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PROJECT REPORT

ON

PUBLIC PRIVATE PARTICIPATION (AIRPORTS)

MASTER OF COMMERCE (ACCOUNTANCY)

PART-1 (SEMESTER-2)

(2015-2016)

INTERNAL ASSESSMENT

STRATEGIC MANAGEMENT

Submitted To:-

PROF. VASANTI RAJADHYAKSHA.

Submitted By:-

VANITA SHANKAR BHUJBAL.

ROLL NO:-08

S.I.E.S. (NERUL) COLLEGE OF ARTS, SCIENCE & COMMERCE

AFFILIATED TO UNIVERSITY OF MUMBAI

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S.I.E.S (NERUL) COLLEGE OF ARTS, SCIENCE & COMMERCE

CERTIFICATE

(2015-2016)

This is to certify that the project entitled PUBLIC PRIVATE


PARTICIPATION (AIRPORTS)is a project work done by VANITA
SHANKAR BHUJBAL, ROLL NO-08, in fulfilment of the requirements
for the M.COM in ACCOUNTANCY (PART-1) (SEMESTER-2) during
the academic year 2015-2016 is the original work done of the candidate
and completed under guidance of PROF. VASANTI RAJADHYAKSHA

Date:-

Place:-

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DECLARATION BY STUDENTS

I, VANITA SHANKAR BHUJBAL, ROLL NO-08, the student of


M.COM in ACCOUNTANCY (Part-1) (Semester-2) (2015-2016) hereby
declares that I have completed the project on PUBLIC PRIVATE
PARTICIPATION (AIRPORTS)under the supervision of the internal
guidance of PROF. VASANTI RAJADHYAKSHA. and that the contents
of the project are not copied any other source such as internet, earlier
projects, textbooks etc.

The information submitted is true and original to best of my knowledge.

Thank you,

Yours faithfully,

VANITA BHUJBAL

ROLL NO:-08

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ACKNOWLEDGEMENT

I would like to thank all the people who helped me in undertaking


the study and completing the project, by imparting me with valuable
information and guidance that was required at every stage of my project
work.

I would like thank our principal, Prof. Rita Basu and Prof. Koel Roy
Choudhury who Co-ordinate for giving me an opportunity and
encouragement to prepare the project.

Last but not the least, I would like to thanks my project guide for
guiding and helping me throughout the preparation of my project, right
from selection of the topic till its completion.

VANITA BHUJBAL

Roll No: 08

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INDEX

PUBLIC PRIVATE PARTICIPATION

SR.NO TOPIC NAME PG.NO


1 CHPATER-1
1.1Introduction of PPP 6
1.2Origin of PPP 8
1.3Growth &Decline 9
1.4Controvansy 10
2. CHPATER-2
2.1World banks role in PPP 11
2.2PPP in India 13
3 CHPATER-3
3.1Types of PPP 14
3.2Sector wise PPP statues& issues 18
3.3Understanding the private sectors requirement & capacity 25
4 CHPATER-4
4.1Potential benefits of PPP 26
4.2pontential risk of PPP 27
4.3Descripation of Environment 29
5 CHPATER-5
5.1PPP of Airports in India 36
5.2PPP of International Airports in India
Cochin International Airport Ltd. 37
Hyderabad International Airport Ltd. 38
Mumbai International Airport Ltd.
39
6 CHPATER-6
6.1 Conclusion & References 41

CHAPTER-1

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INTRODUCTION OF PUBLIC PRIVATE PARTICIPATION

A business relationship between a private-sector company and a government


agency for the purpose of completing a project that will serve the public. Public-
private partnerships can be used to finance, build and operate projects such as
public transportation networks, parks and convention centres. Financing a
project through a public-private partnership can allow a project to be completed
sooner or make it a possibility in the first place.

PPP as "a long-term contract between a private party and a government entity,
for providing a public asset or service, in which the private party bears
significant risk and management responsibility, and remuneration is linked to
performance". PPPs typically do not include service contracts or turnkey
construction contracts, which are categorized as public procurement projects, or
the privatization of utilities where there is a limited ongoing role for the public
sector.
Public-private partnership (PPP) in infrastructure is a relatively new
experience in most developing countries of the Asian and Pacific region.
Although many governments have considered various steps to promote PPPs in
their countries, lack of capacity in the public sector remains to be one of the
major problems in implementing PPP projects. So far, only few countries have
established institutional arrangements and developed manuals and resource
materials in support of PPP development and for the capacity-building of their
public officials. In the absence of such established institutional arrangements
and resource materials, public officials face difficulties in project development
and implementation, and general public can have many misunderstandings
about PPPs.
Public-private partnerships (PPPs) are a mechanism for government to procure
and implement public infrastructure and/ or services using the resources and
expertise of the private sector. Where governments are facing ageing or lack of

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infrastructure and require more efficient services, a partnership with the private
sector can help foster new solutions and bring finance.

PPPs combine the skills and resources of both the public and private sectors
through sharing of risks and responsibilities. This enables governments to
benefit from the expertise of the private sector, and allows them to focus instead
on policy, planning and regulation by delegating day-to-day operations.

In order to achieve a successful PPP, a careful analysis of the long-term


development objectives and risk allocation is essential. The legal and
institutional framework in the country also needs to support this new model of
service delivery and provide effective governance and monitoring mechanisms
for PPPs. A well-drafted PPP agreement for the project should clearly allocate
risks and responsibilities.

The PPP in Infrastructure Resource Center for Contracts, Laws and Regulations
(PPPIRC) seeks to give a offer practical tools for developing a legal
enabling environment and regulation of PPPs conducive to PPPs and
to provide sample and annotated contracts and bidding documents
from different sectors for PPP projects.

DEFINITION OF PUBLIC-PRIVATE PARTICIPATION

There is no one widely accepted definition of public-private partnerships (PPP).


The PPP Knowledge Lab defines a PPP as "a long-term contract between a
private party and a government entity, for providing a public asset or service, in
which the private party bears significant risk and management responsibility,
and remuneration is linked to performance". PPPs typically do not include
service contracts or turnkey construction contracts, which are categorized as
public procurement projects, or the privatization of utilities where there is a
limited ongoing role for the public sector.

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1.1 ORIGIN:

Pressure to change the standard model of public procurement arose initially


from concerns about the level of public debt, which grew rapidly during
the macroeconomic dislocation of the 1970s and 1980s. Governments sought to
encourage private investment in infrastructure, initially on the basis
of accounting fallacies arising from the fact that public accounts did not
distinguish between recurrent and capital expenditures.

The idea that private provision of infrastructure represented a way of providing


infrastructure at no cost to the public has now been generally abandoned;
however, interest in alternatives to the standard model of public procurement
persisted. In particular, it has been argued that models involving an enhanced
role for the private sector, with a single private-sector organization taking
responsibility for most aspects of service provisions for a given project, could
yield an improved allocation of risk, while maintaining public accountability for
essential aspects of service provision.

Initially, most publicprivate partnerships were negotiated individually, as one-


off deals, and much of this activity began in the early 1990s.

PPPs are organized along a continuum between public and private nodes and
needs as they integrate normative, albeit separate and distinct, functions of
societythe market and the commons. A common challenge for PPPs is
allowing for these fluctuations and reinforcing the intended partnership without
diminishing either sector. Multi sectoral, or collaborative, partnering is
experienced on a continuum of private to public in varying degrees of
implementation according to the need, time restraints, and the issue at hand.
Even though these partnerships are now common, it is normal for both private
and public sectors to be critical of the others approach and methods. It is at the
merger of these sectors that we see how a unified partnership has immediate
impact in the development of communities and the provision of public services..
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1.2GROWTH AND DECLINE :

From 1990 to 2009 nearly 1,400 PPP deals were signed in the European Union,
representing a capital value of approximately 260 billion. Since the onset of
the financial crisis in 2008, estimates suggest that the number of PPP deals
closed has fallen more than 40 percent.

Investments in public sector infrastructure are seen as an important means of


maintaining economic activity, as was highlighted in a European Commission
communication on PPPs. As a result of the significant role that PPPs have
adopted in the development of public sector infrastructure, in addition to the
complexity of such transactions, the European PPP Expertise Centre
(EPEC) was established to support public-sector capacity to implement PPPs
and share timely solutions to problems common across Europe in PPPs.

PPPs provide a unique perspective on the collaborative and network aspects of


public management. The advancement of PPPs, as a concept and a practice, is a
product of the new public management of the late 20th century and
globalization pressures. The term "public-private partnership" is prey to
thinking in parts rather than the whole of the partnership, which makes it
difficult to pin down a universally accepted definition of PPPs.

U.S. city managers' motivations for exploring public-private service delivery


vary. According to a 2007 survey, two primary reasons were expressed: cost
reduction (86.7%) and external fiscal pressures, including tax restrictions
(50.3%). No other motivations expressed exceeded 16%. In the 2012 survey,
however, interest had shifted to the need for better processes (69%), relationship
building (77%), better outcomes (81%), leveraging resources (84%), and belief
that collaborative service delivery is "the right thing to do" (86%). Among those

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surveyed, the provision of public services through contracts with private firms
peaked in 1977 at 18% and has declined since. The most common form of
shared service delivery now involves contracts between governments, growing
from 17% in 2002 to 20% in 2007. "At the same time, approximately 22% of
the local governments in the survey indicated that they had brought back in-
house at least one service that they had previously provided through some
alternative private arrangement.

1.3 CONTROVERSY :

A common problem with PPP projects is that private investors obtained a rate of
return that was higher than the governments bond rate, even though most or all
of the income risk associated with the project was borne by the public sector.

A 2008 report by Price Water house Coopers argued that the comparison
between public and private borrowing rates is not fair, because there are
"constraints on public borrowing", which may imply that public borrowing is
too high, and so PFI projects can be beneficial by not putting debt directly on
government books.

A number of Australian studies of early initiatives to promote private


investment in infrastructure concluded that, in most cases, the schemes being
proposed were inferior to the standard model of public procurement based on
competitively tendered construction of publicly owned assets. In 2009, the New
Zealand Treasury, in response to inquiries by the new National
Party government, released a report on PPP schemes that concluded that "there
is little reliable empirical evidence about the costs and benefits of PPPs" and
that there "are other ways of obtaining private sector finance", as well as that

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"the advantages of PPPs must be weighed against the contractual complexities
and rigidities they entail".

One response to these negative findings was the development of formal


procedures for the assessment of PPPs in which the focus was on "value for
money" rather than reductions in debt. The underlying framework was one in
which value for money was achieved by an appropriate allocation of risk. These
assessment procedures were incorporated in the private finance initiative and its
Australian counterparts from the late 1990s onwards. Another model being
discussed is the publicprivate community partnership (PPCP), in which both
the government and private players work together for social welfare,
eliminating the prime focus of private players on profit. This model is being
applied more in developing nations such as India.

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CHAPTER -2

WORLDS ROLE IN PPP

2.1WORLD BANK GROUP'S ROLE IN PPP

The World Bank Group provides support to client countries in relation to


developing programs and projects for public-private partnerships (PPPs)
through a number of different tools and mechanisms. Find more at World Bank
Public Private Partnerships.The World Bank Group also supports a number of
knowledge management tools, in addition to this PPPIRC website, in
collaboration with other development partners, including:

The PPP Knowledge Lab

PPI Database - Private Participation in Infrastructure Database

BoKIR - Body of Knowledge on Infrastructure Regulation

PPIAF - Public Private Infrastructure Advisory Facility

The World Bank provides financing to governments seeking to support specific


projects or PPP programs through viability gap funding or financial
intermediary loans. IFC has a number of financing mechanisms for supporting
PPP projects, whether in their early stages through the IFC Infra
2.5Ventures initiative, through lending to and equity participation in private
sector operators in projects, through infrastructure funds and facilities
supporting projects, and through guarantees. IFC Advisory Services advises
governments on structuring PPP transactions in infrastructure and other public
services. Access the IFC website for more information.

Different parts of the World Bank Group provide Risk Mitigation Tools and
Guarantees to client countries. Access the World Bank Guarantee
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website for information about World Bank Guarantees. The International
Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency
(MIGA) provide risk mitigation for projects also. Go to
the IFC and MIGA websites for more information.

2.2PUBLIC-PRIVATE PARTNERSHIPATION IN INDIA:


The Government of India defines a P3 as "a partnership
between a public sector entity (sponsoring authority) and a
private sector entity (a legal entity in which 51% or more of
equity is with the private partner/s) for the creation and/or
management of infrastructure for public purpose for a specified
period of time (concession period) on commercial terms and in
which the private partner has been procured through a
transparent and open procurement system.In the Indian context, the
term PPP is used very loosely while at the international arena, the PPP is
adopted for developing public assets in various forms According to Ministry of
Finance Government of India the PPP project means a project based on a
contract or concession agreement, between Government or statutory entity on
the one side and a private sector company on the other side, for delivering
infrastructure service on payment of user charges. This is a narrower definition
as compared to world best practices where the private sector participation in any
form of concession agreement, divestiture of the public sector, Greenfield
projects and management and lease contract are considered as PPP. The
Planning Commission of India has defined the PPP in a generic term as the
PPP is a mode of implementing government programmes/schemes in
partnership with the private sector. It provides an opportunity for private sector
participation in financing, designing, construction, operation and maintenance
of public sector programme and projects. In addition, Greenfield investment1

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in the infrastructure development has also been given more encouragement in
India.

CHAPTER-3

3.1TYPES OF PUBLIC PRIVATE PARTICIPATION:

There is no single PPP engagement model that can satisfy all conditions
concerning a projects location setting and its technical and financial features.
The most suitable model should be selected taking into account the countrys
political, legal and socio-cultural circumstances, maturity of the countrys PPP
market and the financial and technical features of the projects and sectors
concerned. This has led to innovation in the engagement models.
BUILD OPERATE TRANSFER (BOT) :

BOT and similar arrangements are a kind of specialized concession in


which a private firm or consortium finances and develops a new
infrastructure project or a major component according to performance
standards set by the government.

Under BOTs, the private partner provides the capital required to Build the
new facility, Operate & Maintain (O&M) for the contract period and then
return the facility to Government as per agreed terms.

Importantly, the private operator now owns the assets for a period set by
contractsufficient to allow the developer time to recover investment
costs through user charges.

BOTs generally require complicated financing packages to achieve the large


financing amounts and long repayment periods required. At the end of the
contract, the public sector assumes ownership but can opt to assume operating
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responsibility, contract the operation responsibility to the developer, or award a
new contract to a new partner. The main characteristic of BOT and similar
arrangements are given below:-

Design Build (DB) : Where Private sector designs and constructs at a


fixed price and transfers the facility.

Build Transfer Operate (BTO) : Where Private sector designs and


builds the facility. The transfer to the public owner takes place at the
conclusion of construction. Concessionaire is given the right to operate
and get the return on investment.

Build-Own-Operate (BOO) : A contractual arrangement whereby a


Developer is authorized to finance, construct, own, operate and maintain
an Infrastructure or Development facility from which the Developer is
allowed to recover his total investment by collecting user levies from
facility users. Under this Project, the Developer owns the assets of the
facility and may choose to assign its operation and maintenance to a
facility operator. The Transfer of the facility to the Government,
Government Agency or the Local Authority is not envisaged in this
structure; however, the Government, may terminate its obligations after
specified time period.

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Design-Build Operate (DBO) : Where the ownership is involved in
private hands and a single contract is let out for design construction and
operation of the infrastructure project.

Design Build Finance Operate (DBFO) : With the designbuild


financeoperate (DBFO) approach, the responsibilities for designing,
building, financing, and operating & maintaining, are bundled together
and transferred to private sector partners. DBFO arrangements vary
greatly in terms of the degree of financial responsibility that is transferred
to the private partner

Build- Operate- Transfer (BOT) : Annuity/Shadow User Charge : In


this BOT Arrangement, private partner does not collect any charges from
the users. His return on total investment is paid to him by public authority
through annual payments (annuity) for which he bids. Other option is that
the private developer gets paid based on the usage of the created facility.

Joint Venture:

Joint ventures are alternatives to full privatization in which the


infrastructure is co-owned and operated by the public sector and private
operators.

Under a joint venture, the public and private sector partners can either
form a new company (SPV) or assume joint ownership of an existing
company through a sale of shares to one or several private investors.

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A key requirement of this structure is good corporate governance, in
particular the ability of the company to maintain independence from the
government, because the government is both part owner and regulator.

From its position as shareholder, however, the government has an interest


in the profitability and sustainability of the company and can work to
smoothen political hurdles.

Management Contract :

A management contract expands the services to be contracted out to


include some or all of the management and operation of the public service
(i.e., utility, hospital, port authority, etc.).

Although ultimate obligation for service provision remains in the public


sector, daily management control and authority is assigned to the private
partner or contractor. In most cases, the private partner provides working
capital but no financing for investment.

The private contractor is paid a predetermined rate for labour and other
anticipated operating costs.

Management contract variants include supply and service contract,


maintenance management and operational management.

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3.2SECTOR-WISE PRIVATE PARTICIPATION STATUS AND ISSUES:

India has been growing at a level of 9.3 per cent, on an average, during the last
three years and the supply of infrastructure has also improved to an extent to
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cope up with the increasing demand. But gaps are widening. The developments
in the infrastructure projects since the introduction of economic reforms could
be captured on the basis of two major data bases in addition to respective
Ministry sources one by the Planning Commission on PPP projects and the
other by the World Bank on PPI database. As we have already discussed about
the PPI database, let us have a brief overview on the status of sector-wise
infrastructure projects based on Government of India databases and throw some
light on the sector specific issues.
A. Infrastructure Project sunder PPP Model
Since most of the infrastructure services are rendered by the Government,
commercial approach towards cost recovery has not been adopted, and with the
limited resources at Governments disposal, PPP has been encouraged to fill the
infrastructure gap. To support the PPP model projects, a Public Private
Partnership Appraisal Committee (PPPAC) was constituted in January 2006.
The PPPAC has been adding value by shortening the approval process within
the Government, reducing the transaction costs and acting as a central focal
point for identifying and disseminating best practices in rolling out PPP across
sectors and Ministries of the Government. Since its constitution, it has granted
approval to 65 projects, with an estimated project cost of Rs.53,136 crore
POWER SECTOR

India has a huge installed power generation capacity of 1,43,061 MW (end-


March 2008), of which the private sector projects constituted at 14.0 per cent
only (Table 11). Government of India has, earlier, envisaged a mammoth
capacity addition plan of 100,000 MW through 2012 to meet its mission of
power for all. The 11th Plan has targeted additional power generation capacity
at 78,577 MW, which is more than the total capacity added in the previous three
Plans. Even among the proposed capacity additions, the private sector would
have a share of only 13.7 per cent, which is very low when compared to power

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requirements. This huge capacity addition may not be feasible viewing from the
pace of development of ongoing and proposed new projects.

TELECOMMUNICATION SECTOR

Usually, the Government owned operators play a major role in the development
of telecom sector worldwide. In India, private investment and association of the
private sector was needed in a big way to bridge the resource gap. Therefore,
the telecom sector was opened up for private participation after the
announcement of industrial policy in 1991 to bridge the gap. As a result, the
private telecom companies have started operations in the Indian soil due to vast
availability of market potentials. Slowly, they picked up their market share and
currently they outperform the government owned services due to increasing
commercial gains.

Adoption of unified access service, accepting the intra-circle mergers and


acquisitions, licensing regulations and announcement of broadband policy, the
private sector has continued to play a significant role in the growth of the
telecom sector and their participation has increased significantly during the
recent period. The total telephone connections have increased substantially
from 45 million at the end of March 2003 to over 300 million at the end of
March 2008 (Table 12). The Government continues to provide incentives to the
telecom sector and reduced the license fees significantly. Due to acute
competition in this sector, the tariffs for various services have experienced a
downward movement apart from harmonisation. As at end March 2008, 134
private licensees have been providing mobile telephony services with a total
investment of Rs.95,000 crore. Besides, 120 new private licensees are yet to
commence their service (GOI).

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PETROLEUM SECTOR

The Government has formulated New Exploration Licensing Policy (NELP) to


accelerate and expand exploration of oil and gas in the country. The latest
NELP-VII is offering 57 blocks under transparent international competitive
bidding system (29 onshore, 9 shallow water and 19 deepwater blocks beyond
400m bathymetry). Simultaneous 10 blocks of Coal Bed Methane is under offer
for exploration in the third round. Some of the PSUs in this sector have formed
joint venture companies for exploration and production. However, the response
of the private sector has not been much encouraging. About 14 per cent of the
crude oil production is under joint venture and private sector projects. In the
refinery sector, India has a refinery capacity of over 156 million tonnes. During
the recent period, creation of additional refinery capacity has been limited in the
country in the public as well as in the private sector when compared to the
demand. Currently, two private sector refineries control 28 per cent of refinery
capacity in the country. In the case of natural gas production, the share of
private/joint venture sector has been picking up with 23 per cent during 2005-
06 (Table 13). Steps to augment the crude oil production as well as refinery
capacity of the country would ease strain on domestic petroleum prices and
supply.

ROADS AND HIGHWAYS

The PPP model may be considered as a successful one not only in the world
over but also in India in the development of road sector as majority of the on-

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going highways development projects have been taken up under this model.
With a view to attract private investment in road development, maintenance and
operation, National Highways Act (NH Act) 1956 was amended in June 1995 to
facilitate private participation in road infrastructure projects. While there are a
number of forms of PPP, the common forms that have been used for
development of National Highways are Build Operate and Transfer (BOT) on
Toll basis, BOT on Annuity basis and SPV basis. At present, the Government
has embarked upon a massive programme to develop highways through the
National Highways Development Project (NHDP), Phase-I to Phase-VII. Under
these projects, 13,146 Kms of National highways have been proposed at an
estimated cost of Rs.54,000 crore. So far 82 projects valued about Rs.23,104
crore have been taken up on BOT (Toll) basis. Of this, 34 projects have been
completed and remaining 48 projects are under progress. Under annuity basis,
25 projects covering a length of 1376 Kms have been taken up, of which eight
projects have been completed and the remaining projects are under progress .

AIRPORTS

There are 449 airports/airstrips in the country. Among them, the Airport
Authority of India (AAI) owns and manages 92 airports and 28 civil enclaves at
defence airfields, which provides air traffic services over the entire Indian
airspace and adjoining oceanic areas. The legislative framework for
privatisation of airports already exists in India. Some airports have already been
owned by State Governments, private companies and even individuals.
However, the financing of airport infrastructure has some inherent problems.
These projects have a large element of cost, very long gestation period and

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highly uncertain returns on investment based on several assumptions of traffic
growth that may not materialise. It has been estimated by the Task Force on
Financing Plan for Airport constituted by the Planning Commission that private
sector investment for the modernisation and development of various airports
under PPP model would be Rs.31,100 crore (Table 15).

PORTS AND SHIPPING

There are 12 major ports and about 60 non-major and private ports in the
country. With the awarding of infrastructure status for inland waterways and
inland ports, the construction of ports under private sector has picked up. At
present, 36 private/captive port projects involving capacity addition of about
137 MTPA3 and an investment of about Rs.9,756 crore are at various stages of
evaluation and implementation. Out of these, 13 projects with capacity addition
of about 47.40 MTPA involving an investment of about Rs.2662 crore have
been operationalised and four projects are under implementation through private
participation. Development of other ports is under slow progress, which needs
attention of all concerned for early execution. The main areas which have been
thrown open for private investment under BOT basis include construction of
cargo handling berths, container terminals, warehousing facilities, installation of
cargo handling equipments, construction of dry-docks and ship repair facilities.
There is a plan to develop 54 new berths through PPP model in the next five
years, which are to be hastened to relieve the port congestion problem.

RAILWAYS

The demand for railway containers has grown rapidly due to increasing
containerisation of cargo during the recent period. Since the beginning of the
year 2006, container movement has been thrown open to competition and
private sector entities would be eligible for owning and operating container
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trains. The rapid rise in international trade and domestic cargo has placed a great
strain on the Delhi-Mumbai and Delhi-Kolkata rail track. Government has,
therefore, decided to build a dedicated freight corridor on these high density
routes. This corridor would be constructed, operated and maintained by a
corporate entity on commercial principles. Part of eastern, western and
dedicated fright corridors would be undertaken through PPP model. The
approach to be adopted for the dedicated freight corridor would herald the
ownership and operation of a large number of freight trains by competing
private entities. It is expected that the proposed separation of rail from wheels
would initiate a paradigm shift in the functioning of Indian railways.

URBAN DEVELOPMENT

Over the next 25 years, modernising and expanding the water, electricity, and
transportation systems of the cities of the world will require approximately $40
trillion. But the cost of not meeting the challenge could be even greater than $40
trillion (Viren Doshi et al, 2007). In the Indian scenario, there are about 400
cities with more than 100,000 population, which are facing immense problems
in terms of financial management, in the provision of public services, and
overall city

management. Government or local bodies alone could not develop the cities and
solve the problems. Development of urban infrastructure should be an integral
part of development strategy, which includes mass rapid transport system,
drinking water, sewage system, solid waste management, urban roads and
lightings, etc. However, investment in these areas has been inadequate.
Development of this sector with the PPP may have a changing pace in the
overall economic development, which requires an investor friendly environment
with commercial viability of the projects. Overall, the solution to overcome the
urban infrastructure bottlenecks is to organise the infrastructure more

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effectively, balance the public-private interest, reinvigorate electricity, water and
transportation system by integrating finance, governance, technology and proper
designing of the projects.

3.3UNDERSTANDING THE PRIVATE SECTORS


REQUIREMENTS AND CAPACITY IN THE GOVERNMENT
TO IMPLEMENT THE PROJECT
The private sector has certain requirements that a project must meet in
order to be considered as a viable project. Often the term bankability is used
in the industry to refer to the viability of a PPP project. The term, however, may
mean different things to different parties in a PPP. But, generally, it means if the
project is financially viable, legally tenable, and administratively
implementable.

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Some of the typical requirements of the private sector are:
Private investment is feasible in size and manageable considering the
technical managerial and financial capacity of the private sector;
A fair return on investment taking into account the level of
involvement and assumption of risks;
Security of the private investment;
Political and social comfort in cost recovery pricing of the services;
Government policy continuity; and
Predictable timeframe in administrative and regulatory processes.
The implementing agency possibly will also have to consider other
specific requirements that the private sector should have for specific projects.
Concerning the capacity in the government, the implementing agency
should take into consideration the following matters before considering further
work on the project development:
Whether there is any PPP unit in government or any agency that can
help in project development and implementation;
What previous experience exists within the government and how
much capacity does the agency have in implementing the project;
How much fund is available for project development and, if needed,
how more funds can be obtained.
CHAPTER-4

4.1POTENTIAL BENEFITS OF PUBLIC PRIVATE PARTNERSHIPS

The financial crisis of 2008 onwards brought about renewed interest in PPP in
both developed and developing countries. Facing constraints on public
resources and fiscal space, while recognizing the importance of investment in
infrastructure to help their economies grow, governments are increasingly
turning to the private sector as an alternative additional source of funding to
meet the funding gap. While recent attention has been focused on fiscal risk,
governments look to the private sector for other reasons:

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Exploring PPPs as a way of introducing private sector technology and
innovation in providing better public services through improved operational
efficiency. Incentivizing the private sector to deliver projects on time and within
budget Imposing budgetary certainty by setting present and the future costs of
infrastructure projects over time.

Utilizing PPPs as a way of developing local private sector capabilities through


joint ventures with large international firms, as well as sub-contracting
opportunities for local firms in areas such as civil works, electrical works,
facilities management, security services, cleaning services, maintenance
services

Using PPPs as a way of gradually exposing state owned enterprises


and government to increasing levels of private sector participation (especially
foreign) and structuring PPPs in a way so as to ensure transfer of skills leading
to national champions that can run their own operations professionally and
eventually export their competencies by bidding for projects/ joint ventures.
Creating diversification in the economy by making the country more
competitive in terms of its facilitating infrastructure base as well as giving a
boost to its business and industry associated with infrastructure development
(such as construction, equipment, support services).

Supplementing limited public sector capacities to meet the growing demand for
infrastructure development.

Extracting long-term value-for-money through appropriate risk transfer to the


private sector over the life of the project from design/ construction to
operations/ maintenance .

4.2POTENTIAL RISKS OF PUBLIC PRIVATE PARTNERSHIPS

27
There are a number of potential risks associated with Public Private
Partnerships:

Development, bidding and ongoing costs in PPP projects are likely to be greater
than for traditional government procurement processes - the government should
therefore determine whether the greater costs involved are justified. A number
of the PPP and implementation units around the world have developed methods
for analyzing these costs and looking at Value for Money.

There is a cost attached to debt While private sector can make it easier to
get finance, finance will only be available where the operating cash flows of the
project company are expected to provide a return on investment (i.e., the cost
has to be borne either by the customers or the government through subsidies,
etc.) .

Some projects may be easier to finance than others (if there is proven
technology involved and/ or the extent of the private sectors obligations and
liability is clearly identifiable), some projects will generate revenue in local
currency only (e.g. water projects) while others (e.g. ports and airports) will
provide currency in dollar or other international currency and so constraints of
local finance markets may have less impact.

Some projects may be more politically or socially challenging to introduce and


implement than others - particularly if there is an existing public sector
workforce that fears being transferred to the private sector, if significant tariff
increases are required to make the project viable, if there are significant land or
resettlement issues, etc.

There is no unlimited risk bearing private firms (and their lenders) will be
cautious about accepting major risks beyond their control, such as exchange rate
risks/risk of existing assets. If they bear these risks then their price for the
service will reflect this. Private firms will also want to know that the rules of the

28
game are to be respected by government as regards undertakings to increase
tariffs/fair regulation, etc. Private sector will also expect a significant level of
control over operations if it is to accept significant risks.

Private sector will do what it is paid to do and no more than that therefore
incentives and performance requirements need to be clearly set out in the
contract. Focus should be on performance requirements that are out-put based
and relatively easy to monitor.

Government responsibility continues citizens will continue to hold


government accountable for quality of utility services. Government will also
need to retain sufficient expertise, whether the implementing agency and/ or via
a regulatory body, to be able to understand the PPP arrangements, to carry out
its own obligations under the PPP agreement and to monitor performance of the
private sector and enforce its obligations.

The private sector is likely to have more expertise and after a short time have an
advantage in the data relating to the project. It is important to ensure that there
are clear and detailed reporting requirements imposed on the private operator to
reduce this potential imbalance. A clear legal and regulatory framework is
crucial to achieving a sustainable solution .

29
4.3DESCRIPTION OF ENVIRONMENT

General

Airport development may create a wide range of impact on the


environment by construction work, reclamation, landfills, noise and
emissions from aircraft effecting air quality and ground sources, cargo
operations, and other airport related activities. Environment facets to be
considered in relation to airport development can be categorized into seven
groups: (a) land use
(b) water quality (c) air quality (d) noise pollution (e) biological changes (f)
socio-economic changes and occupational health and (g) solid waste
management. Hence it is necessary to ascertain the baseline data of these
environmental facets.
1.Study Area

Primary data through measurements and field surveys; and secondary data
from secondary sources are to be collected in the study area within 10 km
radius from Aerodrome Reference Point (ARP). Primary data should cover one
season other than monsoon and secondary data is to cover one full year. The
basis for selection of these criteria is that the aircraft gains a height of 1000ft in
this area below which noise and air pollution are generated maximum during its
take off stage. Secondary data should be collected within 15 km aerial distance
for the parameters as specifically mentioned at column 9 (III) of Form I of EIA
Notification, 2006. Details of secondary data, the method of collection of
secondary data, should be furnished. Similarly the proposed locations of
monitoring stations of water, air, soil and noise etc should be shown on the
study area map.

The methodology involves analysis of secondary data including satellite


imagery, to describe the existing environmental status in the study area of the
project referring to the source of the data in each case. The primary data on
the other hand describes the existing environmental status in an area of 10km
radial distance from ARP through scientifically designed monitoring network.
The methods defer from one parameter to the other. The basis for this depends
on the relevance of the parameter and the impact of the airport activity on it.
2.Land Environment

2.1 Soil:

Land is one of the important and rare resources. Airport projects require
considerable land area for development of activity areas, operational and non-
operational buildings, areas for ancillaries, utilities including townships.
Sometimes acquisitions of large stretches of land and areas being used by the
local habitat may be necessitated requiring rehabilitation measures. Availability
of land for earmarking for the airport without causing undue hardship to local
habitat and their socio cultural and economic aspects is very important. Studies
on land use aspects of ecosystem play an important role in identifying sensitive
issues in the past and present development of the region. Existing baseline status
of land use can be determined through a study of changes in the land use pattern
in the past 10yrs by collecting data from secondary sources such as census, and
land records. Interpretation of satellite data of current year will bring out the
trends in the changes of land use pattern in the past. The land use pattern in
study area is analysed with the help of a map to 1:25000 scale based on recent
satellite imagery of the study area delineating the cropping pattern, forest area
and built-up area etc.

Soil samples are collected all around the project site covering the
agricultural and reserved forestland, if any in the study areas. Sampling
frequencies and the methods of baseline environmental quality monitoring
are given in Annexure 3. The samples are collected during the study period
and analysed for physical, chemical parameters and heavy metal
concentrations, as per standard methods of analysis. The nature of the soil
is to be discussed based on the classification.
2.2Physiography and Drainage Patterns
The terrain and hill slope, general slope and elevation of the area, the flow
direction of streams and rivers, the water bodies and wet lands and the
vegetation which together describe the physiography of the land, will control
the drainage pattern in the region. Land farms, terrain, may get affected due to
construction of airport. . High rise buildings, industrial areas and zones,
slaughter houses and other features of flight safety importance may also be
marked on the map.
Secondary data from Central Water Board GOI; State ground water department,
State Irrigation Department is to be obtained. Geomorphology of the region is to
be clearly delineated. Study of land use patterns, habitation, cropping pattern,
and forest cover data is undertaken. Information on the location of water bodies,
drainage, forests, surface travel routes with respect to the project site is obtained
within the study area and plotted on a map. This map will show the natural
slopes and the drainage patterns, which give a guideline while planning the
drains in the airport project. The drains help in discharge of storm water from
the airport to avoid flooding and water logging in the project area.
3.Water Environment

Ground water quality is important, as change in its chemical


parameters will affect the water quality. Airport activities during
construction / operation may have impact on ground water quality. Due
to airport construction existing low areas may be reclaimed with dredged
spoil. The pollutants from dredged spoil are likely to enter into the
ground water. This is likely to increase sedimentation of pollutants in
airport area, which may migrate in time to the neighbouring ground
water. Also runoff from solid waste if any, may percolate into the ground
and may contaminate the ground water. Hence, they need to be studied
through primary surveys and secondary sources. Monitoring locations
are to be finalized as per CPCB norms which can represent the
baseline conditions.
Ground water, surface water and waste water within study area are examined
for physic- chemical, heavy metal and bacteriological parameters. The samples
are collected and analysed as per procedures prescribed (Annexure 3). Baseline
data on location sources of surface water like water bodies, lakes, their
dimensions, present quality and their utility are to be provided. The location of
sampling stations is to be provided as shown in Table 4.3. Similarly baseline
data on the groundwater, surface water is to be provided. Water Table contour
map for the pre monsoon months are made for the study area based on
secondary data collected from state ground water board.
4.Air Environment:

Ambient air quality (AAQ) is important for the airport projects. The
significance of aviation's impact on air quality will vary depending on
many other factors such as, background pollution levels, other sources
of pollution, weather and proximity of residential areas. Around many
airports some large emission sources already exist (power stations,
factories) that are not related to the airport at all. Also local roads and
motorways, even roads associated with an airport, may be heavily used
by non-airport traffic.

Aircraft engines produce emissions that are similar to other emissions


resulting from any oil based fuel combustion. These, like any exhaust
emissions, can affect local air quality at ground level. It is emissions
from aircraft below 1,000ft, above the ground (typically around 3km
from departure or, for arrivals, around 6km from touchdown) that are
chiefly involved in influencing local air quality. These emissions
disperse with the wind and blend with emissions from other sources
such as emissions from domestic sources , emissions from industries
and from surface transport.

The ambient air quality in area with radial distance 10km. from Aerodrome
Reference Point (ARP), forms the baseline information. For new airport
development, the sources of air pollution, for baseline studies are vehicular
traffic, dust arising from unpaved village roads, domestic fuel burning and
nearby industrial air emissions. For expansion / modernisation projects,
additional pollutants include the airside and geographic sources in the airfield.
5.Meteorological Data

The methodology adopted for collection of micro meteorological data specific


to the site is to compile the Mean monthly normal of atmospheric parameters,
from previous 10yrs data recorded by the nearest IMD station. The Central
Monitoring Station (CMS) equipped with continuous monitoring equipment to
record wind speed, direction, temperature (2m & 10m levels) and solar
radiation is to be set up at the project site. Relative humidity and atmospheric
pressure are recorded manually daily at 0830hr, and 1730hrs. Data on cloud
cover and storms is recorded by visual observation. Rainfall is monitored
daily by rain gauge. Hourly averages of maximum and minimum values of
wind speed, direction, solar radiation and temperature are recorded
continuously at the site. Upper air climatic data is useful in locating ground
and elevated inversions and computing hourly mean mixing heights ,which
are required for use in air dispersion models. They can be procured from
nearest IMD station and other secondary sources.s

6.Noise Environment

The effect of noise on population depends on the characteristics of the


source, the time of its existence and the location with respect to the
noise sensitive land use. Noise can cause Noise Induced Hearing Loss
(NIHL) to annoyance depending on its loudness. The effects of noise
from proposed airport, construction activity, and vehicular traffic can
cause potential damage to hearing, physiological responses, annoyance
and general community responses. The ambient noise measurement
frequencies and standards are given in Annexure 3 and Annexure 6
respectively. The existing noise levels before starting the construction of
airport are to be measured for collecting baseline data. The process is to
be repeated during construction and operational phases of project as
well.

7.Biological Environment

Airport operations may cause change in local ecosystems, threaten


endangered species, and disturb movements and breeding patterns of
local wildlife. Airports are located within a variety of settings (both
urban and rural), which support habitats and species of their own, some
of which will have direct interaction with those located on the airport
and vice versa. Some local areas will also be designated for their nature
conservation value.
8. Socio- Economic Environment

Airport development may often require relocation of the local community,


which, sometimes causes ethnic, cultural, tribal or religious conflicts with
local people. Industrialization and modernization may change the cultural
traditions of the local community. To study the socio- economic aspects of
people in the study area around proposed airport, baseline data on
demographics, land used patterns, water resources for agricultural and
industrial use, human settlements, health status of the communities,
infrastructure facilities and economic conditions in the existing and relocated
area, cultural and archaeological assets within the project area should be
catalogued and presented.
9.Solid Waste

Solid waste generation, in airport development is in three stages namely,


site preparation, construction and operation. The types of waste, which are
generated, can be classified into 4 categories namely, construction or
demolition waste; municipal waste, i.e., biodegradable and recyclable waste;
hazardous waste and E- waste.Details of authorized municipal solid waste
disposal facilities, biomedical treatment facilities and hazardous waste
disposal facilities in the area are highlighted.
Chapter-5
5.1PUBLIC PRIVATE PARTICIPATION OF AIRPORTS IN INDIA :
Government of India is committed to improving the level and the quality of
economic and social infrastructure services across the country. In pursuance of
this goal, the Government envisages a substantive role for Public Private
Partnership (PPPs) as a means for harnessing private sector investment and
operational efficiencies in the provision of public assets and services.
India has already witnessed considerable growth in PPPs in the last one and half
decade. It has emerged as one of the leading PPP markets in the world, due to
several policy and institutional initiatives taken by the central as have been
established.
To provide a broader cross- sectoral fillip to PPPs, extensive support has been
extended through project development funds, viability gap funding, user charge
reforms, provision of long tenor financing and refinancing as well as
institutional and individual capacity building. PPPs are now seen as the
preferred execution mode in many sectors such as highways, ports and airports.
well as many state governments. Government of India has set up Public Private
Partnership Appraisal Committee to streamline appraisal and approval of
projects. Transparent and competitive bidding processes Increasingly, PPPs are
being adopted in the urban sector and in social sectors. Over the years an
elaborate eco-system for PPPs has developed, including institutions, developers,
financiers, equity providers, policies and procedures.
In India, airports were totally owned and managed by central government or the
armed forces. The Airport Authority of India (AAI), a body functioning under
the Ministry of Civil Aviation was responsible for managing the airports in
India. In 2000, there were 117 usable airports (including 26 civilian enclaves
maintained by the military) in India, which according to ICAO (International
Civil Aviation Organisation) was more than China, which had 76 airports. Out
of these, scheduled commercial operations were made only to 61 airports.

5.2PPP AIRPORTS IN INDIA :


1. Cochin International Airport Ltd.

Cochin International Airport is operated by Cochin International Airport Ltd.


(CIAL), a unique entity founded in 1994. It is the first green field airport in the
country, build from scratch, with private participation and is thus a pioneer of
the Indian airport public-private partnership (PPP) model.

Shareholders are the Government of Kerala, financial institutions, non-resident


Indians (NRIs), financial institutions, airport service providers and foreign
countries, with around 18,000 shareholders from more than 25 countries, among
them being Bharat Petroleum, India, and Air India.

The Kochi International Airport Society (KIAS) was founded by the


Government of Kerala in 1993 in order to plan the international airport and to
mobilize and manage financial resources under the PPP project.

The novel financing scheme proposed included government founding, interest


free loans and donations from NRIs, airport users, foreign countries, financial
institutions and airport service providers. Contributors were entitled to certain
facilities such a special lounge and a separate check-in counter after the opening
of the airport.

Cochin airport is the first in India to be built in a publicprivate partnership and


is owned by a public limited company called Cochin International Airport
Limited, better known as CIAL, floated by the government of Kerala in 1994.

2. Hyderabad International Airport Limited:

Hyderabad Rajiv Gandhi International Airport is operated by the


Hyderabad International Airport Limited (HIAL) which signed a concession
agreement with the Government of India in December 2004 for a period of 30
years. The inauguration of the airport was in March 2008.
Hyderabad International Airport Limited is a joint venture formed as a
consortium between GMR Group
(63%), Government of India (13%), Government of Telangana (13%) and
Malaysia Airports Holding Bhd
(11%). The model of PPP for Hyderabad Airport is based on a Build-Own-
Operate-Transfer (BOOT) basis.
During the period of concession, the consortium was
incorporated to design, finance, build and maintain the
greenfield Hyderabad Airport, which has the flexibility to
increase capacity to handle over 40 million international and
domestic travelers per annum.

Rajiv Gandhi International Airport (RGIA) has won the Best Cargo Airport and
Best Cargo Terminal of the Year award. Mr. Vikram Jaisinghani,CEO of GMR
Hyderabad International Airport Limited which operates RGIA said in a
statement that it was an honour and a prestigious moment for RGIA and he
added: The award further motivates us to achieve many more milestones
towards our vision of transforming RGIA into a logistic hub of India.

The Air Cargo Agents Association of India (ACAAI) is the only National
Association representing the Air cargo industry in India. Formed in 1970, it has
now about 278 Active members, 298 Associate members, 42 Allied members.
Apart from the common obligation of all associations, namely, protecting the
interests of the members, the Association gives professional assistance and
guidance both to its members and to various Central and State departments

3.Mumbai Chhatrapati Shivaji International Airport:


With the privatization of the Mumbai Chhatrapati Shivaji International Airport
(CSIA), India experienced a momentous change in its civil aviation history.
In 2006, Mumbai International Airport Pvt. Ltd. (MIAL), a joint venture
between the GVK led consortium (74%) and Airports Authority of India - AAI
(26%), was awarded the mandate to modernize and upgrade CSIA in order to
meet higher demands resulting from rapid growth and higher passenger traffic.
The consortium consists of the following actors: GVK Group India, Airports
Company South Africa, which is 75,78% owned by the South African Ministry
of Transport, and Bidvest.
The improvement plan for Mumbai Chhatrapati Shivaji International Airport
was drafted by Changi Airports International Pte Ltd (CAI), Singapore.
MIAL was charged with the objectives of operating, maintaining, developing,
designing, constructing, upgrading, modernizing, financing and managing the
airport. Some of the key objectives were the refurbishment of domestic
terminals 1A & 1B, the international terminals 2B & 2C and the opening of a
brand new domestic terminal 1C and terminal 2. Moreover, MIAL was
responsible for the commissioning of new taxiways, aprons, reconstruction of
the runway intersection and the reconstruction of both the main runway 09/27
and the secondary runway 14/32. A new ATC tower has been constructed as
well.

CHAPTER-6

6.1CONCLUSION:

Public-private partnerships (PPPs) are a mechanism for government to procure


and implement public infrastructure and/ or services using the resources and
expertise of the private sector. Where governments are facing ageing or lack of
infrastructure and require more efficient services, a partnership with the private
sector can help foster new solutions and bring finance.

PPPs combine the skills and resources of both the public and private sectors
through sharing of risks and responsibilities. This enables governments to
benefit from the expertise of the private sector, and allows them to focus instead
on policy, planning and regulation by delegating day-to-day operations.

In order to achieve a successful PPP, a careful analysis of the long-term


development objectives and risk allocation is essential. The legal and
institutional framework in the country also needs to support this new model of
service delivery and provide effective governance and monitoring mechanisms
for PPPs. A well-drafted PPP agreement for the project should clearly allocate
risks and responsibilities.

In India, airports were totally owned and managed by central government or the
armed forces. The Airport Authority of India (AAI), a body functioning under
the Ministry of Civil Aviation was responsible for managing the airports in
India. In 2000, there were 117 usable airports (including 26 civilian enclaves
maintained by the military) in India, which according to ICAO (International
Civil Aviation Organisation) was more than China, which had 76 airports. Out
of these, scheduled commercial operations were made only to 61 airports.

6.2REFERENCES
www.makeinindia.com

www.pppinindia.com

indianexpress.com

articles.economictimes.indiatimes.com

ppp.worldbank.org

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