funding amount to 0s ",DH,### crore, the 2P1 element is left at 0s (.F< lakh crore or FF per cent of total healthcare e%penditure. If the 2P1 element is to be reduced to say D# per cent, the gap in healthcare funding would be appro%imately 0s H",### crore which will need to be met by a combination of public and private funding.* +o why are healthcare players so keen to enter a PPPL $ccording to e%perts, for a private player, PPP is the easiest and the quickest way to enter any market. $n e%pert remarked, *It7s a safe route. It also helps to take healthcare cheaper and faster to a much wider population.* $s of today, the private sector accounts only for /J per cent of the beds in the hospitals as per a report on task force on medical education, 5oG:> and cater to FH per cent of the patients in rural areas and H/ per cent in urban areas (+ource? 3++2 D#th round report . *This indicates very low bed utilisation in the public sector. Gence both the sides recognise the need for PPP as a tool for augmenting public health system by ensuring optimum utilisation,* says 5urali 3air, Partner, @ifesciences, Ausiness $dvisory +ervices, 1rnst 6 Moung.

"#

4ifferent models of PPP in health sector are? +ocial :ranchising Aranded ;linics ;ontracting +ocial 5arketing Auild, 2perate and Transfer Boint ,enture ;ompanies ,oucher +ystem 4onations from individuals Involvement of ;orporate sector Partnership with Professional $ssociations ;apacity Auilding of Private Providers $utonomous Institutions 5obile Gealth ,ans Gealth Insurance Partnerships with +ocial ;lubs and Groups

E)*CA("O+
The base of our education pyramid is very weak. The primary education in the country can be improved if an element of competition is brought into the system at the primary level. ,ocational education has been a feeble sector in India. Partha 5ukhopadhyay's paper outlines a PPP approach to upgrading e%isting Industrial

""

Training Institutes (ITIs to enable the e%ploitation of the benefits of private delivery in craftsmen training which requires a high level of initial investment. It will also enhance linkages between these it is and industry. The performance based contracting system specifies a cost sharing arrangement with the private partner in a manner such that the return to the private partner depends on its ability to find suitable employment for the graduates of the Institute. Aonuses are built in for long)term employment in the organi9ed sector. 5ost importantly, this PPP structure will enable the upgradation of ITIs to happen almost immediately while the e%pense on this programme will be deferred and spread out over many years. The model will enhance the supply of tradesmen with requisite skills requiring a high level of capital investment in training facilities and improve the linkage of the it is with industry. It also accelerates the process of upgradation of ITIs in a manner that allows the e%pense to be deferred and spread out over many years, while the upgradation happens almost immediately, within a year or so. 5ore than ( crore children are out of school in India, the ma!ority from rural areas in spite of +arva +hiksha $bhiyan. 1ven the $pproach Paper to the NI :ive Mear Plan which seeks empowerment through education is unable to offer meaningful solutions for high drop)out rates and poor quality of schooling.

"+!RAS(R*C(*RE
The most significant criteria for a continued growth rate of an economy is rests on the provision of a quality infrastructure. $ccording to the Planning ;ommission, an appro%imation of H percent of the Gross 4omestic Product or G4P needs to be invested. This would help in acquiring a prospective economy as stated in the ""th

"/

:ive Mear Plan. :und investment of over I+ O CJC billion has been conceived of according to the ""th :ive Mear Plan with effective from /##F to /#"/. The investment sectors under consideration are inclusive of telecommunications, electric power, water transport, road, rail, air, water supply as well as irrigation amounts to about 0s. /#,/F,"DJ crore according to /##D)#F prices. In order to meet such demands, various Public Private Partnerships or PPPs are being promoted for implementation of infrastructure pro!ects. PPP is often described as a private business investment where / parties comprising government as well as a private sector undertaking form a partnership. The deficit can be overcome by ensuring much more private capital investment. 1%pert guidance is the only way out for enabling efficiency through subsequent reduction in cost. 4ifferent models of PPP funding are characteri9ed by which partner is responsible for owning and maintaining assets at different stages of the pro!ect. Types of PPP models in infrastructure include?

4esign)Auild (4A ? The private)sector partner designs and builds the infrastructure to meet the public)sector partner7s specifications, often for a fi%ed price. The private)sector partner assumes all risk.

2peration 6 5aintenance ;ontract (2 6 5 ? The private)sector partner, under contract, operates a publicly)owned asset for a specific period of time. The public partner retains ownership of the assets.

4esign)Auild):inance)2perate (4A:2 ? The private)sector partner designs, finances and constructs a new infrastructure component and

operates&maintains it under a long)term lease. The private)sector partner

"(

transfers the infrastructure component to the public)sector partner when the lease is up.

Auild)2wn)2perate (A22 ? The private)sector partner finances, builds, owns and operates the infrastructure component in perpetuity. The public)sector partner7s constraints are stated in the original agreement and through on)going regulatory authority.

Auild)2wn)2perate)Transfer (A22T ? The private)sector partner is granted authori9ation to finance, design, build and operate an infrastructure component (and to charge user fees for a specific period of time, after which ownership is transferred back to the public)sector partner.

Auy)Auild)2perate (AA2 ? This publicly)owned asset is legally transferred to a private)sector partner for a designated period of time.

Auild)lease)operate)transfer (A@2T ? The private)sector partner designs, finances and builds a facility on leased public land. The private)sector partner operates the facility for the duration of the land lease. >hen the lease e%pires, assets are transferred to the public)sector partner.

2peration @icense? The private)sector partner is granted a license or other e%pression of legal permission to operate a public service, usually for a specified term. (This model is often used in IT pro!ects.

:inance 2nly? The private)sector partner, usually a financial services company, funds the infrastructure component and charges the public)sector partner interest for use of the funds.

"C

The developers of PPP in the infrastructure sector are? AES Cor#oration% $1+ is one of the world7s largest global power companies, with /##D revenues of O"/.( billion. Their "( utilities a mass annual sales of over F(,### G>h and our "/" generation facilities have the capacity to generate appro%imately C#,### megawatts. In India, $1+ successfully participated in the country7s first and only generation privati9ation at 2PG;. 2PG; has been a very successful e%ample of the PPP in the Indian Power +ector and the company has achieved significant improvements in operational, financial, safety and environmental aspects since $1+ has taken over the management. ,-R% G50 Group is a 0s. /,<## crore business house focused on infrastructure development as a key growth driver for India. >ith ma!or interests in energy, transportation and businesses in manufacturing, they have the e%perience and e%pertise to carry a pro!ect through, from concept to commissioning, within the challenging Indian conte%t. ,./? G,K is a diversified business house with a predominant focus on infrastructure ) power, transportation and urban infrastructure. They also have a significant position in services and manufacturing. /P-,? KP5G is the global network of professional services firms of KP5G International. It is one of the leading professional services firms, turning knowledge into value for the benefit of clients, people and the capital markets. They provide rapid, performance)based, industry focused and technology enabled services.

"<

Ernst &0oung? 1rnst 6 Moung is a global leader in assurance, ta%, transaction and advisory services. 2ur e%tensive e%perience in the PPP space has put us at the forefront of the industry. Their strength is our three)stream methodology that caters to every need in the PPP arena. >e can support you strongly in the areas of policy, regulatory, implementation and pro!ect development.

The ma!or financing institutions are II:;@ , Infrastructure 4evelopment :inance ;ompany (I4:; , I;I;I Aank, Mes Aank, G4:;, +tate Aank of India, Infrastructure @easing 6 :inancial +ervices @imited (I@ :+ .

PO1ER The total installed capacity in India is calculated to be "C<,<<C.JF mega watt, out of which F<,H(F.J( mega watt (</.<= is from +tate, CH,CF#.JJ mega watt ((C= from ;entre, and /",/CD.#< mega watt ("(.<= is from Private sector initiative. India possesses a vast opportunity to grow in the field of power generation, transmission, and distribution. The target of over "<#,### 5> of hydel power germination is yet to be achieved. Ay the year /#"/, India requires an additional "##,### 5> of generation capacity. $ huge capital investment is required to meet this target. This has welcomed numerous power generation, transmission, and distribution companies across the globe to establish their operations in the country under the famous PPP programmes. The power sector is still e%periencing a large demand)supply gap. This has called for an effective consideration of some of strategic "D

initiatives. There are strong opportunities in transmission network ventures ) additional D#,### circuit kilometers of transmission network is e%pected by /#"/ with a total investment opportunity of about I+O /## billion. The elasticity of electricity consumption with respect to gross domestic product(G4P was around ".< in the 'J#s. Gowever, as more capacities are created, the government pro!ects an elasticity of #.J< for the future. Per capita consumption, which was /(H k>h in "JJ# rose to C(< k>h in /##( and currently stands at D#D k>h (/##< , far below the world average of /,C/J k>h. $t an H percent G4P growth, India's per capita consumption in /#(/ is estimated to be /,DC( k>h, which is !ust comparable to the present day world average.

!orecaste$ energ2 requirement for "n$ia

0ear /##()#C /##D)#F /#"")"/ /##"D)"F /#/")// /#/D)/F /#(")(/

"nstalle$ Ca#3 Req34,15 "(" "<( //# (#D C/< <F< FFH

Energ2 Req34 illionk1h5 D(( FD" "#JF "</C /""H /HHD (HH#

Source: Draft report of Expert Committee on Integrated Energy Policy, 2005

>ith an installed capacity of "/( G>, the country currently faces an energy shortage of H percent and a peak demand shortage of "".D percent. To sustain a growth rate of H percent, it is estimated" that the power generation capacity in India would have to increase to FFH G>, unless adequate measures are taken to reduce requirement. The regulatory system now consists of a ;entral 1lectricity 0egulatory ;ommission (;10; , +tate 1lectricity 0egulatory ;ommissions (+10;s and an $ppellate

"F

Tribunal (being the higher court of appeal against the two regulators . In addition, there is a ;entral Government authority, the ;entral 1lectricity $uthority (;1$ , which is responsible for power planning for the country and according approvals for large hydro pro!ects. The recent emphasis of policy and regulatory framework, as guided by the provisions of the 1lectricity $ct, /##(, is on bringing in competition, private sector participation and independent regulation.

(RA+SPORA(A("O+ >hile India has been clocking an average G4P growth rate of F.D percent driven by e%pansion of the domestic economy and growth in international trade, the performance of the transport sector has lagged the economic and trade growth resulting in a significant transport infrastructure gap. 0ear G4P (I+O Aillion = Growth Trade (I+O Aillion = of G4P = Growth Transport +ector +hare (= of G4P = Growth Source: CMIE 2006 6776-78 CDF.# (.H= ""C.F /C.D= )) F.J= J.D= 6778-79 <<(.J H.<= "C/." /<.F= /(.J= H./= "F./= 6779-7: D(/.F F.<= "J".< (#.(= (C.H= H.<= "C.H= 677:-7; F/C.H H.C= /(<.H (/.<= /(."= )) ))

The total logistics cost in India, at "" percent of the G4P, compares unfavorably with the global average of D percent. It is estimated that this gap is affecting India7s G4P by at least ".< percent to / percent.

"H

$s India aspires to achieve greater growth, achieving and sustaining such growth requires that constraining factors causing the gap are addressed on priority. The Transport sector comprises the following sectors? 0oads Ports $irports 0ailways

Roa$s >ith an e%tensive road network of (.( million kilometers, India is the second largest in the world. Indian roads carry about D"= of the freight and H<= of the passenger traffic. $ll the highways and e%pressways together constitute about DD,### kilometers (only /= of all roads , whereas they carry C#= of the road traffic. To further the e%isting infrastructure, Indian Government annually spends about 0s."H### crores (I+4 (.F#C billion . $t the ;entral @evel, the overall policy and programme development and planning is done by the Planning ;ommission in consultation with the 5inistry of +hipping, 0oads, Transport and Gighways (52+0T6G and 5inistry of 0ural 4evelopment (5o04 . $t the +tate @evel, the overall policy and programme development and resource planning is done by the +tate Planning ;ell in consultation with ;entral Planning ;ommission and +tate 5inistry in charge of roads. 0oad development is recogni9ed as essential to sustain India's economic growth. 0oad development is a priority sector and the ongoing focus on the highway infrastructure development is targeted to pro!ected annual growth of "/)"<= for

"J

passenger traffic and "<)"H= for cargo traffic. The pro!ect has been attracting huge 4irect :oreign Investment (:4I .

/#

Ports >ith "/ ma!or ports and "HF minor ports, F,<"F km long Indian coastline plays a pivotal role in the maritime transport helping in the international trade. Traffic handled at ma!or ports during $pril /##H to Banuary /##J is recorded to be C(DDHD units. The ports in India offer tremendous scope for international maritime transport both for passenger and cargo handling. The Government of India targets to increasing the cargo handling capacity of ma!or ports by two folds to reach ".< billion metric tonnes (5T by the year /#"/. This will be achieved at an investment of around I+4 /< billion through public)private partnerships. $ ;risil research on Indian ports and maritime transport estimates that ports will grow by "D# per cent over the /#"")"/ period. . Kochi port is being developed as a transshipment hub for India. Indian Government plans to bring a new orientation to encourage the private sector to come forward in developing port activities and operations. The goal is planned to be achieved through numerous initiatives and policies. The legal framework governing the sector comprises the Indian Ports $ct of "J#H and the 5a!or Port Trusts $ct of "JD(. P 5a!or Ports under ;entral !urisdiction are governed by policy and directives of 5inistry of +hipping of Government of India P 5inor Ports under +tate7s !urisdiction and governed by policy and directives of respective +tate Government7s nodal departments& agencies P Tariff $uthority for 5a!or Ports (T$5P has been constituted for regulating tariffs in ma!or ports and its functioning&role is being revised to ensure uniform and transparent norms relating to fi%ing tariffs as well as prescribing quality of service for port authorities&terminal operators.

/"

Air#orts 2f a total number of C<C airports and airstrips in India, "D are designated as international airports. The $irports $uthority of India ($$I owns and operates JF airports. $ recent report by ;entre for $sia Pacific $viation (;$P$ , 2ver the ne%t "/ years, India7s ;ivil $viation 5inistry aims at <## operational airports. The Government aims to attract private investment in aviation infrastructure. India has been witnessing a very strong phase of development in the past few months. $ pro!ected investment of I+4 H.< billion has been planned for the development of Indian airports during the ""th plan. 5umbai and 4elhi airports have already been privati9ed. These two airport are being upgraded at an estimated investment of I+O C billion for the period /##D)"D. 4evelopment of airport infrastructure is a focus area for the Government. ;urrently ;ivil aviation is a central sub!ect with 5inistry of ;ivil $viation. The ministry controls two important bodies? P Aureau of ;ivil $viation security, which overseas safety aspects, and P 4irectorate General of ;ivil $viation which is responsible for enforcement of regulations. The key policies governing the sector include $irport $uthority of India $ct, Policy on $irport Infrastructure, 4omestic $ir Transport Policy, $ircraft $ct and $ircraft 0ules and the 2pen +ky Policy.

//

Rail<a2s Indian 0ailways is the backbone of the socio)economic growth of India. >orld7s fourth largest rail network and the second largest in $sia, Indian 0ailways has recently attracted immense global attention due to its successful turnaround to profitability. Indian 0ailways has been consistently recording impressive growth rates for the last few years. The cash surplus before dividend and net revenue are estimated at I+O D."F billion and I+O C.<( billion, for /##F)#H respectively. This has placed Indian 0ailways in a much better position ahead of many of the :ortune <## companies. India 0ailway has taken up one of the most ambitious annual plans for /##H)#J with huge investment of about I+4 F.J" billion. The plan includes a total budgetary support of I+4 ".DD billion that includes I+4 "D(.(( million from the ;entral 0oad :und. This much ambitious plan is eying a massive profits of more than I+4 /#.CCF billion for the year/##H)#J. ;urrently 0ailway is a central sub!ect with 5inistry of 0ailways. Indian 0ailways (I0 are a departmental enterprise wholly owned by the 5inistry of 0ailways. The legal framework governing the sector comprises the Indian 0ailways $ct of "JHJ. P 0ailways have allowed private entry into container rail transport services with licenses issued to "C private parties and are commencing the ne%t round of issuing licenses. P 0ailways have announced a revamped >agon Investment +cheme for private participation in rolling stock. P 0ailways have announced intent to pursue PPP framework for e%pansion of infrastructure and services.

/(

Efforts at the Central ,overnment an$ State 'evel% 0ecogni9ing that strengthening the capacities of different levels of government to conceptuali9e, structure and manage PPPs will lead to more and better PPPs, 41$ is facilitating mainstreaming PPP through Technical $ssistance from $4A. The primary ob!ective is effective institutionali9ation of the PPP cells to deliver their mandate through provision of 7in house7 consultancy services to each of the selected entities at the ;entre and +tate level. (echnical Assistance% The selected entities will be provided assistance for a period till 4ecember /##J in the form of? 2ne PPP 1%pert on an individual basis focusing on pro!ect financial analysis and risk management 2ne 5anagement Information +ystems e%pert focusing on information management. $ panel of three legal e%perts on retainer basis to provide legal e%pertise on PPPs.

Eligibilit2% The +tates wishing to avail this Technical $ssistance are required to enter into an 52I with 41$ detailing steps that would be taken to promote PPPs in the +tate. The 52I requires the +tate Government to? +et up a PPP cell as the nodal agency for processing all PPP pro!ects in the +tate with a designated PPP 3odal 2fficer and defined scope of work

/C

 4evelop a robust shelf of pro!ects amenable for PPPs and adhere to the following set of targets on the level of PPPs in the +tate?

4uring /##F)#H bid out at least ( pro!ects with a total cost of 0s. F<# cr or more in at least two sectors

4uring /##H)#J bid out at least < pro!ects with a total cost of 0s."/<# cr or morein at least three sectors

4uring /##J)"# bid out at least < pro!ects with a total cost of 0s. "<## cr or more in at least four sectors

;ommit to establish such policies and regulatory andgovernance frameworks in the identified infrastructure sectors toenable a transparent and effective private sector participation Prepare a 7Plan of PPP pro!ects7 in con!unction with its $nnual Plan. Commit to%

$dopt standard concession agreements for PPP pro!ects in defined infrastructure sectors $dopt competitive bidding procedure for bidding and awarding of infrastructure pro!ects under defined rules and procedures according to best international commercial practices and G2I guidelines 4esignate a +tate)level dispute resolution mechanism for the speedy resolution of disputes relating to PPP pro!ects

/<

 $dopt formal +tate policies on environment, resettlement and social safeguards with respect to the implementation of infrastructure pro!ects, according to best international commercial practices.

Outcomes% The Technical $ssistance aims to? Gelp the participating +tate to implement PPP schemes effectively and efficiently 1nhance capacity of PPP cells in participating entities to prepare, evaluate and appraise PPPs in infrastructure. +ignificantly improve monitoring of overall progress in PPPs in infrastructure at both central and state levels through well)knit databases. Increase awareness among potential private sector partners about the pro!ect cycle of PPP pro!ects in infrastructure and the e%pectations of Government with respect to value for money. 2ver the long term, an increase in private sector participation in infrastructure development and management throughout the country. "n$ia "nfrastructure Project )evelo#ment !un$% :inance 5inister in his Audget /##F)#H speech announced the setting up of IIP4: in 41$ with an initial corpus of 0s. "## cr for supporting the development of credible and bankable PPP pro!ects that can be offered to the private sector. The IIP4: will be available to the +ponsoring $uthorities for PPP pro!ects for the purpose of meeting the pro!ect development costs which may include the e%penses incurred by the +ponsoring $uthority in respect of feasibility +tudies, environment impact studies, financial structuring, legal reviews and development of pro!ect documentation including concession agreement, /D

commercial assessment studies (including traffic studies, demand assessment, capacity to pay assessment etc. required for achieving technical close of such pro!ects, on individual or turnkey basis, but would not include e%penses incurred by the +ponsoring $uthority on its own staff. Eligibilit2 for ""P)!%

+ponsors to include ;entral Government 5inistries&4epartments, +tate Governments, 5unicipal or @ocal Aodies or any other +tatutory $uthority. 3ecessary for the sponsoring authority to create and empower a PPP cell to not only undertake PPP pro!ect development activities but also address larger policy and regulatory issues to enlarge the number of PPP pro!ects in its shelf. The IIP4: will finance an appropriate portion of the Transaction $dvisor costs on a PPP Pro!ect where such Transaction $dvisors are appointed by the +ponsoring $uthority through a transparent system of procurement under a contract for services.

,overnment Su##ort for ""P)!% IIP4: will contribute upto F<= of the pro!ect development e%penses to the +ponsoring $uthority as an interest free loan. /<= will be co)funded by the +ponsoring $uthority. 2n successful completion of the bidding process, the pro!ect development e%penditure would be recovered from the successful bidder. Gowever, in the case of failure of the bid, the loan would be converted into grant. In case the

/F

+ponsoring $uthority does not conclude the bidding process for some reason, the entire amount contributed would be refunded to the IIP4:. (ransaction A$visers for PPP Projects% The Government has pre)qualified a panel of firms through International ;ompetitive Aidding. The short listed consultants have been evaluated for their capability and e%perience in discharging a lead role in PPP transactions. The panel is intended to?

+treamline the tendering process for the engagement of transaction advisers for PPPs. 1nable fast access to firms that have pre qualified against relevant criteria. 1nsure transparency and accountability through clear definition of the processes and the role and responsibilities of the agencies and the private sector. This panel is available to all ;entral, +tate and 5unicipal Governments who are undertaking PPP transactions. They would be able to select any of the consultants from this panel through a limited financial bid without having to go through the lengthy and more comple% technical bid. :irms on the panel will contract directly with the agencies concerned for provision of transaction management services. 41$ would be kept informed on the use being made of the panel, and the performance of panel members. +tates can draw upon IIP4: to incur e%penditure on hiring of Transaction $dvisors. Online PPP (oolkit% $ PPP Toolkit is being developed which will enable the investors and PPP stakeholders to understand the PPP process better. The Toolkit will be provide on www.pppinindia.com. It is envisaged to provide the technical content /H

and methodology for all Government practitioners involved in different phases of the lifecycle of PPPs. Thrust will be given for understanding the entire PPP lifecycle, including inception, feasibility, procurement, approving, monitoring, regulation and accounting treatment.

(he (oolkit -anual <ill cover% >hat are PPPs and why use them rather than public procurement The PPP pro!ect cycle PPP inception Inderstanding government commitments and e%posure to PPPs PPP feasibility study PPP Procurement $ccessing the ,G: 2versight and regulation of a PPP $uditing PPPs and evaluating their success $ccounting treatment for PPPs in the Government balance sheet +ector specific references and cross references will be made available in the Toolkit. The scope of sectors to be covered in the Toolkit would include roads, ports, railways, urban transport, airports, water supply and sanitation and power distribution. (he (oolkit <ill #rovi$e clarit2 to the users on% ;onceptual framework of PPPs 2b!ectives of PPP >hen to have a PPP Pro!ect

/J

 +tructuring of a PPP Pro!ect Types of PPP 0isk allocation under a PPP :inancing of a PPP Key challenges&tasks during developmental phase of a PPP pro!ect 5odel agreements +tandard operating frameworks&procedures Guidelines for procurement +ector wise deviations.

Other Efforts un$ertaken% $ :ramework for widening training net through various Institutes. :our 0egional >orkshops are to be conducted !ointly with ;II. 0egular events are being planned to facilitate e%change of views and interaction among PPP nodal officers from ;entral 5inistries and +tate Governments.

.iabilit2 ,a# !un$ing% +ome PPP pro!ects which have economic and social !ustification but are not commercially viable need support from the Government to cover this viability gap. The central Government has therefore notified a scheme for financial support to infrastructure pro!ects that are to be undertaken through PPP posed by ;entral 5inistries, +tate Governments and statutory authorities. $ private concessionaire shall be eligible for ,G: only if it is selected on the basis of open competitive bidding and is responsible for financing, construction, maintenance and

(#

operation of the pro!ect during the concession period. The pro!ect should provide a service against payment of a pre)determined tariff or user charge. The proposal for ,G: consists of concession agreement, state support agreement, substitution agreement, escrow agreement, 265 agreement, shareholders7 agreement and the detailed pro!ect report. The proposal is circulated by the PPP cell to all members of the 1mpowered Institution, which is chaired by the $dditional +ecretary, 1conomic $ffairs for their comments within four weeks. The comments are sent back to the proposer of ,G: for response within two weeks. $fter the comments are received the proposal along with the comments are submitted to 1mpowered Institution for 7in principle7 approval. The PPP cell has to indicate whether the proposal conforms to the mandatory requirements of the scheme. 2nce cleared by the 1mpowered Institution, the pro!ect would be eligible for financial support under the scheme. The quantum of ,G: shall be in the form of a capital grant at the stage of pro!ect construction. The amount shall be equivalent to the lowest bid for capital subsidy, but sub!ect to a ma%imum of /#= of the total pro!ect cost. In case the sponsoring 5inistry&+tate Government& +tatutory entity proposes to provide any assistance over and above the said ,G:, it shall be restricted to a further /#= of the total pro!ect cost. :inancial bids shall be invited by the concerned 5inistry, +tate Government or statutory entity, as the case may be, for award of the pro!ect within four months of the approval of the 1mpowered Institution. The period may however be increased by 41$ if necessary. The private concessionaire is selected through a transparent and open competitive bidding process and the criterion for bidding shall be the amount of ,G: required. >ithin three months from the date of award, the lead financial institution shall present its appraisal of the pro!ect for consideration and approval of the 1mpowered Institution. The appraisal shall be accompanied by an updated application in the

("

prescribed format along with the detailed pro!ect report and pro!ect agreements. The lead financial institution shall verify the contents of the application and convey its recommendation to the 1mpowered Institution. Prior to final approval by the 1mpowered Institution, the 5inistry&+tate Government&statutory entity shall certify that the bidding process conforms to the provisions of this scheme and that all the conditions specified in the scheme have been complied with. $fter the final approval, the 1mpowered Institution, the lead financial institution and the private concessionaire shall enter into a tripartite agreement in such format as may be prescribed by the 1mpowered ;ommittee headed by +ecretary, 41$ from time to time. $ @ead :inancial Institution shall be the financial institution that is funding the pro!ect and in case of a consortium of :Is, the :I designated as such by the consortium shall be the lead financial institution. ,G: shall be disbursed only after the private sector concessionaire has subscribed and e%pended the equity contribution required for the pro!ect and will be released in proportion to debt disbursements remaining to be disbursed thereafter. ,G: shall be released to the @ead :inancial Institution as and when due. The final sanction for ,G: upto 0s."## cr per pro!ect is given by 1mpowered Institution, for ,G: between 0s. "##)/## cr is given by 1mpowered ;ommittee and for ,G: above 0s./## cr is given by 1mpowered ;ommittee with the approval of :inance 5inister. Inder the ,G: scheme, twenty three pro!ects with pro!ect cost of 0s.""""C.DJ crore have been given in principle&final approval involving an estimated ,iability Gap :unding of 0s. /DJ#.(/ crore.

(/

Roa$s

Ports Air#orts

Rail<a2s

P "## percent :4I allowed percent :4I permitted P ;apital Grant of C# e%isting airports with percent of capital cost by 3G$I to enhance pro!ect viability. 3G$I also permitted to participate into equity of A2T pro!ects P Institution of ;entral 0oad :und for assured for creation of $irport funding of road development pro!ects. P Provision of encumbrance free site for work by PPP framework for Government

P 4raft 3ational 5aritime Policy developed with the aim of for strengthening automatic approval upto the sector through FC= and :IPA approval synergies of initiatives at beyond FC percent. the centre and state level P "##= :4I under and encouraging automatic route investment flows. permissible for Greenfield P ;entral and +tate airports. Governments have come

P 0ailways have allowed private entry into container rail transport services with licenses issued to "C private parties and commencing the ne%t round of issuing licenses. P $nnounced a revamped >agon Investment +cheme for private

P "## for

P Aill

out with policies for participation in rolling 1conomic 0egulatory private participation in stock $uthority ($10$ currently 5a!or and 5inor ports P $nnounced intent to under consideration. respectively. pursue

P $ comprehensive 5odel e%pansion of infrastructure P A2T guidelines for private ;oncession $greement and services sector participation put in (5;$ has been place for building and P Toll & shadow toll & annuity operating ma!or port based concessions to on a A2T basis. private participants framework of 5;$ P 3ew model concession addresses the issues agreement (5;$ developed

terminals The

((

important for limited finali9ed. The new recourse financing of agreement includes infrastructure pro!ects and design, build, finance, elaborates on the operate and transport commerciali9ing activities instead of build, a planned and operate and transfer. This phased manner. implies that government, mechanisms instead of owning the been developed asset after the concession by some +tate period, would continue to Governments (Gu!arat, buy 7road services7 from $ndhra Pradesh and the concessionaire 2rissa P Partial traffic risk mitigation introduced P ;oncession period linked to D)laning of pro!ects P Toll rates inde%ed to C# perce nt of >PI P +ector has been declared an industry to allow commercial borrowing also basis for ports in

P ;oncession have also

(C

Objectives of the Research

The proposed research work has been carried out with following broad ob!ectives in mind?

To study the concept and growth of Public Private Partnership.

$nalysis of various Public Private Partnership models as per industry requirements.

To study advantages and disadvantages of Public Private Partnership in developing economy like India.

Investigating the problems of Public Private Partnership model in India and suggesting probable solutions.

(<

Sco#e of the Research

This research broadly covers following aspects of commodity markets ? It discusses the concept of PPP. It covers the PPP pro!ects involved in health, education, power and transport . It throws light on the government efforts to promote PPP in India . It traces the growth of PPP only in India and not worldwide. It tries to analyse the problems faced in PPP in India and suggest remedies for further growth of such markets .

(D

RESEARC& -E(&O)O'O,0

0esearch is a common language refers to the search of knowledge. It is scientific 6 systematic search for pertinent information on a specific topic. In fact, research is an art of scientific investigation. This research attempts to investigate the working and growth of PPP in India.

Problem $efinition%
0esearch problem, in general, refers to some difficulty which a researcher e%periences in the conte%t of either a theoretical or practical situation and wants to obtain a solution for the same. $s the resources of a growing economy like India is limited, the Government should come forward to take various measures for the growth of economy. :or this, the Government of India has taken steps by collaborating with the private enterprises to generate sufficient funds and resources for the development of infrastructure which resulted in !oint ventures called Public Private Partnership. Thus, PPP is very important for the growth of an economy. ,arious advantages are seen in PPP but the

(F

disadvantages are also there as well. Thus, the study contains the various problems and disadvantages of PPP and its probable solutions.

"m#ortance of the #ro#ose$ research%

Governments particularly of developing economies like India do not have funds sufficient enough to fulfill the requirements of large investment pro!ects as it has many social obligations. Therefore capital and technology are required in order to meet the requirements of the pro!ects which are provided by the private sectors. Aut conflict of interest and working philosphies bteween the sectors come up which leads to problem formulation and its successful implementation.

Research $esign%
The proposed research is descriptive and e%ploratory in nature, where e%isting structure, functioning and problems of PPP have been identified and possible courses of corrective actions are suggested.

)ata Collection%
The proposed research shall primarily be based on secondary data collected from various published sources like newspapers, maga9ines, !ournals, books, periodicals and websites.

)ata Anal2sis%

(H

:or easy inference, data tables and bar charts have been used.

Perio$ of Stu$2?
This study has been carried out for a period of D weeks.

'imitations of the research%

The study is based on secondary data. The studynis confined only to specific sectors and few e%amples are given only due to data and time constraints. It does not cover all the sectors where PPP is involved. This research report is pat of my course)curriculum and I have analysed the problem with the limited time and knowledge which was at my disposal. ;omple% statistical tools for data analysis have not been employed.

(J

=3 (o stu$2 the conce#t an$ gro<th of Public Private Partnershi#3

4evelopment and use of PPPs for delivering infrastructure services has now at least "" years of precedence in India, with the ma!ority of pro!ects coming in line in the last < years. Policies in favor of attracting private participation as well as innovation with different structures have met with varying degrees of success. +ome sectors like power, and ports and roads, have done very good progress compared to limited success in other sectors. +ome states have undertaken far more PPPs than others, and a much heavier use of PPPs in some sectors than others. $s far as current status of pro!ects in place as per our database, there have been at least C<# PPP pro!ects in our main sectors of focus where a contract has been awarded and pro!ects are underway in the sense that they are either operational, have reached construction stage, or at least

construction&implementation is imminent. The total pro!ect cost is estimated to be about 0s. /, /C,"F<.F< ;rore.

C#

Table "?

S T A T E W I S E F I G U R E S (otal +umber of Projects base$ on value of contracts (otal et<een et<een States +umber ase$ =77 to 6:= to -ore of on =77 6:7 :77 than .alue of Projects crore crore crore :77 crore contacts An$hra Pra$esh D( "#D/.J( "<<C./F ("HH.<( ((CF(.F (J/FJ.C( ihar / C # C"H.#C # C//.#C Chan$igarh "C "< # # # "< Chhattisgarh C F# (#C CDC # H(H )elhi J J< # C#H./ "#(FC "#HFF./ ,oa / (# //# # # /<# ,ujarat /F "(#.#D /FF.// ((D#.J "CJC(.F" "HF"".HJ &ar2ana / # #) F<D # F<D >harkhan$ D "(" <<# # # DH" /arnataka J< JH#.(J "DJ/.<< "//#(.(" /CD"<.D (JCJ".H< /erala "" ""C ""/ D"<.< """(" ""JF/.< -a$h2a Pra$esh (F "#/F.(/ """F./H /DJC.J< /JCJ FFHH.<< -aharashtra /H< ""H.< FC<.< "#JJ.HC (/#D".J< (C#/<.FJ Orissa "D /(<." # <## DHHH.(C FD/(.CC Pu$$ucherr2 / # # C"J "HDF //HD Punjab "J <(F./D C(C.F/ <F/ # "<C(.JH Rajasthan CJ </(.J/ FH(.FJ H(( (""/.F </<(.C" Sikkim /C "F<.<J <<H /DDJ "(F#H "F""#.<J (amil +a$u (# "C(.(" <<<.D DC"/.HF <(C# "/C<".FH *ttar Pra$esh < # # "C<H.<F DCJ./" /"#F.FH

C"

1est engal "nter-State (otal Table /?

< "( 9:7

# /## "/"C.C DC" /#<<.C "D#.C< "J< //JC.DF <JHC HD(C."/ :;8?3?8 @6@@3@8 9=:?63A? =;AA8@36= 669=A:3?

S E C T O R W I S E F I G U R E S Sector (otal ase$ et<een et<een -ore +umber on =77 =77 to 6:= to than :77 of crore 6:7 :77 crore Projects crore crore Air#orts < # # (#( "HH#H E$ucation " J(.(/ # # # Energ2 /C "F<.<J <<H /DDJ "(F#H Ports C( JD JF# /CC# D/JJ/.J< Rail<a2s C # "#/.// J#< <JC.(C Roa$s /F" ("D/.< <</D.CJ (/HD".HF D#C<(.J/ (ourism /J FC/.<D DFC.</ # "#<# *rban )evelo#ment F( "/H(.HD "CDH.F /C#(.J" "#"(/ (otal 9:7 :;8?3?8 @6@@3@8 9=:?63A? =;AA8@36=

.alue of contacts

"J""" J(.(/ "F""#.<J DDCJH.J< "D#".<D "#/##C.F /CDF.#H "</HH.CF 669=A:3?

>e see that road pro!ects account for D#= of the total number of pro!ects and C<= by total value because of the small average si9e of pro!ects. Ports though account for "#= of the total number of pro!ects have a larger average si9e of pro!ect and contribute (#= in terms of total value. It is noteworthy that if ports and central road pro!ects are e%cluded from the total, there is in fact a relatively small value of deal flow, at only 0s <<F<F.#/ ;rores in basic infrastructure PPPs to)date, suggesting a significant potential upside for PPP pro!ects across sectors where states and municipalities have primary responsibility. The potential use of PPPs in e)governance and health and education sectors remains largely untapped across India as a whole, though off)late there have been some activities shaping in these sectors.

C/

$cross states and central agencies, the leading users of PPPs by number of pro!ects have been Karnataka, $ndhra Pradesh, and 0a!asthan, with J<, D( and CJ awarded pro!ects respectively and the 3ational Gighways $uthority of India (3G$I , with about FF pro!ects. In terms of main types of PPP contracts, almost all contracts have been of the A2T&A22T type (either toll or annuity payment models or close variants.

"+(ERPRE(A("O+
:rom the above data it is clear that some sectors like power, and ports and roads, have done very good progress compared to limited success in other sectors. >e see that road pro!ects account for D#= of the total number of pro!ects and C<= by total value because of the small average si9e of pro!ects. Ports though account for "#= of the total number of pro!ects have a larger average si9e of pro!ect and contribute (#= in terms of total value. $cross states and central agencies, the leading users of PPPs by number of pro!ects have been Karnataka, $ndhra Pradesh, and 0a!asthan, with J<, D( and CJ awarded pro!ects respectively and the 3ational Gighways $uthority of India (3G$I , with about FF pro!ects.

63Anal2sis of various Public Private Partnershi# mo$els as #er in$ustr2 requirements3

C(

In terms of approach to provider selection, almost all the pro!ects in the sample were competitively bid (either national or international competitive bidding with the negotiated ones (through 52Is primarily coming from the railway PPP pro!ects, which is understandable given the lack of clear policy framework and standard contract still date. In terms of contract award method the International ;ompetitive Aidding yielded (J= of total investment in India followed by 4omestic ;ompetitive Aidding with ((=.

Table (?

SECTOR WISE CONTRACT AWARD METHOD

Sector

(otal +umber of Projects

(otal +umber of Projects base$ on Contract A<ar$ -etho$

)omestic "nternational Com#etitive Com#etitive i$$ing i$$ing +egotiate$ -O* .alue of Contracts 4Rs3 Crore5

Air#orts E$ucation Energ2 Ports Rail<a2s Roa$s (ourism

*rban )evelo#ment

< " /C C( C /F" /J F(

# J(.(/ "## CH"D DJD.<D D/FFJ./ "(DF.FD CDC<.H(

"HH#H # # /C#(F # (C"D".J JH/.(/ JF<H.J"

# # "D#"C.<J (C<J".J< J#< "/<J./ # "<

"J""" J(.(/ "F""#.<J DDCJH.J< "D#".<D "#/##C.FH /CDF.#H "</HH.CF

(otal

9:7 A9:?83;A

?AA9?3=8

:6A?:3A9

669=A:3?

The primary reason for pro!ect being implemented through PPP has been qualitative benefits accrued from the pro!ect, it remains to be seen if these decisions are based on

CC

clear value)for)money calculations for the conceding authority. There is also relatively little available in terms of information on the actual contracts used.

)omestic versus !oreign Private #la2ers Partici#ation in PPP #rojects Private sector targeted towards financing, designing, implementing, and operating infrastructure facilities and services that were traditionally provided by the public sector have been a success story so far with the Government of India leading the process of promoting Public Private Partnerships (PPPs in India. The ;entral Government is working with the +tate Governments and all other stakeholders to e%pand the hori9on of PPPs in infrastructure development in the country. It has created a favourable atmosphere, provided fiscal incentives and facilitated funding of PPP pro!ects. The Government now allows :4I in most infrastructure sectors to the e%tent of "## percent. The crucial initiatives to operational and institutionali9e the flow of private capital for accelerated infrastructure development in the country through PPPs, has led to an investment of 0s. "(<HF".C/ crore as per the sample of (## in the PPP database. )omestic #la2ers #artici#ation in PPP #rojects 0eview of successful pro!ects indicates that they have clear boundaries and measurable performance for the private party, sufficiently large scale of operations, competitive market for provisioning of the services, significant service delivery, and ability for the private sector to control factors for which it is responsible.

C<

2n aggregate level the domestic players have dominated the PPP pro!ects both in terms of numbers and investment. 2ut of sample of (## pro!ects /FH pro!ects with investment of 0s. "(C"C<.<F crore. The road sector has dominated investment by domestic players with aggregate investment of 0s. <",(JH crore. The port sector with total domestic player investment of 0s. /(J(" crore comes second and airports at 0s. "J,""" crore. The energy space that includes hydro based power plants is dominated by domestic private players 0s. "F,H#/ crore.

;hart "?

!oreign versus $omestic number of PPP #rojects in "n$ia F=

foreign investor indian private investor

J(=

;hart /?

CD

Sector-<ise $omestic #la2er investment in PPP #rojects

=AA:B =C =77AB =C

=A?76B =8C :=8@?B 8@C =@===B =9C

roads ports airports energy urban development railways

987:8B 86C

@eading among big domestic players is @arsen 6 Toubro with a total investment of, both in e%isting and under construction pro!ects, totaling 0s. (CJH crore mostly in road pro!ects. It is followed with G50 Infrastructure with a total investment of 0s. "/HH crore. In case of small road pro!ects on A2T basis +adbhav 1ngineering @imited with investment in "" pro!ects with total investment of /#H<.DH crore leads the domestic scene. The 4elhi based 4+ ;onstructions @imited is second, with total investment of 0s. (/# crore. 5umbai based 5+K Pro!ects (India @imited is third in terms of investment, with "< pro!ects and total investment of 0s. /(H.HC crore. $mong these three players they shared (# pro!ects out of (## sample pro!ects.

Table (? CF

Domestic players in PPP projects )omestic #la2ers "nvestment b2 +umber of #rivate #la2er #rojects 4Ru#ees in crore5

-ajor $omestic #la2ers 'arsen & (oubro (rans#ortation "nfrastructure 't$3 ,-R "nfrastructure 't$3 ".RC' "nfrastructure & Projects 't$3 Small $omestic #la2ers )S Constructions Sa$bhav Engineering 'imite$ -S/ Projects 4"n$ia5 'imite$ (otal

(CJF.J< "/HF.JH J(D.D ("J.C/ /#H<.DH /(H.HC ?8;;39A "# D C C "" "< :7

!oreign #la2er Partici#ation in PPP #rojects $s per available records, foreign multinationals have equity participation only in // PPP pro!ects in the sample of (##, where contracts have already been awarded and pro!ects are underway. 5alaysian companies are leading investors in public private partnership (PPP pro!ects in India, involving nearly si% ma!or infrastructure ventures. :ollowed by the Inited Kingdom with four pro!ects, 5auritius (three , two each for :rance, Germany, Inited $rab 1mirates and the Philippines, and one each for the Inited +tates and +wit9erland. :oreign equity participation of /F foreign companies in PPP pro!ects was only at 0s ",F/<.H< crore which is meager " per cent of the total pro!ect investment. Prominent PPP pro!ects where foreign companies have an equity stake include modernisation of

CH

5umbai and 4elhi international airports, 4elhi)3oida toll bridge, Pipavav port, Aangalore international airports and B3PT container terminal etc. 5auritius)based $;+$ Global ($irports ;ompany +outh $frica , for e%ample, has 0s "D# crore equity stake in moderni9ation of 5umbai international airport pro!ect. $pollo 1nterprises from IK has equity stakes of 0s CH crore and 0s "" crore in @ucknow)+itapur road pro!ect and 0aipur 4urg e%pressway respectively. Table C?

Foreign vers s !omestic investment in PPP projects in In!ia" "nvestor (2#e (otal C of total C of total "nvestment number of #roject cost #rojects !oreign "nvestor "F/<.H< F= "= "n$ian Private "nvestor "(C"C<.<F J(= JJ= (otal =8:?A=396 =77C =77C

Table <?

Sector#$ise %rea&# p o' 'oreign investor participation in PPP projects !oreign "nvestor .ersus Sector +o3 of "nvestment C of total Projects #roject cost Ports J C"D.< /C= Roa$s J /<D.// "<= Air#orts C "#<(."( D"= (otal 66 =A6:3?: =77C Q$s per records made available during pro!ect survey

CJ

"+(ERPRE(A("O+
:rom the above data it is clear that the ma!or sectors in which PPP has developed in India are 0oads , Ports 6 1nergy. :oreign investors contribute to only J = whereas Indian private players contribute J"= in the total. The ma!or contribution of domestic private players are in airport , ports 6 road development PPP's.

83(o stu$2 a$vantages an$ $isa$vantages of Public Private Partnershi# in $evelo#ing econom2 like "n$ia3
<#

&EA'(& ;hart (?

sources of health spending in India

2.20% 14.40%

7.20% 0.30% 5.10% 2.00% 68.80%

household external funding firms others inc l.NG s central go!t state go!t local go!t

+ome successful PPP e%periences in the health sector in India are? Table D? ;onventional ;ontracting in +awai 5an +ingh 0adiology 6 (+5+ Gospital, 4rug store Baipur 4iet, ;leaning, Ahaga!atin Gospital @aundry, security Kolkata Karuna Trust, PG; 5gt. Karnataka ;G; 5gt. +hamla!i Gospital Tertiary care Gu!arat hospital 0a!iv Gandhi Gospital, 0aichur Private Com#an2D "n$ivi$ual Entre#reneurs Charitable +,O Charitable +,O Private com#an2

;ontracting out

<"

Performance 5anagement ;ontracts

$PIG+ Pro!ect, 0;G +ervices Charitable +,O $dilabad, $P 0;G&5G services Private clinics ;hiran!eevi Mo!ana, Charitable +,O Gu!arat Private &os#itals consortium

;ommunity& GealthMeshashvini +urgical ;are Insurance +cheme,Karnataka ,oucher +cheme

$rogya 0akshaGospitali9ation Private +cheme, $P 5aternity ;are&&os#italsDPS* +I:P+$, $gra IP Institutional insurance +;2,$, Garidwar,4elivery Private &os#itals IK Gospital $utonomy 0K+, Ahopal & 6Patient welfarePublic &os#ital 2ther Places committee :ranchising 5erri Tarang8 5erri5 ;G & 2ther!ranchise$ #rivate +ilver8 5erri Gold8curative services entre#reneurs @ife +pring) G@:PPT& +I:P+$' Banani, Aihar

+ome other successful e%amples in this sector are?

(eleme$icine initiative b2 +ara2ana &ru$a2ala2a in /arnataka The Government of Karnataka, the 3arayana Grudayalaya hospital in Aangalore and the Indian +pace 0esearch 2rgani9ation initiated an e%perimental tele)medicine pro!ect called RKarnataka Integrated Tele)medicine and Tele)health Pro!ect' (KITTG , which is an on)line health)care initiatives in Karnataka. >ith connections by satellite, this pro!ect functions in the ;oronary ;are Inits of selected district hospitals that are linked with 3arayana Grudayalaya hospital. Tele)medicine provides access to areas that are underserved or un)served. Tele)medicine improves the quality of health care through timely diagnosis and treatment of patients.

</

(he *ttaranchal -obile &os#ital an$ Research Center 4*-&RC5 It is three)way partnership among the Technology Information, :orecasting and $ssessment ;ouncil (TI:$; , the Government of Ittaranchal and the Airla Institute of +cientific 0esearch (AI+0 . The motive behind the partnership was to provide health care and diagnostic facilities to poor and rural people at their doorstep in the difficult hilly terrains. TI:$; and the +tate Govt. shares the funds sanctioned to AI+0 on an equal basis.

P&CEs in ,umballi an$ SugganahalliB /arnataka 5anagement of Primary Gealth ;enters in Gumballi and +ugganahalli was contracted out by the Government of Karnataka to Karuna Trust in "JJD to serve the tribal community in the hilly areas. J#= of the cost is borne by the Govt. and "#= by the trust. The agency ensures adequate stocks of essential drugs at all times and supplies them free of cost to the patients. 3o patient is charged for diagnosis, drugs, treatment or anything else e%cept in accordance with the Government policy. The staff salaries are shared between the Govt. and the Trust. Gumballi district is considered a model PG; covering the entire gamut of primary health care S preventive, promotive, curative and rehabilitative

Emergenc2 Ambulance Services Scheme in (amil +a$u The Government of Tamil 3adu has initiated an 1mergency $mbulance +ervices scheme in Theni district of Tamil 3adu in order to reduce the maternal mortality rate in its rural area. The ma!or cause for the high 550 is anon)medical cause ) the lack of adequate transport facilities to carry pregnant women to health institutions for childbirth, especially in the tribal areas. This scheme is part of the >orld Aank aided

<(

health system development pro!ect in Tamil 3adu. The Government supports the scheme only by supplying the vehicles.

*rban Slum &ealth Care ProjectB An$hra Pra$esh The Irban +lum Gealth ;are Pro!ect the $ndhra Pradesh 5inistry of Gealth and :amily >elfare contracts 3G2s to manage health centers in the slums of $dilabad. The basic ob!ectives of the pro!ect are to increase the availability and utili9ation of health and family welfare services, to build an effective referral system, to implement national health programs, and to increase health awareness and better health)seeking behaviour among slum dwellers, thus reducing morbidity and mortality among women and children. -obile &ealth .ans $lready implemented in inaccessible areas ;omprehensive Gealth +ervices :i%ed Bourney Plans Public +ector contribution 5edical 2fficers and 5edicines Private +ector for Purchase and 5anagement of ,ans These vans are useful in? Provide access to services people living in inaccessible terrain 5ake services available at central location to reduce travel time and costs of clients. $part from the above e%amples of successful PPP's instrumented by healthcare sector in India there are numerous e%amples wherein innovative models are being envisaged to provide a robust healthcare framework in the country. +ome of the pro!ects in the pipeline include setting up of the diagnostic centres at the district hospitals of <C

Pithoragarh and Kotdwara in Ittaranchal, establishing /## bedded secondary level hospitals in 4elhi under the PPP model. KP5G is the advisor for both these pro!ects and is involved in designing of the PPP model, financial and pro!ect structuring, detailing scope of services, technical advisory, tendering process and eventually short listing of private partner. Public)Private Partnership has emerged as one of the options to influence the growth of private sector with public goals in mind. Ised !udiciously and fitted to local circumstances, they clearly have the potential to drastically change the healthcare landscape in India. PPPs will survive only if the interests of all stakeholders are taken into account.

E)*CA("O+ $ public, private, and community partnership model pool together best practices for the benefit of rural children. These best practices relate to diverse areas such as teacher training, teaching&learning content, computer aided education, innovative use of technology, creative methodologies, quality improvement assessment, early childhood education programme, and programmes for challenged children. Two such collaborations established for technology based learning interventions are? Com#uter Ai$e$ 'earning Programme? ;omputer)$ided @earning (;$@ is an integral part of the :oundation's 5odel +chool programme. >ithin ;$@, the :oundation provides each of the schoolsSprimary, upper primary, and high schools Sequipment such as computers, T,, 4,4 player, two)in)one, public address system, and power back)up. $long with the equipment, supporting multimedia content is provided to the schools for imparting knowledge to children. ;ontent in the form of ;4s or 4,4s is sourced from agencies such as $9im Prem!i :oundation, I3I;1:, 3ational Green ;orps, International @iteracy Institute, and 1ureka 5ultimedia

<<

content. The content pertains to diverse sub!ect areas such as language development, new approaches to science and mathematics, environmental education, and some fun filled activities. " - /i$smart Programme% The RIA5 Kid+mart' is the only programme in India aimed at introducing technology at the pre) and primary)school levels in government schools. It is designed to help children in the age group (EH years from disadvantaged sections of society to get a head)start in their academic development. The programme helps children understand basic concepts in language, maths, and science, and focuses on developing reading skills among children. In the above conte%t, Ayrra!u foundations' e%pertise in rural transformation helped IA5 launch this programme for the first time in partnership with the government and the village community across "#" schools in rural$ndhra Pradesh. 1ach of the "#" centres imparts training to nearly /<# students and also caters to children from neighbouring schools, and pre)school centres. $ total of /<,### children have benefited through this programme. E$ucation .ouchers% Inder this system, all parents will get education vouchers from the state, free of cost, which they can offer to private schools in lieu of fee payment. The schools can later encash these through state agencies. $ successful voucher scheme will encourage the private sector to meet the demand of primary education services especially in remote areas, but the government will have a significant role in monitoring the quality of education offered in e%change for vouchers through effective implementation of certification and accreditation procedures. Poorer households may be provided higher value vouchers in order to safeguard against any discrimination that they may face with private providers reluctant to enroll children from backward groups and to ensure that drop out rates are reduced. In other words, the cost of educating these children might be greater, requiring greater public

<D

financing. 1stimates suggest that public e%penditure on the voucher system might be much less than running public schools. One Cam#usF-an2 Schools -o$el% In the 2ne ;ampus)5any +chools model, designed mainly for rural India, the state will build schoolrooms around a playground and lease them out to teacher entrepreneurs to run primary schools from standard I to I, according to the curriculum designed and approved by the state. The state will continue to support primary education by giving educational vouchers to all eligible children which can be used to pay fees in any school of their choice run by the teacher entrepreneurs. The government has declared its intention to revamp the vocational education sector. 2ne of these initiatives is to upgrade the Industrial Training Institutes (ITIs . $ccording to the >orking Group an actively functioning I5; can bring about significant improvements in the functioning of ITI in areas such as (a up)keep of machinery and equipment and donation of tools and equipment, (b training and development of faculty, (c student placement and industry interaction, and (d revenue generation. They also have better management information systems regarding institute functioning and student performance. 5aruti Idyog @imited adopted the ITIs at Gurgaon and 0ohtak, @iberty +hoes @imited adopted the one at Karnal, +ona Koyo +teering +ystems @imited at 3agina and Bay Aharat 5aruti @imited at :aridabad. This has led to some protest too. ;onstruction Industry 4evelopment ;ouncil (;I4; has also started to become active in this area, with sector specific ITIs. In Pun!ab, a few ITIs have been transferred to the private sector under a structured concession agreement. PO1ER

<F

Projects in #o<er *ltra -ega Po<er Projects% The 5inistry of Power has initiated the establishment of pro!ects with a rated capacity of around C,### 5>. Known as Iltra 5ega Power Pro!ects (I5PP , these would use supercritical technologies and supply power at competitive tariffs. Private Sector Partici#ation in (ransmission% PG;I@ had invited offers from eligible bidders as a prospective Independent Private Transmission ;ompany (IPT; to establish transmission lines associated with the >estern 0egion +ystem +trengthening +cheme (the Pro!ect . The scheme is made of two distinct sub)pro!ects (Pro!ect A and Pro!ect ; of total value of around I30 /,<## crore. Private Sector Partici#ation in )istribution% The Torrent Group now has the rights to distribute electricity in Ahiwandi, north of 5umbai for "# years. The Ahiwandi circle's estimated annual revenues are about I30 <## crore and around D## 5> of power is distributed in this circle. Table F?

S3 +ame of the #roject +o3

Sector (+ponsoring $uthority Power(5inistry of Power.

State

Project cost in 0s. ;rore (in I+O, 5illionQ DHF.H# ("CH.""

Remarks

"

,iability Gap :unding for 0evival of Turial Gydro) 1lectric Pro!ect and also appraisal by PPP$; >estern 0egion +ystem strengthening scheme

5i9oram

Proposal withdrawn by 5inistry of Power. Proposal withdrawn by <H

Power(5inistry of Power.

5i9oram

<,//"./( (","/C.(#

5inistry of Power. Sub-(otal :B@7@378 4=B6A63975

(RA+SPOR( Projects in Roa$s Table H?

+o

+ame of the #roject

Sector (+ponsori ng $uthority

State

Project cost in 0s. ;rore (in I+O, 5illionQ /##.<C (C(."H

Remarks

"

>idening and strengthening of two lane Aeawar ) Gomti section of 3GH

0oads (3ational Gighway $uthority of India

0a!asthan

Proposal approved by +:;

Sub-(otal

6773:9 4983=?5
0oads (4epartment 0oad Transport and Gighways 0oads (4epartment 0oad Transport and Gighways Karnataka "F(.H# ((F.C/ Proposal approved by +:;

"

>idening and strengthening of two lane Gospet ) Aellary +ection of 3G D( :our laning of Talegaon ) $mravati section of 3G D in 5aharashtra on 4A:2T basis

5aharashtra

D"#.<J ("(".CH

Proposal approved on /#.#/./## J Proposal approved on /#.#/./## J

:our laning of 4indigul ) Theni section of 3G C< and 5umili ) Theni section of 3G //# in the +tate of Tamil 3adu under 3G4P III om A2T (Toll basis. :our laning of Tindivanam ) Krishnagiri

0oads (4epartment 0oad Transport and Gighways

Tamil 3adu

H"(.## ("F<.#D

0oads (4epartment

Tamil 3adu

",#F<.## (/(".CH

Proposal approved

<J

section of 3GDD in the +tate of Tamil 3adu under 3G4P III on A2T (Toll basis < :our laning of 5u9affarpur )+onbarsa section of 3G FF in the +tate of Aihar under 3G4P III on A2T (Toll basis. :our laning of Pune )+holapur section (km "CC.## to /CJ.## of 3GJ in the +tate of 5aharashtra under 3G4P III $ on A2T (Toll basis ) Package II

0oad Transport and Gighways

on /#.#/./## J

0oads (4epartment 0oad Transport and Gighways

Aihar

J(/.D# (/##.H/

Proposal approved on /#.#/./## J

0oads (4epartment 0oad Transport and Gighways

5aharashtra

H#J.H< ("FC.(J

Proposal approved on /#.#/./## J

Sub-(otal

9B9=93?9 4@:73;:5

+ince Banuary /##D, the Public)Private Partnership $ppraisal ;ommittee (PPP$; has granted approval to a total of HF pro!ects including FF highway pro!ects. The PPP$; approves the infrastructure pro!ects worth I+O <.JH billion on 3ovember /##H. This includes /" highway pro!ects to be taken up under 3G4P Phase III and ,. To cater to investment needs of the road sector, the investments in the sector are pro!ected to grow by around /C percent over the ne%t < years. The state and the central governments have planned investments in the road sector to the tune of almost I+4 <# billion by /#"". The share of private participants is e%pected at I+4 C billion by way of equity alone for 3G$I A2T pro!ects under the 3ational Gighway 4evelopment Program from Phase III to Phase ,II. Projects in Ports Table J?

D#

+o

+ame of the #roject

Sector (+ponsorig $uthority

State

Project cost in 0s. ;rore (in I+O, 5illionQ C(H.(D (JC.(J

Remarks

"

5echanism of ;oal Gandling facilities and upgradation of General ;argo Aerth at 2uter Garbour of ,isakhapatnam Port to cater /##,### 4>T vessels on 4A:2T basis 4evelopment of +tandalone container handling facility with a quay length of (##m towards 3orth at Bahawar @al 3ehru Port Trust 4evelopment of :ourth ;ontainer Terminal at Bawahar @al 3ehru Port Trust 4evelopment of ;ontainer Terminal at 3ew 5angalore Port on A2T basis 4evelopment of 5ultipurpose Aerth to handle clean cargo including containers on A2T basis at Paradip Port 4evelopment of 3orth ;argo Aerth II for handling bulk cargo at Tuticorin Port on 4A:2T basis 4evelopment of 5ega ;ontainer at ;hennai Port

Ports (5inistry of +hipping

$ndhra Pradesh

Proposal approved on "".""./##J

Ports (5inistry of +hipping

5aharashtra

D##.#H ("/J.//

Proposal approved on "".""./##J

Ports (5inistry of +hipping

5aharashtra

D,F##.## (",CC/.F/

Proposal approved on "".""./##J

Ports (5inistry of +hipping

Karnataka

/F<.H/ (<J.(J

Proposal approved on #D.#"./#"# Proposal approved on #D.#"./#"#

<

Ports (5inistry of +hipping

2rissa

CC<.<" (J<.J(

Ports (5inistry of +hipping

Tamil 3adu

((/."D (F".</

Proposal approved on #D.#"./#"#

Ports (5inistry of +hipping

Tamil 3adu

(,"/<.## (DF/.J"

Proposal approved on #D.#"./#"# Proposal approved on "<.#(."#. Proposal approved on "F.#H./#"#.

4evelopment of 4ry Aulk Terminal at Tekra near Tuna on A2T basis 4evelopment of 1T " berth by replacement of the e%isting 1T" and part of 1T/ berths in the north of the Inner Garbour of ,ishakhapatnam Port 4evelopment of 1T "$ berth on south of 1T " berth

Ports (5inistry of +hipping

Gu!arat

","C#.H/ (/C<.D<

Ports (5inistry of +hipping

$ndhra Pradesh

(/(."H (DJ.<J

"#

Ports (5inistry of +hipping

$ndhra Pradesh

("(.(J (DF.CH

Proposal approved on

D"

for handling Thermal ;oal and +team ;oal in the Inner Garbour of ,ishakhapatnam Port Sub-(otal =8B;@9386 46B@9?3?65

"F.#H./#"#.

The 3ational 5aritime 4evelopment Program targets investments of the order of almost I+4 "( billion over the ne%t "#)year period. $bout D# percent of this investment is envisaged to come from the private sector amounting to appro%imately I+4 H billion. The balance investments would come from the port7s internal accrual as well as budgetary support from the government. The 354P includes pro!ects for the creation of berths, port facilities, landside infrastructure, etc. as well as the +ethu) +amudram Pro!ect, which will dredge a navigable channel between India and +ri @anka at an estimated cost of I+4 <C# million to enable ships up to "# meter draft a shorter passage. $n additional I+4 <H# million is proposed to be pumped into the sector for hinterland connectivity pro!ects.

Projects in Air#ots Table "#?

+o +ame of the #roject Sector 4S#onsoring Authorit25 State Project cost in Rs3 Crore 4in *SGB -illionH5 Remarks

"

;ity side development of Idaipur $irport through PPP

;ivil $viation (5inistry of ;ivil $viation

0a!asthan

Proposal granted in) principle approval on (#.C./##H Proposal granted in) principle approval on

;ity side development of $mritsar $irport through PPP

;ivil $viation (5inistry of ;ivil $viation

Pun!ab

D/

(#.C./##H

Sub-(otal

7377 473775

The ;ommittee on Infrastructure chaired by the Prime 5inister estimates an investment of I+4 J billion for the development of airports during /##D)#F to /#"()"C.2ut of the total, it is estimated that I+4 D.J billion would come from PPPs. This comprises P 5oderni9ation of ;hennai and Kolkata airports and greenfield airports for 3avi 5umbai, Pune, Goa, 3agpur, Pune, 3avi 5umbai, Greater 3oida, and four 3orth) eastern states P 5oderni9ation of (< non)metro airports but private participation allowed in development of city)side facilities only P Ipgradation of equipment & instrumentation at all airports in country

Projects in Rail<a2s Table ""?

+o

+ame of the #roject

Sector 4S#onsoring Authorit25

State

Project cost in Rs3 Crore 4in *SGB -illionH5

Remarks

"

2bulavaripalle) Krishnapatnam 0ail @ine Pro!ect E 0,3@

0ailways(5inistr y of 0ailways

$ndhra Pradesh

<HF.CJ ("/D.<"

Proposal yet to be considered by PPP$;. 1mpowered Institution under the ,G: +cheme has

D(

considered the proposal and not found it admissible. 5inistry of 0ailways are revising the proposal.

Sub-(otal

:?A39@ 4=6;3:=5

"

0edevelopment of 3ew delhi 0ailway station

0ailways(5inistr y of 0ailways

4elhi

H,<##.## (",H(#.(/

Proposal approved on #D."#./##H

Sub-(otal Q ;urrency 1%change 0s. CD.CC U "O.

?B:77377 4=B?873865

The rapid rise in international trade and domestic cargo has placed a great strain on the 4elhi)5umbai and 4elhi)Kolkata rail track. Government has, therefore, decided to build dedicated freight corridors in the >estern and 1astern high)density routes. The investment is e%pected to be about 0s. //,### crore (I+4 C.</< billion . 0equisite surveys and pro!ect reports are in progress and work is e%pected to commence within a year. >ith increasing containeri9ation of cargo, the demand for its movement by rail has grown rapidly. +o far, container movement by rail was the monopoly of a public sector entity, ;23;20. The container movement has been thrown open to competition and private sector entities have been made eligible for running container

DC

trains. "C applicants have submitted the application seeking permission for container train operation, which have been approved. The dedicated 0ail :reight ;orridor is being developed at a total cost of I+4 "< billion. $ large proportion of the capital investment is proposed to be raised through PPP. In addition to capacity e%pansion of rail network, an investment of I+4 ()C billion is planned for upgradation of rail safety. $part from safety)related investments, there would also be substantial investments in upgradation and laying of new railway lines. Key areas of PPP in 0ailway sector comprise? P 4evelopment and operation of the dedicated heavy duty rail freight corridor P 4evelopment of terminals and warehousing facilities P Privati9ation of branch lines P ;ommercial e%ploitation through PPPs of the e%cess, vacant and unutili9ed land available with Indian 0ailways P +etting up of rolling stock manufacturing facilities for I0

)evelo#ment in a nut-shell $s per a >orld Aank financed and 41$ commissioned study by Price water house ;oopers, in the last "# years a total of //F PPP infrastructure pro!ects were found to have achieved financial close. :urthermore, PPP pro!ects in India clearly show a sharp increasing trend in the past "# years. 2ut of the //F PPP pro!ects, more than ""F pro!ects have achieved financial close in the last three years. 0oad sector which forms more than H"= of the total pro!ects by number accounts for only <C= of the total

D<

pro!ects by value. Port and $irport pro!ects which form H.C= and ".H= respectively by number constitute /"= and "F./= respectively of the pie by value. >estern region followed by +outhern region dominates both in terms of number and value of pro!ects. Though states dominate in terms of the number of PPP pro!ects awarded (<<= , they trail the centre in terms of the total value of the pro!ects (centre accounting for F/= . This is because most state pro!ect si9es are less than O<# million but central pro!ect si9es8 in particular $irport pro!ects are large being more than O"## million. The highways sector received much required fillip when the government announced 3ational Gighway 4evelopment Programme and its first two phases)Golden Tuadrilateral and 3orth +outh)1ast >est ;orridor. These pro!ects were funded by 3ational Gighways $uthority of India. :or the subsequent phases, i.e. III, I, 6 ,, the government decided to involve the private sector by promulgating the A2T model. Inder this model risks would be allocated to those parties that were best equipped to manage them. Gu!arat and 5aharashtra have had success especially in ports, roads and urban infrastructure. Karnataka also has done well in the airport, power and road sector. Pun!ab has had PPPs in the road sector. The initiatives in developing transport infrastructure alone are estimated to require a total investment of I+4 J# billion over the ne%t < to "# years.

The I+ O "## million 4elhi)3oida bridge pro!ect, implemented on a A22T framework on the basis of a (# year concession, is India7s first ma!or PPP initiative. The Baipur)Kishangarh highway is a Auild 2perate Transfer (A2T success story and it has been decided that the four laning of "#,### kms, under

DD

3G4P III will be done entirely on A2T basis.

"+(ERPRE(A("O+
:rom the above data it is clear that in the last "# years a total of //F PPP infrastructure pro!ects were found to have achieved financial close. :urthermore, PPP pro!ects in India clearly show a sharp increasing trend in the past "# years. 2ut of the //F PPP pro!ects, more than ""F pro!ects have achieved financial close in the last three years. 0oad sector which forms more than H"= of the total pro!ects by number accounts for only <C= of the total pro!ects by value. Port and $irport pro!ects which form H.C= and ".H= respectively by number constitute /"= and "F./= respectively of the pie by value. >estern region followed by +outhern region dominates both in terms of number and value of pro!ects. Though states dominate in terms of the number of PPP pro!ects awarded (<<= , they trail the centre in terms of the total value of the pro!ects (centre accounting for F/= . This is because most state pro!ect si9es are less than O<# million but central pro!ect si9es8 in particular $irport pro!ects are large being more than O"## million.

-easures taken to encourage PPP% In airports and ports sectors, 5odel ;oncession $greements are being developed to encourage public private partnerships. Planning ;ommission has already drafted the 5odel ;oncession $greement for the 0oads sector. $t the same time, public investments are being stepped up, coupled with revamping of $irports $uthority of India ($$I , 3ational Gighways $uthority of India (3G$I and Port Trusts. The core

DF

group on 3G4P :inancing has submitted its report on the suggested financing pattern for 3G4P. The report of the I5G on restructuring of 3G$I has been finali9ed. $ Task :orce appointed by ;ommittee on Infrastructure has finali9ed the financing plan of ports. The Task :orce on financing of the development and moderni9ation of (< non)metro airports has finali9ed its report. The Task :orce has also recommended that the city side development in all airports should be taken up through PPPs. Bawaharlal 3ehru 3ational Irban 0enewal 5ission is designed to encourage the involvement of the private sector in service delivery and management. It accordingly encourages participation of business, industry, civic groups and communities in local decision)making.

!"+)"+,S%
4evelopment and use of PPPs for delivering infrastructure services has now at least "" years of precedence in India. The ma!ority of pro!ects have come in line in the last < years. There have been at least C<# PPP pro!ects in the sectors which have been

DH

focused in the report as per our database of Government of India. The total pro!ect cost of PPP in India concerning this sample is estimated to be about Rs3 6B 69B=A:3A: Crore3 $lmost in every state PPP is involved. Karnataka leads the states with remarkable cost of 0s, (JCJ".H< crores invested in it. $ndhra Pradesh leads in the mega pro!ects (above <## crores with Rs3 889A83A crores3 The leading users of PPPs by number of pro!ects have been Karnataka, $ndhra Pradesh, and 0a!asthan, with J<, D( and CJ awarded pro!ects respectively and the 3ational Gighways $uthority of India (3G$I , with about FF pro!ects. The data shows that it has covered the sectors like transport, energy, education, tourism, urban development. $ccording to it the roads (transport has the highest investment in PPP with the whooping Rs3 =767793A crore3 >e see that road pro!ects account for D#= of the total number of pro!ects and C<= by total value because of the small average si9e of pro!ects 1ducation sector has not covered a wide area in PPP. The potential use of PPPs in e)governance and health and education sectors remains largely untapped across India as a whole, though off)late there have been some activities shaping in these sectors. $lmost all the pro!ects in the sample were competitively bid (either national or international competitive bidding with the negotiated ones (through 52Is

DJ

In terms of contract award method the International ;ompetitive Aidding yielded (J= of total investment in India followed by 4omestic ;ompetitive Aidding with ((=.

The ;entral Government is working with the +tate Governments and all other stakeholders to e%pand the hori9on of PPPs in infrastructure development in the country.

The Government has now allowed :4I in most infrastructure sectors to the e%tent of "## percent.

2n aggregate level the domestic players have dominated the PPP pro!ects both in terms of numbers and investment. 2ut of sample of (## pro!ects /FH pro!ects with investment of Rs3 =89=9:3:A crore3

The road sector has dominated investment by domestic players with aggregate investment of 0s. :=B8@? crore3

@eading among big domestic players is @arsen 6 Toubro with a total investment of, both in e%isting and under construction pro!ects, totaling 0s. (CJH crore mostly in road pro!ects. It is followed with G50 Infrastructure with a total investment of Rs3 =6?? crore33

In case of small road pro!ects on A2T basis +adbhav 1ngineering @imited with investment in "" pro!ects with total investment of Rs3 67?:3;? crore leads the domestic scene. The 4elhi based 4+ ;onstructions @imited is second, with total investment of 0s. (/# crore. 5umbai based 5+K Pro!ects (India @imited is third in terms of investment, with "< pro!ects and total investment of 0s. /(H.HC crore. $mong these three players they shared (# pro!ects out of (## sample pro!ects.

F#

:oreign multinationals have equity participation only in // PPP pro!ects in the sample of (##.

:ollowed by the Inited Kingdom with four pro!ects, 5auritius (three , two each for :rance, Germany, Inited $rab 1mirates and the Philippines, and one each for the Inited +tates and +wit9erland.

:oreign equity participation of /F foreign companies in PPP pro!ects was only at Rs =BA6:3?: crores which is meager " per cent of the total pro!ect investment.

5a!or source of health spending in India is from household. +ome of the successful pro!ects in health sector are +awai 5an +ingh (+5+ Gospital, BaipurAhaga!atin Gospital Kolkata, Karuna Trust, Karnataka +hamla!i Gospital Gu!arat 0a!iv Gandhi Gospital, 0aichur and $rogya 0aksha +cheme, $P.

+I:P+$, $gra IP +;2,$, Garidwar, IK. 5obile Gealth ,ans are used so to provide a better service. Com#uter Ai$e$ 'earning Programme with the equipments such as computers, T,, 4,4 player are being provided so as to have better and effective education.

" - /i$smart Programme is designed to help children in the age group (EH years from disadvantaged sections of society to get a head)start in their academic development.

Through E$ucation .ouchers all parents will get education vouchers from the state, free of cost, which they can offer to private schools in lieu of fee payment to support primary education by

F"

One Cam#usF-an2 Schools -o$el designed mainly for rural India will support primary education.

The Torrent Group now has the rights to distribute electricity in Ahiwandi, north of 5umbai for "# years. The Ahiwandi circle's estimated annual revenues are about I30 <## crore and around D## 5> of power is distributed in this circle.

PG;I@ had invited offers from eligible bidders as a prospective Independent Private Transmission ;ompany (IPT; to establish transmission lines associated with the >estern 0egion +ystem +trengthening +cheme (the Pro!ect of total value of around I30 6B:77 crore3

Power(5inistry of Power in 5i9oram has invested a sum Rs3 :@7@378 crores in two pro!ects.

0oads (3ational Gighway $uthority of India has led a pro!ect in 0a!asthan with the cost estimates of Rs3 6773:9 crores3

0oads (4epartment 0oad Transport and Gighways has invested a total pro!ect cost of Rs3 9B9=93?9 crores in various states.

Tamil 3adu in road sector leads with the total pro!ect cost of 0s. ",#F<.## crores.

The Public)Private Partnership $ppraisal ;ommittee (PPP$; has granted approval to a total of HF pro!ects including FF highway pro!ects.

The state and the central governments have planned investments in the road sector to the tune of almost I+4 <# billion by /#"".

Ports (5inistry of +hipping has invested a total of 0s =8B;@9386 crores in the Ports sector.

F/

4evelopment of :ourth ;ontainer Terminal at Bawahar @al 3ehru Port Trust, 5aharashtra is the largest pro!ect in the port sector with the total costs of Rs3 ;BA77377 crores3

The 3ational 5aritime 4evelopment Program targets investments of the order of almost I+4 "( billion over the ne%t "#)year period of which I+4 H billion is envisaged to come from the private sector which is about $bout D# percent of this investment.

Pro!ects in airports by ;ivil $viation (5inistry of ;ivil $viation has been adopted in the states of 0a!asthan and Pun!ab.

$ccording to an estimate, I+4 D.J billion would come from PPPs out of the total investment of I+4 J billion for the development of airports during /##D) #F to /#"()"C.

0ailways (5inistry of 0ailways has approved a pro!ect in 4elhi with outstanding amount of Rs3 ?B:77377 crores3

Government has decided to build dedicated freight corridors in the >estern and 1astern high)density in 4elhi)5umbai and 4elhi)Kolkata rail track routes and the investment is e%pected to be about Rs3 66B777 crore

$n additional of investment of I+4 ()C billion is planned for upgradation of rail safety in the dedicated 0ail :reight ;orridor which is being developed at the cost of I+4 "< billion.

In airports and ports sectors, 5odel ;oncession $greements are being developed to encourage public private partnerships.

In the last "# years a total of //F PPP infrastructure pro!ects were found to have achieved financial close

F(

+ome of the constraints which were found in the PPP model are?

+ufficient instruments as well as the ability to undertake long)term equity cannot be provided by the market in the present financial scenario. $lso financial liability required by infrastructure pro!ects would not be sufficed.

5ost sectors face a lot of hindrance in enabling a regulatory framework as well as a consolidated policy. +o its important to convert such policies into PPP friendly. To achieve the desires results, active participation of various state pro!ects are essential.

@ack of ability of private sectors to fit into the risk of investing in diversified pro!ects also needs to be overcome. 5oderni9ation of new airports, transmission systems and building power generating plants are some of the avenues which required skilled manpower.

$bility of public institutions to manage the PPP process should also be subdued. 5a%imi9ing the return of the stakeholders needs to be managed due to the involvement of long term deals including the life cycle of the asset infrastructure.

@ack of credibility of bankable infrastructure pro!ects used for financing the private sector should also be overcome. Inconsistency is still visible in the limitations of PPP pro!ects, despite of continued initiatives by +tates and ;entral ministries.

Inadequate support to enable greater acceptance of PPPs by the stakeholders forms another source of constraint

RECO--E+)A("O+S%
>ith the rapid growth in the industry, there is still a mismatch of supply and demand FC

in terms of construction equipment. 4elays in deliveries of equipment result in delayed mobili9ation and completion of pro!ects. :urther, prices of construction equipment have steadily increased over the past few years, partly due to the high demand, and partly due to increase in input costs. $ large portion of construction machinery deployed in pro!ects is imported. The import duties levied on construction equipment are increasing the cost of construction. 1%emptions are available in some pro!ects funded by e%ternal agencies such as the $sian 4evelopment Aank and >orld Aank. Gowever, this e%emption is not available in other pro!ects including PPP pro!ects. To sustain the growth in the construction sector, import duty on construction equipment and material such as bitumen, steel and cement should be removed specially in PPP pro!ects. +everal initiatives have been undertaken by Government of India to enable a greater PPP framework in order to eradicate the constraints. ,arious foreign as well as private investments by waving off charges are encouraged. :raming of standardi9ed contractual documents for laying down the terminologies related to risks, liabilities and performance standards have been devised. $pproval schemes for PPPs in the central sector has been streamlined through Public Private Partnership $ppraisal ;ommittee or PPP$;. $ website has been launched for the purpose of virtual PPP market serves as an online database for PPP pro!ects. 2ne of the pressing needs is adequate compensation for increased prices of certain materials such as steel, cement, bitumen and diesel. 5ost construction contracts rely on indices for price escalation in these materials, and the indices are not fully reflective of the price rise, especially in cases of e%traordinary increases in short periods of time. :urther, in A2T pro!ects it is left to the entrepreneur to estimate the price escalation during the implementation period of the pro!ect. Gowever, it is not

F<

possible to factor in such e%traordinary increase in prices at the time of tendering for the pro!ects. There should be a mechanism to ensure planned and e%peditious implementation of infrastructure pro!ects. ;urrently, there is a large gap between the time of announcement of pro!ects and their award. $lso, there are periods of furious activity in awarding a large number of pro!ects followed by a long period without pro!ects being awarded. It is essential to phase the pro!ects in a continuous manner in order to optimi9e the scale up of resources in the infrastructure sector in India. $s this is !ust the beginning of the infrastructure boom in the country, the industry needs to prepare for e%ecution needs. >ith the ramp up in manpower and other resources, Indian companies will be in a position to cash in on opportunities both domestically and internationally. Inless adequately addressed, shortage of skilled manpower will be the single most important hindrance to aggressive infrastructure development. 3ewer trends in road pro!ects such as si%)eight laning of highways, large)scale and more comple% pro!ects in power sector, metro rails, monorails and high capacity bus systems mark the eagerness of our country to take its infrastructure to another level. $ concerted effort is required from the government to make world)class infrastructure a reality in India. $lternative funding for pro!ects, favorable policies and increased incentives for PPP pro!ects would encourage the private sector to work in tandem with the government. 2ther steps that can be taken in the various sectors are?

Po<er

FD

The above e%amples&possibilities notwithstanding in the sector of power, PPP practices can be further improved by taking key initiatives across the energy value chain as discussed below? 5ore clarity in policy framework is required in matters related to pricing of energy, the target market structure, cross)border investments, and imports and e%ports of energy products. +tronger independent regulatory mechanism is required to enable the development of a competitive market structure and to facilitate a level playing field for all. >ell)functioning and integrated energy markets are important to attract investments and bring efficiency in the sector. To develop markets, multiple players should be allowed in the energy sector in the first instance followed by the development of the organi9ed marketplace in the form of e%changes for energy products. $ well)functioning market enables transparency and competition, sets the right price signals, and enables liquidity for different players. Physical markets would enable energy derivative products that meet the important ob!ective of risk management for the different players. (rans#ort 0eview of successful pro!ects indicates that these have clear boundaries and measurable performance for the private party, sufficiently large scale of operations, competitive market for provisioning of the services, significant service delivery, and ability for the private sector to control factors for which it is responsible. PPP pro!ects have not been successful where the private sector has been asked to manage risks beyond its control. The contour of the PPP

FF

procurement process also has a bearing on the success of the pro!ect. In this conte%t, attracting private participation for the transport sector necessitates that following key areas of concern are addressed?

Project #re#aration +ignificant efforts need to be invested in preparing pro!ects for PPP to ensure that issues on traffic reali9ation, land acquisition, and associated delays do not arise. The pro!ect preparation should ensure the following? P 1stablish clear boundaries and measurable performance P +cale and value of interest to be assumed by private sector contractors especially in case of road pro!ect P ;ost)effective allocation of risk to the private sector P 2pportunity for innovation P +cope for the generation of additional third party revenue P ;ompetitive market for the provision of the service

Procurement #roce$ures $ fair, transparent, and standardi9ed process for the procurement of PPP services needs to be established, especially for airports and railways. Privati9ation plans need to be communicated to private participants and the design of bids should be standardi9ed including parameters for evaluation.

Contractual frame<ork an$ contract management #lan The PPP contract is central to identification of risks and placing it on the party best able to bear it. Therefore, a robust contractual arrangement needs to be established

FH

for each sector depending upon the type of PPP being procured.

+imultaneously, a robust contract management is required to enable the private sector and the government to meet their respective obligations and anticipate future needs by managing proactively rather than merely reacting to situations as they arise.

Regulator2 set u# $ robust regulatory set up needs to be established, either sectoral or cross sectoral, to create a level playing field, establish equitable tariff structures, and redress disputes between the concerned stakeholders.

Outreach $n outreach program, must be initiated to attract international bidders & investors for investing in the transport sectors.

:urther, the private sector had to its credit the capability of delivering quality services to the public. Gere, the private sector stood to benefit, as the PPP model would generate reasonable long)term revenue and profits for them. The model also allowed the government to allocate and use its funds in other focus areas of development. 2ne of the key factors acting as a deterrent to growth is paucity of funds. This holds true especially in the case of large scale, comple% pro!ects, as in case of hydro power pro!ects, which have long gestation periods. The Government needs to consider introducing mechanisms& instruments that allow efficient long)term funding of pro!ects. In addition, limits on e%ternal commercial borrowings for such

FJ

infrastructure pro!ects should be removed.

H#

India has witnessed an absolute metamorphosis over the last decade. +prawling cities, flourishing businesses, higher standard of living are all indicators of unprecedented growth, globalisation, urbanisation, e%pansion and diversification. Infrastructure modernisation and development is said to be the key driver of all the growth and economic activity. The public sectors alone can't meet the required funds and technology for the pro!ects. +o the Government decided to accomplish this business by collaborating with the sector which could provide this requirement which was none other than the private parties. Thus PPP emerged as a !oint collaboration of the public and private sectors. The Indian infrastructure sector is at an inflection point and there are immense opportunities for the private sector. The PPP has come in to e%istence from over a decade but it has shown remarkable results in past <)D years. $lmost every sector is covered where PPP needs to be implemented. 5any foreign companies also show their interests but their participation is not much as the domestic private companies. The sectors covered in this research are health, education, power and transport. Indian infrastructure growth has reached massive heights. 5ost PPPs have been restricted to the roads sector. $nd the sector still has lot of scope and the measures are taken also by the PPPs to achieve it. $mbitious pro!ect plans have been developed for various transport sectors to bridge the infrastructure gap. The sectors are booming but there are hindrances and constraints persist threatening to slow down growth in the smooth development of world)class infrastructure. This is because the private sectors which are involved in the PPPs have the prime motive of

H"

profit making rather than doing any social work. The companies which have the close contact with political parties can also take up a pro!ect with a view of making lot of profits. If the pro!ect reaches in the wrong hands that is if the tender is passed to a wrong person he may severely cause problems. Aut the Government is controlling all these constraints to have successful e%amples in PPP and heading towards the economic development of the country. It has taken various steps to accomplish the pro!ects successful.

'imitations of the stu$2

The study is limited up to some specific sectors and does not cover the whole area where PPP is involved. +ince the study is based on the secondary data any faulty data will be forwarded as the data is e%tracted from here only. The study has the time constraints too which leads to its limited scope.

H/

OO/S %
Krishnaswami, 2. 0. 8 5ethodology of 0esearch in +ocial +ciences 8 /##F 8 Gimalaya Publishing Gouse Kothari, ;. 0. 8 0esearch 5ethodology 8 "JJJ 8 >ishwa Prakashan

-A,I"+ES %
Ausiness 6 economics Ausiness India Ausiness today India today The +unday Indian

+E1SPAPERS %
The Times of India Gindustan times

>O*R+A' %
Indian 3ational Bournal of :inance

H(

1E S"(ES %
www.scribd.com en.wikipedia.org searchcio.techtarget.in www.pppinindia.com www.pro!ectsmonitor.com www.e%presshealthcare.in www.indiareport.com www.indiaedunews.net web.worldbank.org www.adb.org edcatn)dise.in (inetwork.org medind.nic.in

HC