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Regional Training Institute Chennai 1 Reading Material Dcember 2014
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For Departmental Circulation only
News Clippings
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Public Private Partnership
June 2015
REGIONAL TRAINING INSTITUTE CHENNAI
Regional Training Institute Chennai 2 Reading Material Dcember 2014
TNN | May 27, 2015, 12.49AM IST
NEW DELHI: In a move to improve public private
partnership (PPP) model for infrastructure
development, the government has set up a
committee under former finance secretary Vijay
Kelkar to look into issues including the need to
introduce renegotiation clause in long-term
contracts. The committee will submit its report
within three months.
PTI Apr 20, 2015, 10.53PM IST
MUMBAI: The hybrid annuity model announced by the government that proposes to reduce risks in public private partnership format is likely to provide impetus for the next wave of PPP road projects, said ICRA.
The model is a mix of EPC and BOT formats, with
the government and the private enterprise sharing
the total project cost in the ratio of 40:60,
respectively.
Kelkar panel set up to revamp PPP model
Hybrid annuity model to boost PPP projects: ICRA
Regional Training Institute Chennai 3 Reading Material Dcember 2014
National Highways Authority of India (NHAI) had
recently laid down the guidelines for the hybrid
annuity model (HAM) in which the government
funding to the extent of 40 per cent of the project
cost will come in five equal instalments during the
construction period, thus reducing the financial
burden on concessionaire during the project
implementation phase.
"When compared with EPC projects, shift to HAM
would ease the cash flow pressure on NHAI.
Moreover, the spends can be recovered to an
extent through tolling of these stretches by NHAI
itself. Therefore, NHAI's own upfront funding
requirement will be lower in case of hybrid annuity
compared with EPC mode," ICRA's senior vice-
president Rohit Inamdar said.
He further said the hybrid annuity model will
benefit the developers as they will be required to
achieve financial closure only for 60 per cent of the
total project cost.
"Moreover, if the EPC work is taken up in-house,
the developer's net equity contribution could be
lowered further by way of potential profits that
would be earned in EPC business. Further, annuity
nature of the projects would eliminate traffic
Regional Training Institute Chennai 4 Reading Material Dcember 2014
related risks thereby improving ease of financial
closure and refinancing ability post project
completion. HAM would also attract more private
sector participation," he said.
Inamdar, however, observed that a lot would
depend on NHAI's ability to ensure 100 per cent
right of way and approvals before awarding these
projects and the variation between it and
developers' cost estimates.
The FY16 Budget proposes to introduce Public
Contracts (Resolution of Disputes) Bill for speedy
dispute resolution, a positive development given
that around Rs 20,000 crore worth claims are
pending with NHAI.
"If the dispute resolution process is expedited and
frees up the stuck capital under arbitration claims,
the liquidity position of some developers could
improve significantly.
"There has been demand for setting up a regulator
for the sector for resolution of disputes between
contractor or developer and NHAI, as they feel that
the present dispute redressal method is time
consuming and costly thus inefficient, the
Regional Training Institute Chennai 5 Reading Material Dcember 2014
introduction of this Bill could address their
concern," he said.
By Rajat Arora, ET Bureau | 16 Apr, 2015,
NEW DELHI: Indian Railways is on track to take the
e-auction route for the first time for
redevelopment of stations through public-private
partnership (PPP).
The cash-strapped operator is working on a policy
for e-auctioning contracts for about 100 railway
stations in a bid to overcome the bureaucratic
hurdles faced by private companies while
undertaking PPP projects, a top railway board
Railways to E-auction 100 stations for redevelopment via public-private partnership
Regional Training Institute Chennai 6 Reading Material Dcember 2014
official said. The official said private players will be
able to submit their bids online, after which a
technical committee will study and approve the
bids. He added that private players tasked with
converting the railway stations into world-class
transit facilities will be given a specified area within
the station premises and around it to be exploited
commercially.
"The space given to companies for commercial
development will be such that they get decent
returns. Joint ventures will be formed at the
divisional level for the project," the official said.
Regional Training Institute Chennai 7 Reading Material Dcember 2014
"We have proposed a very transparent and swift
procedure, which is a giant leap from whatever we
have tried earlier in the PPP space," the official
said.
Indian Railways is now working on the list of
stations which will be offered to private companies
for redevelopment. "The number and names of
stations are not confirmed but we hope to start
with around 100 stations in all zonal railways
including major tourist destinations which receive a
heavy footfall," the official cited earlier said.
Railways reported an operational ratio of 93.5% in
2013-14, leaving it with little funds to finance
upgrade and modernisation of rail infrastructure.
TNN | Mar 20, 2015, MUMBAI
Citizens can now seek information under the Right
to Information Act from Mumbai Metro One
Private Limited (MMOPL) that runs the Versova-
Andheri-Ghatkopar metro.
In a landmark judgment, state chief information
commissioner Ratnakar Gaikwad and Mumbai
Mumbai's metro I, a PPP project, comes under RTI
Regional Training Institute Chennai 8 Reading Material Dcember 2014
information commissioner A K Jain ruled that
"considering the quantum of financial support of
the government in terms of viability gap funding,
26% equity holding, concessional grant of nine
hectares of government land for the metro car
shed and the fact that the entire project is on the
public right of way, the project of MMOPL is
controlled and substantially financed by the
government. The company is therefore to be
treated as a public authority for the purpose of the
RTI Act, 2005".
It adds that as per the Concession Agreement,
MMOPL, a public private partnership project
between Reliance Infrastructure and MMRDA, is
obligated to fulfil various conditions while
operating the metro and failure would enable
MMRDA to terminate the contract.
Regional Training Institute Chennai 9 Reading Material Dcember 2014
Metro III is funded by the state and Centre (50-50)
and will automatically come under RTI.
Last December, former central information
commissioner Shailesh Gandhi was directed to the
MMRDA when he sought copies of the inspection
report given by the commissioner of metro rail
safety from MMOPL. He filed a complaint before
the state information commissioner, pointing out
that since the government had substantially funded
the Metro project, including providing the metro
car shed at a nominal rent of Re 1 as well as the
public right of way, it has to be treated as a public
authority. He added that three of the eight
directors of MMOPL were public servants.
The commission has directed the MMOPL to "take
all necessary measures including the appointment
of Public Information Officers in accordance with
the RTI Act and furnish the information demanded
by the complainant within a month of the receipt
of the order.''
Gandhi said: "The decision becomes very important
since it effectively establishes that most PPPs are
public authorities as defined in the RTI Act and
should appoint Public Information Officers and
provide information to citizens of the country."
Regional Training Institute Chennai 10 Reading Material Dcember 2014
MINT THU, FEB 12 2015. New Delhi
India’s zoos should be managed as public-private
partnerships (PPPs), the environment ministry has
proposed in a bid to involve the public and infuse
more funds in animal conservation. The ministry
has suggested that zoos encourage animal
adoption by individuals as well as companies. The
practice is common in many countries, where zoo
authorities allow people, especially children, to
adopt animals for days, weeks or years for a
payment, or make a gift of adoption. Some zoos in
southern India offer adoption schemes and the
environment ministry aims to push it across the
country. “The idea is being seriously considered
and soon a decision will be taken on it,” a ministry
official said, requesting anonymity. The Delhi zoo
has a proposal for such a scheme. Some 620 million
people visit zoos every year around the world. Of
them, more than half the visits take place in Asia
and over 50 million in India alone. There are
around 200 zoos in India and their activities are
regulated by the Central Zoo Authority, which is
overseen by the ministry.
PPP model mooted for zoos
Regional Training Institute Chennai 11 Reading Material Dcember 2014
TNN| Feb 17, 2015, CHENNAI
A rabid combination factors — poor progress in
awarding road contracts coupled with changed
policies for the same — has forced France-based
Vinci Concessions, the world's largest construction
and concessions company, out of India.
"Vinci has wound down its Indian operations which
was headquartered in New Delhi. The company has
sent home its associates and only very few
remain," sources told TOI. While the source said
that the key reason for the pullout was the
government's changed policy to award road
contracts on an EPC basis or cash contracts rather
than PPP or public private partnership which does
not fit into Vinci's plans.
Vinci is active in India through its contracting-
related speciality companies such as Soletanche,
Freyssinet, Nuvia or Entrepose (all part of Vinci
Construction) and through recent acquisitions for
Vinci Energies in manufacturing systems
(Vasundara) or construction and public works
company for Eurovia," the spokesperson said.
France's Vinci Concessions exits
India on poor road business
Regional Training Institute Chennai 12 Reading Material Dcember 2014
Europe's largest construction and concessions
company, which operates half of France's
motorway concessions over a network of 4,386
kilometers, besides interests in roads, highways,
stadiums and airports, has been bidding for
highway projects here in equal partnership with
Hindustan Construction Co, but has been unable to
secure any such project.
"Just when Vinci was planning aggressive bidding
for contracts and concessions here, its JV partner
was fighting a battle on the Lavasa front," the
source said.
Several Indian road contractors have been
knocking on the doors of the government for
bailouts. Consolidated Construction Consortium,
Hindustan Construction Co and Lanco have all
approached the corporate debt restructuring (CDR)
cells, seeking recast of debt, while several others
have stretched or fully leveraged balance sheets.
Road sector regulator NHAI too has scaled down
and changed its business plans. From the earlier
PPP route, NHAI has now decided to award
contracts on EPC basis which does not fit into
Vinci's scheme of things, sources said. Also, EPC
contracts can take off only when 90% land required
for project is acquired. Besides, NHAI has reduced
its fresh order for road contracts sharply as there
Regional Training Institute Chennai 13 Reading Material Dcember 2014
operators are reluctant to bid for these. In some
cases, operators have walked out of the contracts
after winning contracts.
Vinci Concession India clocked a revenue of 200
million in the last fiscal and is currently involved in
active bids for highway projects.
By PTI | 24 Feb, 2015, NEW DELHI
Government is seeking overseas investment for
infrastructure projects worth over $ 75 billion in
sectors like power, roads and railways over the
next few years. That includes highway projects
worth $ 6 billion to be implemented in the next few
years. "As many as 26 projects worth $ 3.6 billion
are in final preparation stages before
implementation, 9 are ready to be bid out and 16
are at various stages of the bidding process,"
according to a DIPP paper -- Investment
Opportunities in India.
The value of roadways and bridge infrastructure in
India is expected to grow at a CAGR of 17.4 per
cent between 2012-17 to reach $ 10 billion. "The
PPP model will continue to be the favoured way of
Government seeks foreign funds for
infrastructure projects worth over $75 billion
Regional Training Institute Chennai 14 Reading Material Dcember 2014
executing the remaining NHDP phases," the paper
said. There has been an unprecedented increase in
cargo handling capacity from 575 Million Metric
Tonnes (MMT) in 2009 to 800 MMT in February
2014.
As part of the government's efforts to actively
focus on development and up gradation of
capacities across all coastal states projects in
shipping for the next few years’ worth $ 9 billion
will be implemented. In the power sector four
thermal power projects with installed capacity of
more than 8,200 MW will be out for bidding in
2015-16. About 10 projects in power sector worth
over $ 19 billion will be implemented in the next
five years, said the DIPP paper, which was part of
the booklet circulated among wealthy sovereign
funds during the India Investors Summit held on
February 3.
Government has set a target of producing 100 GW
of solar power by 2020 and the country offers
unlimited growth potential for the solar
photovoltaic industry. Government has allowed
100 per cent FDI in the railway infrastructure
segment which has opened up opportunities for
participation in projects such as high-speed
Regional Training Institute Chennai 15 Reading Material Dcember 2014
railways, railway lines to and from coal mines and
ports, electrification and suburban corridors.
"Indian Railways has begun exploring the PPP
mode of delivery and aims to award projects
through the PPP route," the DIPP paper
added. Railway projects worth over $ 42 billion in
the next few years are likely to be implemented.
The government also proposes to execute
infrastructure projects on PPP basis across the
various infrastructure sectors. Out of 26 road
projects eight are on PPP basis. Of the 11 projects
in the ports and shipping sector, 90 per cent will be
executed on PPP basis. As many as 10 power
projects in the next financial year will be built on
PPP mode. "Majority of projects in railways
proposed for FY 2015-16 are on PPP basis," it said.
"The National Tariff Policy ensures adequate return
on investment to companies engaged in power
generation, transmission and distribution and to
companies producing assured electricity to end
users at affordable and competitive rates," said the
paper.
Regional Training Institute Chennai 16 Reading Material Dcember 2014
DNA Thursday, 26 March 2015 -New Delhi
It's not just the HR matters but also the lack of in-
principle nod of the Public-Private-Partnership
Appraisal Committee (PPPAC) that is hampering
the privatisation process of the four airports
undertaken by the ministry of civil aviation, said an
Airports Authority of India (AAI) source.
As per the government rule, approval from this
committee formed for any PPP project is crucial
before inviting expression of interest from the
prospective investors. The government has already
floated the request for qualification (RFQ) for
operation, development and management of
Chennai, Kolkata, Jaipur and Ahmedabad airports.
"We had raised this issue (nod from the PPPAC
before inviting expression of interest) with the
ministry in our last meeting (about two months
back) and were told that it would be taken in due
course of time. How can they move ahead with the
bidding process without the committee's in-
Regional Training Institute Chennai 17 Reading Material Dcember 2014
principle clearance," said a source in the state-
owned airport firm AAI.
The PPPAC consists of secretaries from
departments of economic affairs, planning
commission, expenditure and legal affairs, along
with the secretary of department to which the
project is related to.
The source said, in the case of the privatisation of
the Chennai, Kolkata, Jaipur and Ahmedabad
airports, which would be done through the PPP
mode, such an in-principle clearance has not been
taken.
This is in violation of the PPP guidelines, which
states: "The ministry concerned may develop
individual proposals using legal, financial and
technical consultants and also avail the benefit of
an inter-ministerial consultative group, if
necessary. The proposal as formulated by the
ministry would be considered by the PPPAC for in
principal clearance before inviting expressions of
interest from prospective investors".
Regional Training Institute Chennai 18 Reading Material Dcember 2014
Abhijeet Patil, TNN | Mar 26, 2015 KOLHAPUR
The Kolhapur Municipal Corporation (KMC) will
revise the detailed project reports (DPRs) prepared
for rehabilitation of slum-dwellers and include the
road map for execution of projects on the basis of
public-private-partnership (PPP) mode of
financing.
The decision was taken after the Union
government decided to launch a new scheme
called Sardar Patel Urban Housing Mission which
will include earlier schemes for slum rehabilitation
such as the Rajiv Awas Yojana, Indira Awas Yojana
and Rajiv Rinn Yojana. The KMC had drafted the
projects based on the guidelines of the Rajiv Awas
Yojana which emphasised on granting funds
through Union and state governments. Also, the
civic bodies were told to raise 25% funds of the
total project cost, thus burdening the civic finances
further.
The KMC has now prepared the draft report for
three slums: Subhashnagar, Kapoor Vasahat and
PPP model to fund slum rehab plan Authority of India
Regional Training Institute Chennai 19 Reading Material Dcember 2014
Bondre Nagar. The DPR for Subhashnagar was sent
to the state government for primary approval
about a year back. Owing to lack of separate
finances, the government has not yet approved it.
The total cost of constructing houses for 165
families from Subhashnagar slum was around Rs 9
crore as per the district standard rates (DSR) for
2014.
Prasad Sankpal, programme coordinator for slum
rehabilitation, said, "As per the Rajiv Awas Yojana,
the KMC and the state government were supposed
to contribute 25% each of the total cost of the
project and remaining was to be borne by the
Union government. However, the Centre recently
announced a new scheme for the urban poor and
has decided to prioritize the projects based on PPP
financing model. We are going to revise the DPRs
as per the changed funding pattern. Also we are
waiting for the new guidelines related to
assessment of slums under the new scheme to
finalise the DPRs."
The G+3 houses each of 270 sq. ft carpet area
comprising a living room, bedroom, kitchen and
separate bath and toilet and other facilities was to
be provided under the Rajiv Awas Yojana. The cost
of a single house came to around Rs 3.75 lakh. The
Regional Training Institute Chennai 20 Reading Material Dcember 2014
DPR included the cost of both houses and
infrastructure development such as roads, drainage
and water supply. Along with the existing 54 slum
pockets including 44 notified and 10 non-notified
slums, nine new slum pockets have been identified
during the total station survey conducted by KMC.
"We are in the final stage of completing the socio-
economic survey of all slums. The DPRs of slums at
Shenda Park, Sarnaik Colony and Temblai Naka are
in the final stages of completion. We will submit
the DPRs of all these slums once they are revised as
per the new guidelines," said Sankpal.
Slum rehabilitation is important for the city since
according to the city development plan, in 1995,
the total slum population was 56,235 which was
11.60% of the city's total population. According to
the 2001 census, the city's slum population
increased to 67,462, which was 13% of the total
population. The increase in the slum population
shows increasing trend since last two decades as the
slum population in the city according to the 2011
census has reached to 94,650, which is 15% of the
total population.
Regional Training Institute Chennai 21 Reading Material Dcember 2014
BS Reporter Chennai March 21, 2015
E Sreedharan, known for his role in the
development of the Konkan Railway and
Delhi Metro Rail, today said that building metro
rails under the Build-Operate-Transfer (BOT) or
public private partnership (PPP) models is not
viable. Metros, he said, are highly capital intensive.
For example, if it is an elevated type of Metro, the
cost will be something like Rs 200 crore per
kilometer. If it is an underground one, it is around
Rs 450 crore per kilometer. The returns for Metro
Rail are very slow, mainly because of the
compulsion to keep the ticket prices low, he said.
"Maximum one can charge two times of the
existing public transport charges. With this kind of
return, no Metro can make profit," Sreedharan
added.
An internal rate of return, generally for a Metro will
be about 0.5% or even minor. In this case, no
private party will come out to invest in the project.
An investor expects a return of at least 15%, he
said.
Building Metro rails under BOT or PPP
models not viable: E Sreedharan
Regional Training Institute Chennai 22 Reading Material Dcember 2014
"Therefore, Metro Rail is not the area for Build-
Operate-Transfer or PPP model," explained
Sreedharan.
He said the PPP model was tried in the case of
three Metros in India. One was the Airport-line in
Delhi Metro, where the entire civil cost was
undertaken by the government and only the
system cost and the trains were run by another
party. Within one and half year, the private partner
abandoned the project.
In case of Mumbai Metro phase I, first line of 11
kilometers, in spite of a very heavy ridership, the
revenue was not even able to meet the interest
liability of the loan taken by the private partner.
For Hyderabad Metro, the first attempt to get a
private partner was not successful and now L&T
has taken up the project. "Since L&T is a very
prestigious organisation, they will finish the work.
But they will have to pay a very heavy price for
taking that private venture," said Sreedharan.
On Bullet trains, he said, "At the present state of
the economy, we cannot afford a bullet
train. Bullet trains are expensive and power
guzzlers. A bullet train would cost around Rs 150-
160 crore per kilometer. I dont think at present
Regional Training Institute Chennai 23 Reading Material Dcember 2014
state of economy, we should invest money in such
trains. We should upgrade our existing train
services, modernise it, bring more speed and make
it more comfortable. We should have bullet train,
but we should wait for some more time."
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