PPP in Infrastructure Presentation

B. N. Yadava

PPP, Infrastructure ProjectsGovernment or societal projects: International Perspective

Presented by

VP Projects DLF

welcome to the presentation onwelcome to the presentation on

Brij Nandan Yadava

B. N. Yadava

What is the Objective !!What is the Objective !!

to have Best of Facilitiesto have Best of Facilities To develop To develop

concurrent concurrent infrastructure for infrastructure for holistic growthholistic growth

To become WORLD-CLASSTo become WORLD-CLASS

• to improve MASS Standard Of Livingto improve MASS Standard Of Living• to remove disparity, the gap between to remove disparity, the gap between

rich and poor rich and poor• to achieve BALANCED GROWTHto achieve BALANCED GROWTH• to generate employmentto generate employment• to create multiple economic activitiesto create multiple economic activities

B. N. Yadava

What do we need ?What do we need ?

VISION

Money

Time

Man-power

PUBLIC MONEY

• $ 500 billion (for Infrastructure only in XI th plan)

•XIIth plan envisage $ 1 Trillion = Country’s 1 yr GDP

PLENTY

• 2nd Largest Employer after agriculture

• 31 million of total workforce

No Time to Loose

PRIVATE MONEY

• Enough we got

• 1/3rd of cost of infrastructure

B. N. Yadava

No Time !! We need PPPNo Time !! We need PPP

Innovation Extra Efforts

Natural Growth Curve

Accelerated Growth Curve

Today Some dayTargeted day

Present Status

TargetStatus

• BOO• BOT• BOOT• BBO• BT

• BOOM• BOOST• BOST• BLT• DBO

• BOLT• DOT • ROT• BTO / BORT / DBO / DBFO / DBOM/PD/MC

PPP

B. N. Yadava

What is PPP !!What is PPP !!

Government/ Public Body

Private Body

• Risk Share

• Profit Share

• Ownership

THINKING BUILDING RUNNING DEPARTING

Build Infrastructure

RunInfrastructure

Private Body Exits

Public Body Continues

(Private may co-exist in few cases)

Stage-1 Stage-2 Stage-3 Stage-4

• Build from scratch

• Rehabilitate

• Rebuild

• Augment

• Sharing COST

• Capital

• Asset

• Rendering Services

• Operation

• Maintenance

• Management

• Sharing REVENUE

• Expenditure

• Risk

• Returns

B. N. Yadava

PPP Structure PPP Structure (a combination of financial & administrative setups)(a combination of financial & administrative setups)

Services Contracts

(1-3 yrs)

ManagementContracts

(2-5 yrs)

LeaseContracts

(10-15 yrs)

Concessions

(25-30 yrs)

BOTBOT

(Varies)(Varies)

BOO

(Varies)

Financial Arrangements Capital

InvestmentPublicPublic PublicPublic PublicPublic PrivatePrivate PrivatePrivate PrivatePrivate

Recurring Spends (O&M)

PublicPublic PrivatePrivate PrivatePrivate PrivatePrivate PrivatePrivate PrivatePrivate

Risk Coverage PublicPublic PublicPublic SharedShared PrivatePrivate PrivatePrivate PrivatePrivate

Risk Intensity LowLow Low / ModerateLow / Moderate ModerateModerate HighHigh HighHigh HighHigh

Institutional Arrangements Asset

OwnershipPublicPublic PublicPublic PublicPublic Public / Public /

PrivatePrivatePublic / Public / PrivatePrivate

PrivatePrivate

Completion IntenseIntense

ongoingongoingOne timeOne time

Contract -NRContract -NRInitial contractInitial contract

Subsequent Subsequent contract contract

negotiatednegotiated

Initial contract Initial contract onlyonly

Subsequent Subsequent cont.negotiat.cont.negotiat.

One One time time onlyonly

Often Often ngng

IntenseIntense

B. N. Yadava

Need of the hourNeed of the hour

National Policy for PPPNational Policy for PPP• MonitoringMonitoring• Implementation andImplementation and• Dispute Resolution methodologyDispute Resolution methodology

• Legal Framework, Administration mechanism Legal Framework, Administration mechanism (bodies, cells, offices, roles & responsibilities) (bodies, cells, offices, roles & responsibilities)

• The policy to coverThe policy to cover Sector Coverage definitionSector Coverage definition Standard Contract DocumentsStandard Contract Documents Policy Standardization Policy Standardization Investment FrameworkInvestment Framework

• Separate Regulatory BodiesSeparate Regulatory Bodies To protect both party rights (Governments / private)To protect both party rights (Governments / private) To ensure Fair Business / CompetitionTo ensure Fair Business / Competition

B. N. Yadava

PPP – Lessons from International modelsPPP – Lessons from International models

Legislation in placeLegislation in place

Presence of Regulator / Governance StructurePresence of Regulator / Governance Structure

Strong Institutional FrameworkStrong Institutional Framework

Project Implementation Units supported with competent PMProject Implementation Units supported with competent PM

Transparency and ….Transparency and ….

Practice of Cost-Plus contracts in place of conventional contractsPractice of Cost-Plus contracts in place of conventional contracts

Clarity of risks and mitigation plansClarity of risks and mitigation plans

Good Inter-ministerial / departmental coordinationGood Inter-ministerial / departmental coordination

B. N. Yadava

PPP – Lessons from International modelsPPP – Lessons from International models

Concept of General Contractor (management contractor) Concept of General Contractor (management contractor) and seamless connections between Government, and seamless connections between Government, Contractors, Vendors, dispute resolution boardContractors, Vendors, dispute resolution board

Government focuses of Governance Government focuses of Governance rather than project executionrather than project execution

Realistic targets, Realistic costs and good Risk Realistic targets, Realistic costs and good Risk ManagementManagement

Realistic Estimation of potential demand for services Realistic Estimation of potential demand for services being planned forbeing planned for

Certified professionals (for reporting, evaluation, Certified professionals (for reporting, evaluation, estimation and design)estimation and design)

..

B. N. Yadava

PPP – Management success storiesPPP – Management success stories

In India private companies are rolling out wireless In India private companies are rolling out wireless telephone network infrastructure nearly telephone network infrastructure nearly 8% cheaper8% cheaper than than the subsidy benchmark by Governmentthe subsidy benchmark by Government

Mildura hospital contract in Australia Mildura hospital contract in Australia reduced the capital reduced the capital cost by 20%cost by 20% and treatment cost lower than those in and treatment cost lower than those in Government hospitalsGovernment hospitals

In Sweden (Stockhome) private operator has In Sweden (Stockhome) private operator has cut costs by cut costs by 30%30% and treated more number of patients within the and treated more number of patients within the same government infrastructure.same government infrastructure.

In Malaysia the non-revenue-water (losses) were reduced In Malaysia the non-revenue-water (losses) were reduced by leakage control & replacement of mains under service by leakage control & replacement of mains under service contract. contract. Gaining 20% more deliveryGaining 20% more delivery of treated water. of treated water.

B. N. Yadava

Issues with PPP projectIssues with PPP project

Land Acquisition, Socio-political factors, Economic Factors, Environmental factors, Greed, Human Behavior, Unqualified Specialists, Vested Interests, Rating Agencies, Auditors,

Organization, Monopoly, Outdated Tools & Methodology, Poor Governance

Structure, Overlap of Scope, Lack of Supporting Structure, Project Finance, Multilateral agencies approch,statutary problems, influence of developed world, absence of policy and

regulation, Inflation, Liquidity Issues, Corruption red-tapism, Frequent Change in Scope,

Deficient Contracts, Law & Order, Exchange Rates, Statutory Problems, Fragile Governments, One Sided Contracts, SOP, Transparency, Cast, Creed,

Institutional Failure, Supply of Equipments, Global Standards, Poor planning Individual Expertise, Geological issues, Geotechnical issues,

Hydrological, Weather Conditions, Fiscal Issues, Dispute Resolution Board,

Terrorism, Border threats, Speculations, Safety, Security, In-efficient PMO,

Cartel, Media, Recession, Unrealistic Deadlines, War, Bye-laws,, Poor Communication, Strategy, Insufficient Experience, Poor Risk

Management, Standard Bid Documents, Design Drawing Delays,

Procurement Contract Issues, Human Resource, Training, Research & Development

B. N. Yadava

PPP Projects are ElephantsPPP Projects are Elephants

With Individual ExpertiseWith Individual Expertise• It appears Different than what it Really IsIt appears Different than what it Really Is

It can only be SolvedIt can only be Solved• With COLLECTIVE expertise With COLLECTIVE expertise

(An Exceptional Collaborative Work-space,(An Exceptional Collaborative Work-space,Collective Wisdom) Collective Wisdom)

B. N. Yadava

Collaborative work-space Collaborative work-space Integration Management Integration Management

Mostly we do MANAGEMENT BY-PARTSFeasibility / PlanningMostly managed by Finance, Half Technical group

Finance / Sale / MarketingMostly managed by Finance/marketing /Least Technical inputs

Design / StatutoryMostly managed by Designers, Least Finance inputs

ConstructionMostly managed by Highly technical group resulting in Tussle with finance

NEEDUsually ill-managed, sometimes it dies, sometimes results in failed mission

NEED

Delivery

DELIVERYUsually ill-managed, projects are not closed, closed with loose ends, no way forward for O&M

I N T

E G

R A

T E

PIU : Project Implementation UnitPM/PMO/POR-M

B. N. Yadava

ProjectImplementation

Unit / PMO / Portfolio

Management

DesignersArchitects .

Engineers .

Sub-contractors / Specialist Contractors

General Contractor / Management Contractor

Contract Administration

Procurement Management

Adm

inis

trat

ion

M

anag

emen

t Managem

ent ExecutionThe Project Implementation UnitThe Project Implementation Unit

B. N. Yadava

Players: From Concept to Completion – Govt. Players: From Concept to Completion – Govt. AssignmentAssignment

Project Delivered

Source of Fund

Legal & Planning

Authorities

Main or Managing Contractor

Sub-contractor, Specialist supplier

Government Ministry Agency

DesignersQuantity

SurveyorsSpecialist

Consultants

Social & Economic

Need

B. N. Yadava

Players: From Concept to Completion – Private SectorPlayers: From Concept to Completion – Private Sector

Project Delivered

Merchant Bank

Legal & Planning

AuthoritiesContractors

Sub-contractor, Specialist supplier

Project Management Consultants

Designers

Quantity Surveyors /

Building Economists

Specialist Consultants

IDEA

B. N. Yadava

Understanding

project

environment

. Application area knowledge, standards

& regulations

Gener

al

Man

agem

ent

know

ledg

e & s

kills

Soft Skills .

PM concept of Project Management TeamPM concept of Project Management Team

Area of Expertise

needed by the Project

Management Team

Source: PMI, PMBOK

B. N. Yadava

Integrating the Management By-PartsIntegrating the Management By-Parts

Project life-cycle

Management

Statutory

DeliveryManagement

Feasibility

Financing

BidManagement

Design Management

ConstructionManagement

B. N. Yadava

1.1. FeasibilityFeasibility

2.2. FinancingFinancing

3.3. StatutoryStatutory

4.4. Design ManagementDesign Management

5.5. Bid ManagementBid Management

6.6. Construction ManagementConstruction Management

7.7. Delivery ManagementDelivery Management

Will it Work !(IRR,ROE,ADSCR,LLCR,NPV)Does it Make Economic sense!Can it be Built !Is it Legal !Does the Country Require it !•Technical Feasibility

•Operational Feasibility

•Market Feasibility

•Resource Feasibility.

•Schedule Feasibility.

•Economic Feasibility

•Legal Feasibility

•Social / Cultural Feasibility

The Project Life-cycle WBS -1The Project Life-cycle WBS -1

B. N. Yadava

1.1. FeasibilityFeasibility







• Internal Resources

• External Borrowing• Venture capitalists• PE Funds / Institutional• FDI• Equity• Credit• Bonds• Subsidies• Multilateral finanace.


B. N. Yadava

1.1. Idea / FeasibilityIdea / Feasibility







• Land Clearances• Change in Land-use• Development License• Zoning• Demarcation

• Building bye-laws Clearances• Service Plan Estimates• Building plan approvals• Fire Clearances• Lift & other equipments• Temporary Infrastructure• Other authorities

• Environment Clearances• Tree cutting• MoEF / Pollution Control• CTE / CTO

• Insurances• Labour Laws


B. N. Yadava









• Inception Report• Data collection• Finalisation of design

requirements• Concept Design

• Schematic Design

• Detailed Engineering• Architectural Design• Structural Design• Public Health

Engineering• Electrical Design• Mechanical Design• Roads & Infrastructure• Landscaping &

Arboriculture• Design, data, drawing

coordination,asbuilt

B. N. Yadava









• TOR/RFP

• Rate Analysis

• BOQ (Bill of Quantity)

• PQ criteria & evaluation of Contractors

• Detailed Specifications

• GCC (General condition of contract)

• Particular condition of Cont.

• Preparation of Bid Document (Contract Agreement & construction drawings)

• Publishing NIT.

• Evaluation of Bid / award

B. N. Yadava









• Project Implementation

Plan• Integration Management• Scope Management.• Quality Management• Time Management• Cost Management• Contract / Procurement

Management.• Risk Management.• Safety Management.

Management• Human resourse

Management

B. N. Yadava









• As-Built Drawings

• Operation & Maintenance Hand-over, Manuals

• Contract Closure

• Achieving

• Hand-over to Stakeholders

B. N. Yadava

The Life Cycle’s Knowledge landscape The Life Cycle’s Knowledge landscape

KnowledgeArea

BidManagement

DetailedEngineering

ContractManagement

ConstructionManagement

DeliveryManagement

FeasibilityStudies

MasterPlanning

Quality Management

ProofChecking

ValueEngineering

DueDiligence/stat.Mang

Environmental& Social Studies

Risk Management

B. N. Yadava

Restructuring and Modernization Of Delhi AirportRestructuring and Modernization Of Delhi Airport

Global Technical AdvisorGlobal Technical Advisor An area over 5000 acresAn area over 5000 acres

6 Terminal / Cargo 6 Terminal / Cargo ComplexComplex

Airside / Landside Airside / Landside Pavements / RunwaysPavements / Runways

US$ 1.06 billion ProjectUS$ 1.06 billion Project

For Airports Authority of For Airports Authority of IndiaIndia

Avia

tion

B. N. Yadava

Restructuring and Modernization Of Mumbai AirportRestructuring and Modernization Of Mumbai Airport

Global Technical Global Technical AdvisorAdvisor

An area over 3000 An area over 3000 acresacres

5 Terminal / Cargo 5 Terminal / Cargo ComplexComplex

Airside / Landside Airside / Landside Pavements / RunwaysPavements / Runways

US$ 637 Million ProjectUS$ 637 Million Project

For Airports Authority For Airports Authority of Indiaof India

Avia

tion

B. N. Yadava

Ranchi City Development PlanU

rban

Pla

nn

ing

• Ranchi Municipal Corporation

Client

Project Features

Services Provided

• Preparation of Development Plan for Urban Renewal

• Objective is to create economically productive, efficient, equitable and responsive city

• As per JNNRUM guidelines

B. N. Yadava

Mumbai METRO

•FeasibilityFeasibility

•MMRDAMMRDA

Client

Project Features146.5 km30 BILLON

Services Provided

MR

TS

B. N. Yadava

Roads&Bridge Across River Hundri, AP Roads&Bridge Across River Hundri, AP

Length 40 kmLength 40 km Feasibility StudyFeasibility Study Surveys & InvestigationsSurveys & Investigations DPRDPR

US$ 500 million ProjectUS$ 500 million Project

For National Highways For National Highways Authority of IndiaAuthority of India

Infr

ast

rure

-raod

a&

Bri

dg

es

B. N. Yadava

In Malaysia the non-revenue-water In Malaysia the non-revenue-water (losses) were reduced by leakage (losses) were reduced by leakage control & replacement of mains under control & replacement of mains under service contract. service contract. Gaining 20% more Gaining 20% more deliverydelivery of treated water. of treated water.

Example of Implementation - 1Example of Implementation - 1 Water supply project for JBA, MalaysiaWater supply project for JBA, Malaysia

B. N. Yadava

Sewage Rehabilitation Project –Pinang MalaysiaSewage Rehabilitation Project –Pinang Malaysia

In Malaysia the non-revenue-r In Malaysia the non-revenue-r (losses) were reduced by saving (losses) were reduced by saving power and equipment cost power and equipment cost mains under service contract. mains under service contract. Gaining 30% more deliveryGaining 30% more delivery of of treated sewage.treated sewage.

B. N. Yadava

Implementation Tools / Tech 1:Implementation Tools / Tech 1: Life Cycle Program (Time-line)Life Cycle Program (Time-line)

B. N. Yadava

Implementation Tools / Tech 2:Implementation Tools / Tech 2: Spend Projections / Cash FlowSpend Projections / Cash Flow

B. N. Yadava

Implementation Tools / Tech 3:Implementation Tools / Tech 3: Spend Projections / Cash FlowSpend Projections / Cash Flow

B. N. Yadava

Implementation Tools / Tech 4:Implementation Tools / Tech 4: Resource HistogramResource Histogram

B. N. Yadava

Implementation Tools / Tech 5:Implementation Tools / Tech 5: Planning TechniquesPlanning Techniques

• Bar Chart (Gantt Chart) Bar Chart (Gantt Chart) for Simple works @ cutting-edge lvl.for Simple works @ cutting-edge lvl.

• Line of balance technique Line of balance technique for for Repetitive works (terrace houses)Repetitive works (terrace houses)

• Linear Programming Linear Programming (time chainage (time chainage charts) method for road infrastructurecharts) method for road infrastructure

• CPM was used for overall project CPM was used for overall project and condominium, other infrastructureand condominium, other infrastructure

• More than 30,000 activities More than 30,000 activities to be to be programmed and managedprogrammed and managed

B. N. Yadava

StakeholderInvestor

PlannersDesignersEngineersThink Tank

LegalDevelopment BoardMunicipal AuthorityLicensing Authority

ContractorSub-contractorVendor

Whats the ChallengeWhats the Challenge

Environmental Factors

Social Political Factors

Economy

Unforeseen Risk factors

B. N. Yadava

More detailsMore details

PPP Structure and ModelPPP Structure and Model

Management ContractsManagement Contracts

Management Contracts VaManagement Contracts Variantsriants

Operational ManagementOperational Management

Turnkey – BOTTurnkey – BOT

Affermage / LeaseAffermage / Lease

Concession – BOOTConcession – BOOT

Private Ownership of Assets Private Ownership of Assets – BOO– BOO

BOTBOT

BOOTBOOT

BOOBOO

BOOSTBOOST

BLTBLT

Other Financing ModelsOther Financing Models

B. N. Yadava

Way forwardWay forward

Government to bring-in Government to bring-in National Policy for PPP in National Policy for PPP in infrastructure infrastructure • to eliminate inconsistencyto eliminate inconsistency• improve efficiencyimprove efficiency• bring transparencybring transparency

This will This will • attract investments from Private attract investments from Private

Sector.Sector.• help achieve our goal of help achieve our goal of

sustainable economic growth.sustainable economic growth.

Thereby improving the Thereby improving the economic health of our economic health of our countrycountry

B. N. Yadava

Thank you allThank you all

B. N. Yadava

PPP Structure & ModelPPP Structure & Model

PPP models vary short term simple Management contract to PPP models vary short term simple Management contract to long term and a very complex contractlong term and a very complex contract

Short term could be with investment or without investment.Short term could be with investment or without investment. Long term could be BOT form to divestiture.Long term could be BOT form to divestiture.

Models vary mainly due to- ownership of capital, investment Models vary mainly due to- ownership of capital, investment responsibility, assumption of risk and duration of contact.responsibility, assumption of risk and duration of contact.

PPP Models classification arePPP Models classification are1.1. Management contractsManagement contracts

2.2. Turnkey projectsTurnkey projects

3.3. leaselease

4.4. ConcessionsConcessions

5.5. Private ownership of assets. Private ownership of assets.

B. N. Yadava

Management ContractsManagement Contracts

It is an arrangement for management of apart or complete of It is an arrangement for management of apart or complete of public enterprise by private sector.public enterprise by private sector.

It allows private sector skill to be used into service design and It allows private sector skill to be used into service design and delivery, operational control, labor management and delivery, operational control, labor management and equipment procurement.equipment procurement.

Private sector take services risk not commercial risk.Private sector take services risk not commercial risk.

Service provider is paid fee to manage and operate services. Service provider is paid fee to manage and operate services. Payment is performance based.Payment is performance based.

Contract duration is 2to 5 yr for small and longer period used Contract duration is 2to 5 yr for small and longer period used for complex facilities for port and airport.for complex facilities for port and airport.

Management contact varies from supply, service, Management contact varies from supply, service, maintenance and operational management contacts maintenance and operational management contacts

B. N. Yadava

Management contacts variantsManagement contacts variants

Supply or service contactsSupply or service contacts-equipment ,raw material energy, power.-equipment ,raw material energy, power.

Non core activities-catering, cleaning, medical, luggage handling, Non core activities-catering, cleaning, medical, luggage handling, security and transport services.security and transport services.

Some form of licensing or operating agreement is used if private Some form of licensing or operating agreement is used if private sector is to render directly to user of infrastructure facility e.g. sector is to render directly to user of infrastructure facility e.g. catering services for passenger on railways.catering services for passenger on railways.

The main purpose of licensing is to ensure desired level of quantity The main purpose of licensing is to ensure desired level of quantity and quality of services rendered.and quality of services rendered.

Maintenance Management- Maintenance Management- This is very popular with transport This is very popular with transport operatoroperator

Equipment vendors and suppliers can also be used for the Equipment vendors and suppliers can also be used for the maintenance of assets procured from them.maintenance of assets procured from them.

..

B. N. Yadava

Operational managementOperational management

It is useful when local manpower or expertise in running the facility is It is useful when local manpower or expertise in running the facility is limited (port or airport) when inaugurating a new operation.limited (port or airport) when inaugurating a new operation.

This also common in the transport sector for rendering non transport This also common in the transport sector for rendering non transport elements e.g. - ticketing, reservation, system.elements e.g. - ticketing, reservation, system.

Operational management of urban transport services is also Operational management of urban transport services is also contracted to the private sector.contracted to the private sector.

For simplest type of contact operators are paid a fixed fee for For simplest type of contact operators are paid a fixed fee for performing managerial task.performing managerial task.

For more complex contacts may offer greater incentives for efficiency For more complex contacts may offer greater incentives for efficiency improvement by defining performance target and the fee is based in improvement by defining performance target and the fee is based in part on their fulfillment.part on their fulfillment.

B. N. Yadava

Turnkey - BOTTurnkey - BOT

It is a traditional public sector procurement model for infrastructure It is a traditional public sector procurement model for infrastructure facility.facility.

Service provider( contractor) is selected through bidding process.Service provider( contractor) is selected through bidding process.

The service provider( private contractors) design and builds a facility The service provider( private contractors) design and builds a facility for fixed fee, rate or total cost, which is one of the key criteria in for fixed fee, rate or total cost, which is one of the key criteria in selecting bid selecting bid

The contractor take risk in design and build.The contractor take risk in design and build.

The scale of investment by private sector is generally low for short The scale of investment by private sector is generally low for short term.term.

This type of arrangement do not have strong incentive for early This type of arrangement do not have strong incentive for early completion of a projectcompletion of a project

This type of private sector participation is known as design and build. This type of private sector participation is known as design and build.

B. N. Yadava

Affermage / lease - 1Affermage / lease - 1

Lease holder is responsible for operating and maintaining the Lease holder is responsible for operating and maintaining the infrastructure facilities and services.infrastructure facilities and services.

Operator is not required to make any large investmentOperator is not required to make any large investment

This model is applied in combination with other models such as This model is applied in combination with other models such as BROT. In this case contact period is longer and private sector is BROT. In this case contact period is longer and private sector is required to make significant arrangement.required to make significant arrangement.

Afterimage and lease are very similar. The difference between Afterimage and lease are very similar. The difference between them is technical. Under lease ,operator retain revenue from them is technical. Under lease ,operator retain revenue from customer and makes a specified lease fee payment to contracting customer and makes a specified lease fee payment to contracting authority.authority.

Under Affermage the operator and contracting authority share Under Affermage the operator and contracting authority share revenue from user.revenue from user.

In both cases operator takes lease of infrastructure and equipment In both cases operator takes lease of infrastructure and equipment from the govt for an agreed period.from the govt for an agreed period.

B. N. Yadava

Affermage / lease- 2Affermage / lease- 2

Government maintain the responsibility for investment.Government maintain the responsibility for investment.

As part of lease some assets may be transferred on permanent As part of lease some assets may be transferred on permanent basis for a period which extends over the economic life of of basis for a period which extends over the economic life of of assets.assets.

Fixed facilities and land are leased for a longer period than the Fixed facilities and land are leased for a longer period than the mobile assets.mobile assets.

Land to be developed by the developer is usually transferred for a Land to be developed by the developer is usually transferred for a period of 15-30 yr.period of 15-30 yr.

Asset transferred to private sector under lease agreement are Asset transferred to private sector under lease agreement are constrained in their use to specific function or service, the value of constrained in their use to specific function or service, the value of assets is dependent upon the revenue potential. If the asset are assets is dependent upon the revenue potential. If the asset are transferred to the private sector without restriction of use, the transferred to the private sector without restriction of use, the asset value is associated with the optimum use of the assets and asset value is associated with the optimum use of the assets and the revenues that they can negate.the revenues that they can negate.

B. N. Yadava

Concessions - BOOTConcessions - BOOT

In this case govt. defines and grants specific rights to an entity usually a In this case govt. defines and grants specific rights to an entity usually a private company to build and operate for a fixed time.private company to build and operate for a fixed time.

The govt retain the ultimate ownership of the facility or right to supply the The govt retain the ultimate ownership of the facility or right to supply the services.services.

Payment can take both way ,concessionaire pays to govt for concession rights Payment can take both way ,concessionaire pays to govt for concession rights and govt may also pay the concessionaire, which it provides under the and govt may also pay the concessionaire, which it provides under the agreement to meet certain specific conditions, such payments by govt may be agreement to meet certain specific conditions, such payments by govt may be necessary to make projects commercially viable and reduces the level of necessary to make projects commercially viable and reduces the level of commercial risk taken by private sector.commercial risk taken by private sector.

Typical concession period 5-50yrTypical concession period 5-50yr

In concession model of PPP an SPV may not always necessary. concession may In concession model of PPP an SPV may not always necessary. concession may be two type franchise and BOT type.be two type franchise and BOT type.

Under franchise the concessionaire provide services that are fully specified by Under franchise the concessionaire provide services that are fully specified by franchise authority. Private sector take commercial risk.e.g urban bus and rail franchise authority. Private sector take commercial risk.e.g urban bus and rail servicesservices

Others areBOT,BROT,BLTOthers areBOT,BROT,BLT

B. N. Yadava

Private ownership of assets - BOOPrivate ownership of assets - BOO

In this form of participation, the private sector remain responsible for design, In this form of participation, the private sector remain responsible for design, construction and operation of infrastructure facility and in some cases public construction and operation of infrastructure facility and in some cases public sector may relinquish the right of ownership of assets to the private sector.sector may relinquish the right of ownership of assets to the private sector.

BOO,DBFO-The private sector build design and operate and sell the product/ BOO,DBFO-The private sector build design and operate and sell the product/ services to its user or beneficiaries- power sectorservices to its user or beneficiaries- power sector

Private finance initiative-Private sector similar to BOO model. However, the Private finance initiative-Private sector similar to BOO model. However, the public sector( unlike user in a BOO) purchases the services from private sector public sector( unlike user in a BOO) purchases the services from private sector through along term agreement.through along term agreement.

PFI projects bear direct financial obligations to govt in any event. Asset PFI projects bear direct financial obligations to govt in any event. Asset ownership may or may not transferred to public sector. ownership may or may not transferred to public sector.

Divestiture . Private sector buys an equity stake in the public company. Divestiture . Private sector buys an equity stake in the public company. However private stake may or may not imply private management of the However private stake may or may not imply private management of the enterprise. True privatization can happen through transfer of deed , direct sale enterprise. True privatization can happen through transfer of deed , direct sale or private floatation of shares .or private floatation of shares .

Full divestiture of existing infrastructure is not very common. However there is Full divestiture of existing infrastructure is not very common. However there is many example of partial divestiture.many example of partial divestiture.

B. N. Yadava

BOT - Built operate and transferBOT - Built operate and transfer

Contractual arrangement whereby the concessionaire Contractual arrangement whereby the concessionaire undertake the construction, including financing, of a given undertake the construction, including financing, of a given infrastructure facility and operation and maintenance thereofinfrastructure facility and operation and maintenance thereof

Concessionaire operate the facility over a fixed term during Concessionaire operate the facility over a fixed term during which it is allowed to charge facility users appropriate toll, fee which it is allowed to charge facility users appropriate toll, fee rental .rental .

charges not exceeding these proposed in its bid or negotiated charges not exceeding these proposed in its bid or negotiated and incorporated in the contract to enable the concessionaire and incorporated in the contract to enable the concessionaire to recover its investment, and maintenance expenses in the to recover its investment, and maintenance expenses in the project.project.

The concessionaire transfers the facility to government or local The concessionaire transfers the facility to government or local govt unit concerned at the end of a fixed term.govt unit concerned at the end of a fixed term.

B. N. Yadava

BOOT- Build own operate and transferBOOT- Build own operate and transfer

Project is based on granting of concession by a principal Project is based on granting of concession by a principal union ,government or local authority) to the concessionaire.union ,government or local authority) to the concessionaire.

Concessionaire is responsible for construction, financing and Concessionaire is responsible for construction, financing and O&M of a facility over period of the concession before finally O&M of a facility over period of the concession before finally transferring the facility, at no cost to the principal, a fully transferring the facility, at no cost to the principal, a fully operational facility.operational facility.

During the concession period the promoter owns and operates During the concession period the promoter owns and operates the facility and collects revenue in order to repay the financing the facility and collects revenue in order to repay the financing and investment costs.and investment costs.

Maintain and operate the facility and make a margin of profit.Maintain and operate the facility and make a margin of profit.

B. N. Yadava

BOO- Build own and operateBOO- Build own and operate

BOO-Concessionaire is authorized to finance, construct, own operate BOO-Concessionaire is authorized to finance, construct, own operate & maintain an infrastructure or development facility from which the & maintain an infrastructure or development facility from which the proponent is allowed to recover its total investment, O&M costs plus a proponent is allowed to recover its total investment, O&M costs plus a reasonable return thereon by collecting tolls, fees, rentals or other reasonable return thereon by collecting tolls, fees, rentals or other charges from facility users.charges from facility users.

BOST- Build operate share and transfer-Concessionaire is authorized BOST- Build operate share and transfer-Concessionaire is authorized to finance, construct and maintain, share apart of the revenue and to finance, construct and maintain, share apart of the revenue and transfer the infrastructure facility at the end of the period. Proponent transfer the infrastructure facility at the end of the period. Proponent is allowed to recover its total investment ,O&M cost plus a reasonable is allowed to recover its total investment ,O&M cost plus a reasonable return thereon by collecting tolls, fees rentals and other charges return thereon by collecting tolls, fees rentals and other charges from facility user .from facility user .

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B. N. Yadava

BOOSTBOOST

BOOST- Build own operate share transfer-Concessionaire is BOOST- Build own operate share transfer-Concessionaire is authorized to finance, construct, own, O&M,share apart of authorized to finance, construct, own, O&M,share apart of revenue and transfer the infrastructure facility at the end of the revenue and transfer the infrastructure facility at the end of the period. The proponent is allowed to recover its total period. The proponent is allowed to recover its total investment,O&M cost plus a reasonable return there on by investment,O&M cost plus a reasonable return there on by collecting tolls , fees , rentals or other charges from facility collecting tolls , fees , rentals or other charges from facility users.users.

BT- Built and transfer- Concessionaire undertake the financing BT- Built and transfer- Concessionaire undertake the financing and construction and after its completion turns it to Govt, which and construction and after its completion turns it to Govt, which shall pay the proponent on agreed schedule its total investments shall pay the proponent on agreed schedule its total investments expended on the project plus reasonable rate of return thereon. expended on the project plus reasonable rate of return thereon. This arrangement may be employed in the construction of any This arrangement may be employed in the construction of any infrastructure or development project, including critical facilities infrastructure or development project, including critical facilities which, for security or strategic reasons , must be operated which, for security or strategic reasons , must be operated directly by the Government.directly by the Government.

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B. N. Yadava

BLT - Built lease and TransferBLT - Built lease and Transfer

BLT- Concessionaire is authorized to finance and construct an BLT- Concessionaire is authorized to finance and construct an infrastructure or development facility and upon completion turns it infrastructure or development facility and upon completion turns it over to the govt agency on lease arrangement for affixed period after over to the govt agency on lease arrangement for affixed period after which ownership of the facility automatically transferred to the govt.which ownership of the facility automatically transferred to the govt.

B. N. Yadava

Other financing modelOther financing model

BTO- Build transfer and operateBTO- Build transfer and operate BROT- Build rehabilitate operate and transfer- water supply BROT- Build rehabilitate operate and transfer- water supply

projects .projects . BLT- Build lease and transfer .BLT- Build lease and transfer . DB- Design and build.DB- Design and build. DBB- Design bid and build- traditional public sector contract.DBB- Design bid and build- traditional public sector contract. DBOT- design build operate and transfer.DBOT- design build operate and transfer.

DBFO- design build finance and operate.-boot concessionDBFO- design build finance and operate.-boot concession DBOM-Design build operate & maintain-reward th rentalDBOM-Design build operate & maintain-reward th rental ROT- Rehabilitate operate and transfer.ROT- Rehabilitate operate and transfer. DBO- Design build and operate.DBO- Design build and operate. BB0- Bid build and operate.BB0- Bid build and operate. BOOM- Build own operate and maintain.BOOM- Build own operate and maintain.