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Developer’s Perspective in PPP: An Indian Experience. A presentation by Anand Srivastava, SARPS, NDO Fiduciary Forum 2008 NCC, Lees Berg Mar 26-27, 2008. Structure. Infrastructure: Key to growth Public Private partnership (PPP) Issues Galore: Developer’s Perspective. - PowerPoint PPT Presentation
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Developer’s Perspective in PPP: An Indian Experience
A presentation by Anand Srivastava, SARPS, NDO
Fiduciary Forum 2008NCC, Lees Berg Mar 26-27, 2008
• Infrastructure: Key to growth• Public Private partnership (PPP)• Issues Galore: Developer’s Perspective
Structure
Infrastructure: Key to Growth
Growing Indian Economy
• The GDP growth ranges between 8 % to 9%• GDP expected to touch double digit growth during XI
Five Year Plan (2007-12)• Goldman Sach’s BRIC report projects India as one of
the fastest growing economy in first half of 21st century
Infrastructure Bottleneck Infrastructure is the biggest bottleneck in ‘India Growth
Story’: Dampening growth by 1.5% to 2% Transport system has severe capacity constraints:
highways, city roads/MRTS, airports, seaports and railways Urban and Utility infrastructure has collapsed: huge
demand-supply-quality gap in drinking water, sewerage system, drainage and power supply
India needs US$ 494 billion investment in the XI FYP Government alone can not bring the desired investment :
need for Public Private partnership (PPP) to augment resources and efficiency
Upto 25% of investment planned with PPP: Investment of US$ 124 bn by private sector in just 5 years
Public Private Partnership
PPP Approach
•Lack of Budgetary Resources•Need to improve efficiency in service
deliveryNeed
PPP approach
•Attract private investments for infrastructure projects
Goal
•Private Sector contribution for: - Financial investments - Best Management practices - Efficiency in service delivery - Efficient use of capital resources
•Public Sector contribution limited to: - Providing institutional commitment to
project - Project Development - Transparent & Unbiased Selection of
Developer - Viability gap funding (VGF), if any
EIRR
FIRR
Projects Amenable to PPP
Govt. to provide Viability Gap Fund for non-viable projects
Private Investment: Commercially Viable projects
FIRR: Financial IRR (commercially viable)
EIRR: Economic IRR
Issues Galore: Developer’s Perspective
1. Mindset
CURRENT SITUATION1. Owner-EPC contractor
relationship2. Contracts made with several
issues left at Govt. discretion
3. Short term contracts
4. Delays in approvals and clearance to Private sector (Pvt.) partner
DEVELOPERS’ EXPECTATION1. PPP intent is of Developing
partnership for efficient project/service delivery
2. Comprehensive Concession Agreement covering all rights and obligations of both partners with clear termination clauses and Force Majeure
3. Long term partnership with alignment of objectives to meet the project goals
4. Develop amicable relationship between the partners
2. Shelf of Projects CURRENT SITUATION
1. Inadequate Project Development (PD)
2. Low/no budget for Project Development
3. PD efforts run by staff having low exposure to PPP
DEVELOPERS’ EXPECTATION1. Bankable Project Development
2. Create Adequate & Dedicated PD fund to enable diligent PD efforts
3. Train the Government Officials and for the initial period engage competent & experienced professional bodies for developing– Adequate Techno-commercial
details– Risk analysis, allocation and
management – Project Structuring & Bid
Structuring– Concession and other
agreements
3. Environmental & Other Statutory Clearances
CURRENT SITUATION1. Obligation of Private
Developers (even for large projects e.g. Port & Hydro/Thermal power)
DEVELOPERS’ EXPECTATION1. Obligation of the Government
Entity (proponent/anchor of the project) – To be obtained before
start of bidding process (else can be kept as a Condition Precedent for Concession Agreement)
4. Land acquisition
CURRENT SITUATION1. Act provisions ambiguous,
practice varies from state to state
2. Definition of public purposes weak
3. Private developer left to the mercy of the political and social forces resulting in time & cost over-runs & adversely affecting viability
DEVELOPERS’ EXPECTATION1. Uniform and transparent
National level policies and act (to be fully adapted by all the states)
2. Infrastructure Projects under PPP to be included as public purpose
3. The land acquisition to be completed by the Govt. project proponent/anchor in advance. Land to be handed over to pvt. developers free from encroachment and encumbrances
5. Standardisation
CURRENT SITUATION1. Some amount of standard process
& documentation is followed by very few organizations like NHAI
2. Time Constrained Procurement Process, Inadequate understanding of project development cycle
3. Sometimes bids invited with inadequate project development
DEVELOPERS’ EXPECTATION1. Std Docs & Process to be
developed & followed by all Govt. agencies– Model RFQ & RFP docs– Model Concession agreement– Model Performance
Specifications2. Use Two stage competitive
bidding to ensure competent & serious bidders– RFQ (Request for
Qualification)– RFP (Request for Proposal)
3. Speedy & adequate project development & providing enough time for bid preparation
6. Streamlining
CURRENT SITUATION1. No national body to devise &
monitor process & standard documentation
2. Non-uniformity at state levels
3. Disclaimer clause in Project Information Memorandum (PIM) dilutes reliability of data
DEVELOPERS’ EXPECTATION1. National Secretariat for
Public-private Partnership
2. State PPP Secretariat under admin control of the national PPP secretariat
3. No disclaimer clause – Government/ Project Anchor should consider to own responsibility for data & results in PIM
7. Confidence Building
CURRENT SITUATION1. No third party opinion taken
on Infrastructure projects
2. The Prequalification process does not define a clear qualification criteria
3. The Judicial process fraught with delays and favors the Government on frivolous grounds
DEVELOPERS’ EXPECTATION1. Government to fund
Independent rating to for realistic risk assessment
2. An upfront and clearly defined objective qualification criteria will improve competition
3. Set-up pre-award and post-award PPP arbitration tribunals with subject matter experts
8. Viability Gap Funding
CURRENT SITUATION1. Only a few projects can wait
for cumbersome process plagued with several rounds of to-and-fro movements of files
DEVELOPERS’ EXPECTATION1. Process to be simplified &
streamlined – Professional body to be
empowered to take fast decision to make the scheme meaningful
9. Continuation of Government Policies, decisions & agreement concluded
CURRENT SITUATION1. Policies modified with change
in leadership and political formations
2. Lack of Regulators exposes Developers to the lack of focus and conflicting socio-political interests of the Government
3. Existing Concession Agreements (CA) some times overlooked while announcing new projects
DEVELOPERS’ EXPECTATION1. Consistency in policies. Protection
against “change in leadership” akin to “change in Law”
2. Bring in Regulator, ensure end users rationally pay for the services availed – Long-term tariff notifications &
part of CA
3. Exclusivity rights to be maintained as per CA– Government to Champion the
cause of PPP: Project to be awarded in Time, delay in award should attract penal provisions
– issues related to strike, unions lock out best handled by the Govt.
10. Shifting of utilities
CURRENT SITUATION1. Left to private developer with
little/no coordination by state
2. Results in Time & Cost over-runs affecting viability
DEVELOPERS’ EXPECTATION1. To be Government’s
obligation – including the interdepartmental coordination
2. To be time bound with provision of penalty for delay in completion
11. Shortage of Trained Human Capital
CURRENT SITUATION1. Quality, competent, multi-
skilled & experienced PPP professionals in shortage
2. Construction Engineers’ Shortage
3. Skilled Construction workers (Carpenter, Barbender, Masons and Plumbers etc)
DEVELOPERS’ EXPECTATION1. Start High level training
programmes/ Institutes. Allow private sectors to set-up education cities akin to SEZ
2. Set-up Engineering colleges and provide VGF & land to private sector
3. Set-up ITIs and provide Viability Gap Funding (VGF) & land to pvt. Sector to set-up vocational institutes
12. Other issues
CURRENT SITUATION1. Artificial shortage of qualified
developers with relevant experience
2. Model RFQ allows short listing of just 5 (or 6) bidders based on a variable qualifying criteria
3. Legal framework not standardised
4. Risk Pricing not fully appreciated by project proponents/anchors
DEVELOPERS’ EXPECTATION1. Qualification criteria should be
looked differently than in EPC Contracts
2. The pass-fail criteria should be declared upfront • Developers filed a suit in
court of law, protesting this will lead to cartelization
3. To be standardised
4. To be thoroughly understood to minimise the risk and thus maximise the benefits to Government
To do the same old thing the same old way And to expect some new outcome…..
That is madness
-Einstein
Thank you
BACK-UP
Project Development
Government Approvals,
Facilitation & Decision Making
PROJECT DEVELOPMENT
Techno-Economic & Market Assessment
Legal Documentation
Policy amendments and notification
Contractual and Institutional Framework
Track 2DEVELOPER
SEARCH
Expression of Interest
Request for Proposal (RFP)
Pre-Bid Conferences
Proposal Evaluation
Finalisation of Developer
Finalisation of Agreements
Project Development ProcessMARKETING &
COMMUNICATION
One-to-one meetings
Direct Mailers
Media release
Road Shows
Investor’s Conferences
Facilitating Consortia formation
Factors of Success of PPP• Demand for the services/goods where PPP is invited• Political commitment to the project and PPP• Regulatory framework• Judicial and a well defined arbitration framework• Administrative framework and readiness to meet requirements• Partnership of Public (Government) with Private Sector rather than
owner-contractor relationship
Factors of Success of PPP• Adequate project development – resulting in Bankable Projects
– provide information required to take informed decision, reduce risks and uncertainty
– level of project development depends on the intrinsic strength and viability of the project
– technical, environmental, social, financial, legal aspects, risk identification and mitigation
– risk identification and mitigation– bankability of project and project documents
Recommended