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UNESCAP Policy Dialogue on PPPs in Infrastructure
Kathmandu, 22 September 2015
Abhilasha Mahapatra
Director ( PPP)
PPP Cell, Ministry of Finance
Government of India
Sharing India’s PPP Experience
PPP Cell, Department of Economic Affairs, Ministry of Finance 2
Infrastructure needs – Bridging the Gap
“Investment gap”
• Gap between existing and required infrastructure
• Improving the availability of infrastructure by increased investment in the infrastructure assets;
• The 12th FYP projects an investment of Rs. 55.75 lakhs crores during the 2012-17 period, of which, the share of private investment is expected to rise substantially from 37 percent in 11th FYP to 48 percent in 12th FYP.
“Efficiency gap”
• Need to enhance quality of service to minimum acceptable standards of service
Options to bridge the gap
Public Private Partnership is a mode for creation of assets
as well as improve service delivery
Traditional Procurement Model
Public Private Partnership
Privatization
PPP Cell, Department of Economic Affairs, Ministry of Finance 3
PPPs in India
3
Rapid urbanization and industrial growth led to demands for
basic infrastructure, such as, water supply & sanitation,
transportation and energy.
Rapid growth in purchasing power in the rural areas
simultaneously - need for improving connectivity and services
Budgetary Constraints and public sector capacity
considerations
Critical relationship between infrastructure and economic
growth, need for policy and enabling measures to support the
creation of quality infrastructure and efficient delivery of
services –
Emphasis on the Public Private Partnership mode of delivery.
PPP Cell, Department of Economic Affairs, Ministry of Finance 4
Advantages of PPPs
• PPPs not only provide finance for public infrastructure but
also leverage private sector managerial efficiency,
competency for operation and maintenance of the created
assets commercial and creative skills.
• Experience & track record
o Commercial and financial innovation for:
- efficient capital structures
- competitive funding terms
o Strong demand from capital markets for structured project risk
• Sources non-conventional financing of public infrastructure.
• Contractual accountability on the private party to ensure
timely and quality infrastructure service to the end users
• Globally found that 75 % of PPP projects have been delivered
on time or before time.
PPP Cell, Department of Economic Affairs, Ministry of Finance 5
The measures taken by Government of India resulted in a robust pipeline of
projects at different stages of implementation i.e. under bidding,
construction and operational stages ( >1000 PPP projects with project cost
of >Rs 5 crores each with an estimated total investment of INR 8.8 lakh
crores.) .
Sectoral spread of PPPs diverse though transport projects (roads, airports
and ports), considered as more successful.( The new airports at Delhi,
Mumbai, Bangalore & Hyderabad , and the large volume of highway
projects taken up on BOT showcase the programmatic success of PPPs in
the country. )
As per the 2015 report of The Economist Intelligence Unit, “Evaluating the
environment for PPPs in Asia-Pacific 2014”-India ranks first in the world in
“Operational Maturity” for PPP projects, third for sub-national PPP activity
and fifth overall in terms of having an ideal environment for PPP projects. Growth was supported by favorable policy reforms and financial support
for PPPs.
Evolution of PPPs in India
5
PPP Cell, Department of Economic Affairs, Ministry of Finance 6
Infrastructure investment during the XI th Plan - Rs.23,74,307 crore
(at current prices), i.e 2 .8 times the investment of Rs.8,37,159 crore
realized in the X th Plan (2002-2007)-around 7% GDP.
Largely contributed by private investment (share of private investment increasing
from 22 %in the Xth Plan to 37 %in the XI th Plan .
XII th Plan (2012-2017) projection of Rs.55.75 lakh crore (at current
prices) in infrastructure -more than double the investment achieved in
XI th Plan.
Strategy of encouraging higher private investment in infrastructure, directly and
through PPPs - share of private investment (incl PPPS) about 48 %.
Experience in the first two years of XII Plan suggests slow down in
infrastructure investment and likely shortfall of about 30 per cent, with the
shortfall in public investment and private investment at 20 per cent and 43
per cent respectively .
Evolution of PPPs in India
6
PPP Cell, Department of Economic Affairs, Ministry of Finance 7
Enabling Environment :
Key to Success Story
7
PPP Cell, Department of Economic Affairs, Ministry of Finance 8
Enabling PPP Framework:
Institutional Mechanisms Streamlining of procedures for systematic and speedy
appraisal and approval of projects ( SFC & PPPAC)
http://pppinindia.com/PPPAC_Guidelines_and_Forms.php
Public Private Partnership (PPP) Cell set up in MoF in 2006
for mainstreaming and facilitating PPPs and capacity
building for PPPs
Progressively more sectors have been opened to private and
foreign investment,
Levy of user charges promoted
Standardized Contractual Documents such as sector specific
Model Concession Agreements and Standardized bidding
documents such as Model Request for Qualifications and
Model Request for Proposals
PPP Cell, Department of Economic Affairs, Ministry of Finance 9
Enabling PPP Framework:
Financial Support to PPP Projects
Scheme for Financial Support to PPPs in Infrastructure to
provide Viability Gap Funding (VGF) to PPP projects.
http://pppinindia.com/VGF_Guidelines_and_Forms.php
India Infrastructure Finance Company Limited (IIFCL) to
provide long tenor debt to infrastructure projects.
Scheme and Guidelines for India Infrastructure Project
Development Fund (IIPDF) for providing financial support
for quality project development activities to the States and
the Central Ministries
http://pppinindia.com/IIPDF_Home.php
PPP Cell, Department of Economic Affairs, Ministry of Finance 10
National PPP Capacity Building Programme – Dedicated training
for Group A and B category officials of the government in various
central and state government departments, para-statal agencies and
urban local bodies.
Information dissemination through a dedicated website
www.pppinindia.com to provide comprehensive information on the
status and extent of PPP initiatives in India Contains :
• Government Guidelines and Knowledge Products for use of PPP
practitioners in various sectors .
• Online PPP Toolkits for 5 sectors to help improve decision-making for
infrastructure PPPs and structure better PPP projects
Mainstreaming PPPs by providing support to State and Centre PPP
Cells ( ADB TA programmes to provide PPP Experts , MIS Experts )
Knowledge Exchange to share best practices , exposure visits and
knowledge exchange programmes with other countries.( MoU with
AfDB )
Enabling PPP Framework:
Capacity-Building Initiatives
10
PPP Cell, Department of Economic Affairs, Ministry of Finance 11
PPP Pilot Projects Program -structuring of PPP Projects in challenging
sectors to develop demonstrable PPP Projects, successfully bid and establish
their replication potential
Knowledge Products :
• Post-award Management Guidelines and Manuals -Contain checklists, templates
and relevant financial tools for various aspects of post award contract
management/concession management for Highways, Ports and Education sector.
Provide step by step approach for day-to-day monitoring and proactive management
of key.(Available on www.pppinindia.com. Online Toolkits are also ready for
launch.
• Report for framework for Renegotiation of PPP Contracts -focuses on changes
that may need to be made in the contractual and institutional arrangement post award
of the projects.
• Green book for the Health Sector: Green book for the Health Sector incorporating
contract provisions and guidelines as a reference for healthcare PPP contracts in
India for 7 asset classes.
Enabling PPP Framework:
Capacity-building initiatives ,contd
11
PPP Cell, Department of Economic Affairs, Ministry of Finance 12
‘3P India’ proposed to be set up to provide support to
mainstreaming PPPs for a more directed effort to scale up
private investments in infrastructure and developing a broad
and diversified portfolio of PPP projects not only at the Central
and the State Governments’ level but also at the level of Local
Self Governments.
3P India is envisaged to support the public sector in
programmatic level activities, viz., policy implementation and
regulatory support, as also provide advice and handholding
services for delivery support at the project level.
( Partnerships Victoria, Partnerships UK )
Enabling PPP Framework:
3PI
12
PPP Cell, Department of Economic Affairs, Ministry of Finance 13
Evolution of PPPs in India :
Challenges & Lessons
13
• Global economic slowdown has affected infrastructure projects;
• Judicial and statutory orders have delayed the implementation of projects;
External Factors
• Delays in land acquisition, clearances, right of way issues
• Overlapping functions of regulatory authorities;
• Some sectors (Urban) do not have any regulatory frameworks;
• Slow dispute resolution process often derailing projects.
Legal and Regulatory
• Delays in projects leading to equity of local sponsors getting trapped;
• Balance Sheets are stressed and over leveraged;
• Under developed debt markets has been a cause for concern.
Financing Issues
• Institutional capacity constraints;
• Network of multiple agencies and overlapping functions leading inordinate delays;
• Inadequate capacities in authorities, consultants, financers, etc. in PPP context.
Multiple Institutions
• Inadequate provisions to address legal and contractual issues;
• Adoption of model documents in straight jacketed way with little customization;
• Difficulties in dealing with unanticipated events.
Contractual frameworks
• Fundamental design flaws, such as, allocation of risks, prudent utilization of grants;Lack of urban planning and well defined laws and procedures for land acquisition; Rigidity in concession documents have triggered renegotiation.
Other issues
PPP Cell, Department of Economic Affairs, Ministry of Finance 14
Emerging Understanding …
PPPs can bring in the required efficiency and investments in infrastructure projects.
Undertaking PPP projects successfully require consideration of following factors :
need for the project, appropriate project development and adequate project
preparation on revenue model, uncertainties and financial structures
Appropriately structured govt. financial support to PPPs – e.g., viability gap
support, low cost loans, initial capital support etc. (Likely revenues from user fees
should be explicitly accounted for in PPP decisions)
appropriate risk allocation, transparent competitive procurement
Greater role of project proponents-Govt. agency is ultimately responsible for
service delivery- effective monitor ng of the concession/concessionaire for service
delivery.
Need to develop models for new sectors including social infrastructure
Streamlining dispute resolution mechanism
Streamlining land acquisition and approval process(Project Bid Out only after
minimum Land Acquisition
14
PPP Cell, Department of Economic Affairs, Ministry of Finance 15
Due Diligence by Lenders
New Financing Instruments –IDFs,( Debt Take Out ), INVITS (Equity Take
Out )
Exit option –allowing divestment of equity to free capital for new projects
Opening up the domestic pension/ insurance sector for raising resources to
finance PPP projects.
Need to develop a new breed of O&M operators to take on projects that
have been completed.
Flexible Contracts to accommodate changes and uncertainties but consider
the moral hazards and risks in allowing post-award changes(-triggers pre-
identified )
Importance of stakeholder consultations for buy-in of especially with regard
to access, willingness to pay and dispute resolution.
Identify liabilities, direct and contingent, that would devolve on parties to a
PPP concession along with risk-allocation.
Emerging Understanding & New Initiatives
15
PPP Cell, Department of Economic Affairs, Ministry of Finance 16
PPP Cell and Enabling Framework
Development
PPP Cell
DEA
Implementation Procurement
VGF
IIFCL
Training, Toolkits & Handbook
PPPAC
Information dissemination IIPDF
Institutional Mechanisms
Standardised documents
PPP Cell, Department of Economic Affairs, Ministry of Finance 17
Institutional Arrangement for Appraisal and
Approval of PPP Projects
A major difficulty in building infrastructure through PPP is the
absence of expertise to create and evaluate project proposals.
Appraisal mechanism for the PPP projects has been streamlined to ensure
speedy appraisal of projects, eliminate delays, adopt international best
practices and have uniformity in appraisal mechanism and guidelines.
Guidelines for Formulation, Appraisal and Approval of Public Private
Partnership Projects for Central Sector were notified by Ministry of Finance,
Department of Economic Affairs, vide OM No. 1/5/2005 - PPP, dated January
12, 2006
PPPAC Guideline :
http://pppinindia.com/PPPAC_Guidelines_and_Forms.php
PPP Cell, Department of Economic Affairs, Ministry of Finance 18
Sectoral Spread of PPPAC Proposals
PPPAC approved 287
Proposals in the Central
Sector (2006-07 to 2015-16)
valued at
INR 327196.96 crore
Civil
Aviation, 2
Housing, 8
Ports, 34 Railways, 1
Roads, 236
Sports, 5 Tourism,
1
No of Projects
Sector No of Projects Total Project Cost
(In Rs. Crore)
Civil Aviation 2
Housing 8 7299.17
Ports 34 44775.76
Railways 1 8500
Roads 236 266473.5
Sports 5
Tourism 1 148.87
Total 287 327196.96
PPP Cell, Department of Economic Affairs, Ministry of Finance 19
Financial support to PPP Projects in
Infrastructure
19
PPP Cell, Department of Economic Affairs, Ministry of Finance 20
Scheme for Financial Support to PPPs in Infrastructure implemented by
Dept of Economic Affairs, Ministry of Finance
(http://pppinindia.com/VGF_Guidelines_and_Forms.php)
financial support in the form of grants, one time or deferred, to
eligible infrastructure PPP projects undertaken to make them
commercially viable.
capital grant upto 20 % opf Total Project Cost at the stage of project
construction. Budgetary provision made in Annual Plan on year to
year basis.
The Government or statutory entity that owns the project may
provide additional grants upto further twenty percent of the Total
Project Cost.
Viability Gap Funding is up to forty percent of the Total Project
Cost.
Viability Gap Funding (VGF) Scheme
20
PPP Cell, Department of Economic Affairs, Ministry of Finance 21
VGF Scheme - Eligibility Criterion
Government or a statutory entity should make the proposal.
Prescribed pro-forma (VGF Memorandum Application : VGF Memo)
Project implemented by private sector co. ( Co. with 50% or more subscribed equity owned and controlled by a private entity) selected through open competitive bidding.
Service against payment of pre-determined tariff or user charge.
Certification that that the tariff/user charge cannot be increased to eliminate or reduce the viability gap of the PPP.
Project term cannot be increased to reduce VGF
PPP Cell, Department of Economic Affairs, Ministry of Finance 22
S.
No. Sector
In-principle Final
No. of
Projects
Total Project
Cost (in Rs.
crore)
Total VGF
Approved (in
Rs. crore)
No. of
Projects
Total Project Cost
(in Rs. crore)
Total VGF
Approved (in Rs.
crore)
1 Airport 1 354.65 70.93 - - -
2 Capacity
Building 1 216.23 0 - - -
3 Education 25 470.13 50.78 - - -
4 Health 2 653.8 130.76 - - -
5 Metro 2 19,474.00 3,894.08 1 11814.00 1458.00
6 Port 1 3,930.00 0 - - -
7 Power 4 2,624.70 472.94 2 664.70 132.94
8 Road 151 67,139.06 12,011.61 46 18953.48 3639.91
9 Silos 10 304.63 62.91 6 176.73 15.16
10 Water Supply &
Sanitation 1 187.71 37.54 1 187.71 37.54
Total 197 95,138.68 16,731.55 56 31796.62 5283.55
Sectoral Spread of VGF Proposals
In-principle : Total Projects : 197, TPC :Rs. 95138.68 cr., VGF Approved : Rs. 16731.55 cr.
Final : Total Projects : 56, TPC :Rs. 31792.62 cr., VGF Approved : Rs. 5283.55 cr.
PPP Cell, Department of Economic Affairs, Ministry of Finance 23
India Infrastructure Project Development Fund
(IIPDF)
Scheme and Guidelines for India Infrastructure Project Development Fund (IIPDF) for providing financial support for quality project development activities to the States and the Central Ministries http://pppinindia.com/IIPDF_Home.php
Support for development of credible and bankable PPP projects
Available for meeting project development costs for feasibility studies, environment impact studies, financial structuring, legal reviews and development of project documentation, including concession agreement, commercial assessment studies grading of projects etc.
Administered by the Empowered Institution headed by the Additional Secretary, DEA.
75% of PDE supported by DEA ( refunded by the private developer on bidding out of the project). 25% to be funded by the line ministry/state government.
Sectors eligible for VGF are also eligible for IIPDF.
PPP Cell, Department of Economic Affairs, Ministry of Finance 24
IIFCL
India Infrastructure Finance Company Ltd (IIFCL) established in January
2006 as a wholly owned Government of India company and commenced its
operations from April 2006.
Plays a catalytic role in the infrastructure sector. IIFCL may fund viable
infrastructure projects through the following modes:
(a) Long Term Debt;
(b) Refinance to Banks & Public Financial Institutions for loans granted by
them.
(c) Take out Financing
(d) Subordinate Debt
(e) Credit enhancement (on pilot basis)
(f) Any other mode approved by the Ministry of Finance from time to time.
IIFCL raises funds both from the domestic as well as external markets on the
strength of government guarantees.
PPP Cell, Department of Economic Affairs, Ministry of Finance 25
Dedicated Training of public functionaries at the State and municipal level
rolled out in 2010 with funding support from KfW Development Bank of
the Federal Republic of Germany
Across 15 states and 2 central institutions viz. Indian Maritime University
and LalBahadurShastri National Academy of Administration. 175 Training
programmes conducted to train 5458 public functionaries who deal with
PPPs in their domain, till March 2014.
The training material organized into five distinct courses.- structured in an
easy-to-use modular format, with extensive guidance along with
explanatory notes and tips, cross-referencing and additional reading
material.
The courses aimed at five different categories of audience distinguished in
terms of their role in a PPP context as well as their specific need/purpose in
a PPP context, i.e., increasing awareness, obtaining better understanding and
acquiring proficiency in application of PPP skills.
National Capacity Building Programme
25
PPP Cell, Department of Economic Affairs, Ministry of Finance 26
Basic Course:A 3-4 day programme for officials with no prior PPP
experience for a better understanding of the PPP concepts and key elements
and value drivers in structuring a basic level PPP transaction.
Advanced Course:An 6-9 day programme for officials having prior
experience of working on PPP projects and, preferably, completed the basic
course.
Awareness Course: A 1-day programme aimed at elected representatives,
civil society and media, with focus on providing an overview and broad
exposure to key PPP concepts.
Sensitization Course:A 2-day programme aimed at officials with no prior
PPP experience focusing on providing a quick overview of PPP concepts
and trends from a practitioners’ perspective..
Course for Senior Policy Makers:A 2-day programme aimed at senior
level government officials to address broader policy and programme level
issues
National Capacity Building Programme
26
PPP Cell, Department of Economic Affairs, Ministry of Finance
Information Dissemination
www.pppinindia.com
exclusively devoted to PPP policies/ programmes/ initiatives in the States and Central
Ministries. The website contains the following information:
Guidelines for PPPAC, VGF, IIPDF etc. (http://pppinindia.com/reports-policy-
documents.php)
Record of Discussions of EC, EI, PPPAC Meetings,
Knowledge Products, Toolkits (http://toolkit.pppinindia.com/)
Guidance Material for Health, Contract Management and Renegotiation of Contract
http://pppinindia.com/reports-policy-documents.php
http://pppinindia.com/NPBCP_images/PDFs/PostAwardContractManagementMa
nualforHighwayPPPConcessions.pdf
http://pppinindia.com/NPBCP_images/PDFs/DEVELOPING%20A%20FRAMEW
ORK%20FOR%20RENEGOTIATION%20OF%20PPP%20CONTRACTS.pdf
www.infrastructureindia.gov.in
An online database which provides information on infrastructure projects being
implemented in India including PPPs.
PPP Cell, Department of Economic Affairs, Ministry of Finance 28
Standardized Documents
Model Request for Qualification (RfQ) for PPP Projects (http://pppinindia.com/pdf/model_rfq_may2009.pdf)
Model Request for Proposal (RfP) for PPP Projects (http://pppinindia.com/pdf/modelRfp_pppProjects_30nov2007.pdf)
Model Request for Proposal (RfQ) for Selection of Financial Consultants and Transaction Advisers (http://pppinindia.com/NPBCP_images/PDFs/RFPbyDOEforTAandFC.pdf)
Model Concession Agreements (MCA) for PPP projects
MCA for National Highways (A sample CA is available at http://morth.nic.in/writereaddata/linkimages/SSL_3.pdf )
MCA for National Highways (Six Laning)
MCA for Ports
MCA for Transmission of Electricity
PPP Cell, Department of Economic Affairs, Ministry of Finance 29
1 Family Indicator Tool:
Which Type of PPP? 2 Mode Validation Tool:
Risk-based check
3 Suitability Filter:
How likely is success?
4 Financial Viability Analysis Model
Stage-wise Readiness Filters
www.pppinindia.com
Online Toolkits for PPPs
PPP Cell, Department of Economic Affairs, Ministry of Finance 30
Thank You
Abhilasha Mahapatra
Director (PPP)
Department of Economic Affairs
Ministry of Finance, Govt. of India
Visit us at:
www.pppinindia.com
www.InfrastructureIndia.gov.in