89 Chapter 4 Project Development with Public Private Partnership A PPP is an arrangement between a public (government) entity & a private (non-government) entity by which services that have traditionally been delivered by the public entity are provided by the private entity under a set of terms and conditions that are defined at the outset. Definition of PPPs in India PPP means an arrangement between a government or statutory entity or government owned entity on one side and a private sector entity on the other, for the provision of public assets and/ or related services for public benefit, through investments being made by and/or arrangement undertaken by the private sector entity for a specified time period, where there is a substantial risk sharing with the private sector and the private sector receives performance linked payments that conform (or are benchmarked) to specified, pre-determined and measurable performance standards. PPPs can follow a variety of structures and contractual formats. However, all PPPs incorporate three key characteristics: a. A contractual agreement defining the roles and responsibilities of the parties, b. Sensible risk-sharing among the public and the private sector partners, and c. Financial rewards to the private party commensurate with the achievement of pre-specified Outputs. Essential conditions in the definition 1. Arrangement with Private Sector Entity: The asset and/or service under an arrangement will be provided by the Private Sector Entity to the public. 2. Public asset or service for public benefit: Has the element of facilities/ services being provided by the Government as a sovereign to its people. To better reflect this intent, two key concepts are elaborated below: (a) ‘Public Services’ are those services that the State is obligated to provide to its citizens (towards meeting the socio-economic objectives) or where the State has traditionally provided the services to its citizens. For example, provision of security, law and order, electricity, water, etc. to the citizens. (b) ‘Public Asset’ is that asset the use of which is inextricably linked to the delivery of a Public Service. or example, public road which is linked to public transportation. OR, those assets that utilize or integrate sovereign assets to deliver Public Services. For example, right of way on highways, or use of river / water bodies,etc.
Chapter 4 PPP.modProject Development with Public Private
Partnership
A PPP is an arrangement between a public (government) entity &
a private (non-government) entity by which services that have
traditionally been delivered by the public entity are provided by
the private entity under a set of terms and conditions that are
defined at the outset. Definition of PPPs in India PPP means an
arrangement between a government or statutory entity or government
owned entity on one side and a private sector entity on the other,
for the provision of public assets and/ or related services for
public benefit, through investments being made by and/or
arrangement undertaken by the private sector entity for a specified
time period, where there is a substantial risk sharing with the
private sector and the private sector receives performance linked
payments that conform (or are benchmarked) to specified,
pre-determined and measurable performance standards. PPPs can
follow a variety of structures and contractual formats. However,
all PPPs incorporate three key characteristics: a. A contractual
agreement defining the roles and responsibilities of the parties,
b. Sensible risk-sharing among the public and the private sector
partners, and c. Financial rewards to the private party
commensurate with the achievement of pre-specified Outputs.
Essential conditions in the definition 1. Arrangement with Private
Sector Entity: The asset and/or service under an arrangement
will be provided by the Private Sector Entity to the public.
2. Public asset or service for public benefit: Has the element of
facilities/ services being provided by the Government as a
sovereign to its people. To better reflect this intent, two key
concepts are elaborated below:
(a) ‘Public Services’ are those services that the State is
obligated to provide to its citizens (towards meeting the
socio-economic objectives) or where the State has traditionally
provided the services to its citizens. For example, provision of
security, law and order, electricity, water, etc. to the citizens.
(b) ‘Public Asset’ is that asset the use of which is inextricably
linked to the delivery of a Public Service. or example, public road
which is linked to public transportation. OR, those assets that
utilize or integrate sovereign assets to deliver Public Services.
For example, right of way on highways, or use of river / water
bodies,etc.
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The advantages of PPP include: • Access to private sector finance •
Efficiency advantages from using private sector skills and from
transferring risk to the private
sector • Potentially increased transparency • Enlargement of focus
from only creating an asset to delivery of a service, including
maintenance
of the infrastructure asset during its operating lifetime • This
broadened focus creates incentives to reduce the full life-cycle
costs (ie, construction costs
and operating costs) All of these provide strong reasons in favour
of using PPPs in India and elsewhere. • Benefits to people
o Better quality of service – National Highways, Telecom, Air
travel o Decreased user fees – Telecom and Air travel o Happy that
Government using taxes not for salaries but for general public –
High tax
payers
• Benefits to private sector o Return on investment – Paradise
Island o Business opportunity – Hotel Metropole, Mysore o Long term
involvement and guaranteed income due to lower market risk –
BIAL
Airport
• Disadvantages of PSP o Only profit – no service – Cable TV,
public transport crowded o Private monopoly – Courier services v.
Speed Post o Stay till profitable and default o Governments
expectations high especially in commercial properties
Need for PPP Economic reasons - Inadequacy of resources –
leveraging on lower government funding Optimal transfer of risks –
to the entity best suited to manage the risks
− Design, Financing, Construction, Operations and Maintenance – all
are commercially understood and manageable
− Change of scope, defective designs, time overrun, cost overruns,
leakage of revenues, high maintenance costs
Transfer of responsibilities – efficiency gain − Appropriate
technology, innovative design solutions, project management,
better
collection practices, life cycle costing Enhanced bankability –
more rigorous project preparation Incentive to deliver whole life
solution – not just asset creation Focus shifts to service delivery
– integrated with construction, measurement of quality &
payment linked to service delivery Acceleration of programme –
time-bound implementation Better overall management of public
services – transparency in prioritisation, selection and
ongoing implementation
PPP Options
Features of PPP Genuine risk transfer
− All risks pertaining to design, building, financing and to the
private entity
− Transfer of demand risk depends on the extent to which the
private sector can influence usage
Output based Specifications − Contracts specify the service outputs
required rather than asset
configuration/mode of se − Emphasis on type of service &
performance standards − Private entity incentivised to deliver
outputs using innovation in design,
construction, operation and financing Whole life asset
performance
− Private entity takes responsibility & assumes the asset and
delivery of service over a long term
Payment for Performance Revenue/ Payment to private entity is
subject to performance in relation to specific & quantified
criteria enshrined in the contract
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All risks pertaining to design, building, financing and operation
transferred to the private entity Transfer of demand risk depends
on the extent to which the private sector can influence usage
Output based Specifications Contracts specify the service outputs
required rather than asset configuration/mode of service delivery
Emphasis on type of service & performance standards Private
entity incentivised to deliver outputs using innovation in design,
construction, operation and financing
Whole life asset performance Private entity takes responsibility
& assumes risk for the performance of the asset and delivery of
service over a long term
Payment for Performance Revenue/ Payment to private entity is
subject to performance in relation to specific & quantified
criteria enshrined in the contract
operation transferred
Transfer of demand risk depends on the extent to which the private
sector
Contracts specify the service outputs required rather than
asset
Private entity incentivised to deliver outputs using innovation in
design,
risk for the performance of
Revenue/ Payment to private entity is subject to performance in
relation to specific &
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PPP Models
Item Service Contract Mgt, Contract Capital Finance Public Public O
& M Private Private Duration(Yrs) 1-2 Yrs 3-5 Yrs Commercial
Risk Public Public Concession BOT Capital Finance Private
Private
O & M Private Private Duration 20-30 Yrs 20-30 Yrs Commercial
Risk Private Private
Management Contract • Coverage (1) O & M (2)Leak Reduction (3)
Energy Savings(4)Billing and Collection • Duration : 3-5 Years •
Advantages: Integrated Approach • Issues: Existing Staff Policy
Review Needed
CONCESSION CONTRACT
• Coverage: O& M, Leak Detection, Energy Savings, Billing and
Collections & Capital Investment
• Duration: 20-30 Yrs. • Advantages : Expertise of Pvt. Operator
fully utilised • Issues: Long Period/No regulatory framework
Service Contract • Coverage: O & M of distribution system,
pumping stations and filtration plants • Duration: 1-3 Years •
Advantages: No major changes required/Efficiency • Issues: No
Commercial Risk by Operator/Management of the Contract requires
efforts Contractual Framework of PPP projects
All intentions need to be set out in a contract Concession
Agreement - bundle of rights & obligations and consequences in
case of non-
fulfillment Usually the only tangible security available
Contracting parties : Government Agency – Concessioning Authority
and Private Party –
Concessionaire
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Other parties – state government, Lenders, Suppliers of services A
concession is a license – rights enjoyed for obligations
performed
Issues
Striking a balance between differing concerns & objectives of
parties Legislative Back up Rights and obligations of parties
Identification and allocation of risks Penalties and rewards which
would ensure performance
Broad Roles & Responsibilities
Government Agency Providing Project Site/ Assets Environmental
Clearances Specific Obligations (e.g. timely clearances, support
infrastructure facilities) Regulatory Functions
Concessionaire Designing, Engineering, Financing Construction/
augmentation / upgradation Operation and Maintenance Payment and
other obligations Transfer of assets at expiry of concession
period
In exchange the concessionaire has the right to receive revenue –
tolls or annuity or any other mechanism
Other Key Elements
Bankability Issues − Concessionaire’s ability to assign rights −
Lenders’ step-in rights − Charge on project assets and
enforceability − Critical Events and consequences
Force Majeure Events of Default
− Remedial process in case of default/ events leading to
termination − Protection of debt in the event of termination
Supporting Provisions − Dispute Resolution Mechanism −
Re-negotiation in good faith − Termination as a last resort −
Preferential treatment in re-bidding
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• Viability Gap Funding (VGF) Scheme • India Infrastructure project
Development Fund (IIPDF) • India Infrastructure Finance Company
Limited – A scheme for financing viable
infrastructure projects through special purpose vehicle VGF scheme
& how to avail it?
Revolving fund Rs. 200 crores Project gets the fund during
implementation In the form of grant and is monitored by GoI PPP
projects only Project implementation by private entity Private
entity to be selected through open competitive bidding Bid criteria
amount of VGF required by private entity Project based on contract
or concession agreement Service to be rendered on payment at a
pre-determined tariff or user charge
Admissible sectors
Roads and bridges, railways, seaports, airports, inland waterways
Power Urban transport, water supply, sewerage, solid waste
management and other
physical infrastructure in urban areas Infrastructure projects in
SEZ International convention centres and other tourism
infrastructure projects
India Infrastructure Project Development Fund
GoI has set up a fund called IIPDF Initial corpus - Rs. 100 Crore
Objective to assist States & encourage PPP Upto 75% of
development costs borne IIPDF replenished from successfully bid
project and topped up with budget support If bid
successful–interest free loan otherwise deemed as grant
The Guidelines for the Viability Gap Funding (VGF) scheme of
Ministry of Finance- Guidelines for Financial Support to Public
Private Partnerships in Infrastructure’ defines PPPs as- a project
based on a contract or concession agreement, between a government
or statutory entity on the one side and a private sector company on
the other side, for delivering an infrastructure service on payment
of user charges. The Scheme and Guidelines for the India
Infrastructure Project Development Fund, issued by Ministry of
Finance, Government of India define PPPs as- Partnership between a
public sector entity (Sponsoring authority) and a private sector
entity (a legal entity in which 51% or more of equity is with the
private partner/s) for the creation and/or management of
infrastructure for public purpose for a specified period of time
(concession
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period) on commercial terms and in which the private partner has
been procured through a transparent and open procurement system.
The preface of the Guidelines for Formulation, Appraisal and
Approval of Public Private Partnership Projects mentions that
unlike private projects where prices are generally determined
competitively and government resources are not involved, PPP
infrastructure projects typically involve transfer of public
assets, delegation of governmental authority for recovery of user
charges, private control of monopolistic services and sharing of
risks and contingent liabilities by the Government. Protection of
user interests and the need to secure value for public money demand
a more rigorous treatment of these projects.
Comparative Table of Highlighting Core Elements that Define
PPP
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STEPS IN PPP • Unbundling • Identify parts amenable to PPP • Select
Mode of Privatization - Divestiture assets/Rights are Sold or
Transferred for BOO, BOOT etc.) - Contracting Out - Financing -
Deregulation - Invite Bids - Assess the Bidding - Selection of Bids
- Preparation of Contract - Award of Contract - Monitoring,
Evaluation and Impact Assessment PPP Toolkit of GoI The Government
of India has developed PPP Toolkit a web-based resource that has
been designed to help improve decision-making for infrastructure
PPPs in India and to improve the quality of the PPPs that are
developed. The Toolkit is for use by PPP practitioners across India
in both the public and private sectors. It has been designed with a
focus on helping decision-making by Project Officers at the
Central, State and Municipal levels. Other users, including PPP
practitioners in the private sectors, will also find the material
useful. PPP process:
• Phase 1: PPP identification, covering strategic planning, project
pre-feasibility analysis, PPP suitability checks, and internal
clearance to proceed with PPP development
• Phase 2: Full feasibility, PPP preparation and project clearance,
covering project appraisal including a full feasibility study, PPP
preparation including draft documents, and in-principle
clearance
• Phase 3: PPP procurement, covering procurement, final drafts of
bidding documents, final approval and project award
• Phase 4: PPP contract management and monitoring, covering project
implementation and monitoring over the life of the PPP
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• The PPP process
Phase 1 takes place before projects are allowed to enter to the
development pipeline. The purpose of Phase 1 is to ensure a quality
pipeline of PPPs. This is a very important Phase. Projects that are
in Phase 2 or Phase 3 are in the ‘PPP development pipeline’. This
means they are under detailed study, development and (if they are
good enough) procurement as a PPP. Projects that are successfully
developed through to award of a contract to a private bidder then
enter the operations Phase, covered in Phase 4. In most cases Phase
4 is the longest Phase in the life of a PPP. This Phase is focused
on monitoring the terms of the contract to ensure that the
infrastructure services are delivered to the agreed standard. For a
PPP to be successful the Sponsoring Authority must remain engaged
with the project throughout its operating life. The toolkit
includes a series of Readiness Checks at key points in the PPP
process. At each of these checks the project must prove that it is
ready to continue to further development as a PPP. If a project is
not ready it must either be improved or it should exit the process
altogether to make way for a higher quality project. For this
reason, a project is called a ‘potential PPP’ until it has been
given final approval by the relevant Authority in Phase 3. A set of
tools has been developed to assist the analysis and decision making
of potential PPPs. These tools are used at several stages in the
PPP process. The tools are: • PPP family indicator tool, to show
typical options for PPP mode in the sector, and to give a
starting indication of which PPP ‘family’ might be right for the
particular project. PPP Mode Validation tool, to use a risk
allocation analysis to help decide further which PPP mode the
project is best suited to
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The PPP Suitability Filter, to test how well suited the project is
to being a PPP. Used in Phase 1 during the selection of projects
for PPP development.
• PPP Financial Viability Indicator Model, to analyse the key
questions of financial viability and test these using ‘what-if?’
scenarios. Used in Phase 1, Phase 2 and Phase 3.
• VFM Indicator Tool, to help check how likely the project is to
provide value-for-money to the public sector. This is used in Phase
2 and Phase 3.
• Readiness Filter, to check that all the important steps have been
followed and that the
project is suited to further PPP development. Used in all Phases
during the Readiness Checks.
Strategic Planning Exercise Preliminary needs assessment
study
• The key drivers for planning an infrastructure programme are the
service needs of the end-users. An overall needs assessment should
be carried out taking account of the types of services users will
need, total user demand for those services, and all sources of
existing and planned delivery of services.
• Planning for infrastructure services that are provided by assets
with long lives should include a needs assessment that covers a
correspondingly long period. This requires a holistic view taking
account of factors that might affect the level and location of
demand, including expected and planned urban and industrial
development.
• Infrastructure services can be defined and measured in total for
all users and broken down into totals for specific groups of users.
The strategic plan should provide at least a preliminary assessment
of needs for user groups that would be served by particular
infrastructure assets or integrated systems. These can then be
mapped to individual project interventions.
• Defined services in the roads sector would include vehicle
kilometres, peak-hour flows.
• Examples of specific user groups include roads sector users of a
particular route or corridor, such as commuter traffic, light
commercial vehicles, buses, multi-axle vehicles etc.
Pre-feasibility analysis The pre-feasibility of the project should
include the following preliminary analysis::
• Needs and options analysis • Legal feasibility • Technical
feasibility • Scoping social/environment safeguards analysis
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• Preliminary financial viability including expectations of
required Government financial support • Institutional capability
analysis • Identification of next steps required
Full feasibility study and PPP due diligence Contents of the full
feasibility study The analysis and information contained in a
feasibility study will in general include those listed below. Each
of these is a detailed separate section of the toolkit. Sector
specific contents of feasibility studies are given in the tools
section. The general contents of a feasibility study include:
• Market analysis and project scope, to assess the need for and
appropriate scope of the project, building on the work already done
at the strategic planning and pre-feasibility stage. This would
include:
o Needs analysis – does the project meet an end-user need? Does it
contribute to meeting the objectives of the sponsoring authority?
Who will the users be?
o Options analysis – what is the best option for meeting the
service need: a no-asset solution, existing assets, or new
assets?
o Define the output – what services will the project provide?
o Estimate and forecast demand – what level of demand is there for
the outputs / services from
the project, and how much are users willing to pay (what is the
value of the demand)?
• Social and environmental feasibility, including the requirements
for impact assessments and for the associated mitigations
• Technical feasibility and technical parameters based on the
market analysis, including specification of required facilities and
scenarios of project size, for use in preliminary project
design
• Risk studies and refined PPP mode – Assessment of the risks
associated with the project,
study of which party is best able to bear each risk, and refinement
of the PPP mode selected at the pre-feasibility stage
• Preliminary cost assessment, to within a sufficient range based
on the technical specification
and assessed project risks
• Financial analysis and due diligence, incorporating a projected
revenue structure (eg. Proposed tariff, required annuity) and
assessing any need for financial support from the public
sector
Economic feasibility – Assessment of overall net economic benefit
of the project, incorporating estimated project benefits and costs
including non-market factors such as those from the social and
environmental assessment.
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• Other PPP due diligence activities, including value-for money
analysis if data is available
• Project implementation schedule, including an outline of the
proposed PPP procurement and award process through to technical and
financial close, an outline of the construction schedule and target
operation date, and any phasing that is planned for project
extensions or ongoing development.
Social and environmental feasibility Infrastructure projects will
often have significant social and environmental impacts arising
from their construction and operation, which can be both positive
and negative. The impacts may include flow-on effects beyond the
immediate project area and beyond the people directly associated
with the project (secondary impacts). Social impacts on communities
affected by the project include, for example, requirements for
resettlement and the associated impact on quality of life and
livelihoods, and impacts related to environmental alteration (eg on
health and livelihoods) Environmental impacts on the project
location and in associated areas (eg downstream, ground water or
ambient air) include effects on environmental resources due to
alterations or pollutants It will often by a mandatory regulatory
requirement for assessments of social and environmental impacts to
be carried out during infrastructure project development. The scope
of social and environmental studies can cover:
• Quantifiable social and environmental costs and benefits • Non
quantifiable social and environmental costs and benefits • Options
for mitigating adverse impacts and the cost of mitigation.
The secondary effects should be included in the assessment. Public
consultation is often a part of the social and environmental
feasibility process. The analysis should identify what type of
social and environmental impact studies are needed, and the type of
permits and licenses required, and should take into account health
and safety standards. This information will assist the sponsor with
the preparation of tender documents if the project is taken to
market, and will assist bidders with the preparation of risk
minimising bids. The final assessment of environmental and social
costs and benefits is an input to the economic assessment of the
project. Therefore, in addition to being a requirement from a legal
and regulatory perspective, the social and environmental analysis
is an important part of the assessment of the project’s overall
welfare impact, as captured in the economic analysis. Environmental
Clearance and EIA Under Central Government regulation,
Environmental Clearance (EC) must be gained for all physical
infrastructure projects that meet certain thresholds. An
Environmental Impact Assessment (EIA) report is often a key
requirement as part of the process of gaining
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Environmental Clearance. In the recent past an EIA has been a
particularly stringent requirement for road related projects (such
as Highways). EIA is governed within the EC process. In some cases
a preliminary EIA is carried out at the feasibility stage and a
complete assessment takes place during procurement. In other cases
the full EIA will be carried out as part of or in parallel to the
feasibility study. Depending on the regulatory regime, final
approval may depend on the EIA being satisfactory and that there
are no major adverse environmental impacts which can not be
mitigated. The whole environmental clearance process can take a
year depending on the complexity of the project. This must be
factored into the PPP development plan. Environmental Clearance is
regulated at the Centre by the Ministry of Environment and Forests
(MoEF), which is the nodal agency. The requirements are specified
in MoEF’s draft Environmental Impact Assessment Notification (2006)
(the Notification was modified in 2009 but remains in the draft
stage). Environmental Clearance is mandatory under the
Notification. In addition to formal environmental impact analysis,
environmental laws and regulations may also require:
• Mitigation plan • Environmental monitoring plan • Approvals from
the State Forest Department or Central / State Pollution Control
Boards, if
required Social impact analysis / social feasibility Social Impact
Assessment (SIA) is a process that provides a framework for
prioritizing, gathering, analyzing, and incorporating social
information and participation into the design and delivery of
projects. It ensures that infrastructure project development
is:
• informed and takes into account the key relevant social issues,
and • incorporates a participation strategy for involving a wide
range of stakeholders
At the micro-level, SIA impacts on individuals, at the meso-level
it impacts on collectives (eg, groups of people, institutions, and
organizations) and at the macro-level it impacts on social
macro-systems (eg, national and international political and legal
systems). The stages in Social Impact Assessment are:
• Describe the relevant human environment/ area of influence and
baseline conditions • Develop an effective public plan to involve
all potentially affected public • Describe the proposed action or
policy change and reasonable alternatives • Scoping to identify the
full range of probable social impacts • Screening to determine the
boundaries of the SIA • Predicting Responses to Impacts. Develop
Monitoring Plan & Mitigation Measures
Ideally the SIA should an Integral part of other assessments as
shown below.
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Technical feasibility A technical description of the engineering
and non-engineering aspects of the project would be developed. This
would be based on the service definition and sizing in the project
scope. This would include:
• Field surveys of the project site, which may include (depending
on the project) mapping, topographical and geotechnical
surveys,
• Analysis of environmental conditions that impact on the technical
design. There may be some overlap between the information collected
for this task and for the environmental impact assessment.
• A preliminary technical design of facilities required to provide
the project outputs. This should consider alternative design
options, taking into account uncertainty in the demand projections
and other site-related uncertainties. Feasibility Study Report The
outputs of the full feasibility analysis should be drawn together
into a Feasibility Study Report (FSR), which provides the PPP
business case. If the feasibility study is supportive of the
investment and procurement by PPP the FSR can then be presented to
the relevant Appraisal / Clearance Authority for in-principle
clearance. The FSR summarises the results of the project
feasibility analysis and PPP due diligence. It provides all the
information that will be needed for a decision by the appraisal and
clearance committees. At a minimum the FSR should contain summaries
of the outputs of each component of the feasibility study described
above. The contents in this list have been separated into two parts
to emphasise the point that there should be a particular focus on
the PPP aspects of the project. However, the contents of the actual
FSR may be arranged differently. The FSR should include the
following:
• Support and justification for the project – Results of the
feasibility study providing justification for the investment:
o Need for the project – gaps identified in the market analysis
that would be filled by the project, policy objectives met by the
project, alternatives considered
o Description of the project, including definition of services /
outputs it would provide, location, target user group, technologies
to be employed, agencies involved and their responsibilities,
project timeline, etc
o Social and environmental assessments and planned impact
mitigations o Technical description of infrastructure additions
required for the project o Benefits and costs of the project and
their distribution among key stakeholders, including social
and environmental impacts o Summary of the financial viability of
the project o Summary of economic appraisal (benefit / cost
analysis)
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o Project implementation schedule
• Support for procuring the project as a PPP – In addition to the
general project feasibility results, the FSR should include results
of the specific PPP due diligence analysis:
o Identification of major project risks and their allocation
between the public and private partners o Type of PPP proposed
including description of likely finance structure o Requirement for
government assistance to the project (eg VGF) o Value-for-money
(VFM) analysis and result o Other due diligence assessments (legal,
market sounding) o Capacity of sponsor to implement the PPP, plan
for implementation and PPP management
including capacity building and use of advisors, plan for meeting
project development costs
• A section summarizing the justification for the PPP project
Projects that are applying for JnNURM funding are required to
prepare a Detailed Project Report (DPR), which has similarities to
the contents of a FSR. Choosing the best-suited procurement method
Before applying for in-principle clearance for the project the
Sponsor should decide which procurement method would be best
suited. A number of different methods are available. Which one is
most appropriate for a particular project will depend on the
project characteristics? It is generally accepted best practice to
procure PPP projects via an open, competitive bidding process.
Competition encourages innovation and efficiency and ideally should
be as strong as possible . Several different competitive bidding
options are available. Having decided on the bidding strategy it is
also necessary to choose a bidding process. This covers the basis
for selection and the number of stages in the bid process. A Few
PPP based projects in Karnataka
• BIAL • HMRDC • MSW Treatment and landfill at Mavallipura •
Madivala Market • Bangalore-Maddur State Highway • NICE Road •
Hotel Metropole and Hotel KRS • Hotels & Yatri Niwas across
State • CSB to Karnataka Border – Elevated Expressway to E City •
KUWASIP • Swachha Bangalore • MCC, Devanahalli
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• Site Area- 31 Acres • Estimated project cost- Rs 900 Crore
• KSRTC and BMTC propose to jointly develop the existing Kempegowda
Bus Terminal
at Subhashnagar into an Intermodal Transit Center through Private
Sector Participation on BOT basis Objectives − State of the art/
modern terminal infrastructure facilities, amenities, services
and
conveniences − Adequate parking facilities for all users −
integration of the terminals with the proposed mass transit system
and City Railway Station − Commercial development- To leverage the
latent potential from the site − To create a landmark-a ‘welcome
gate’ which will become the new focus for the city RTO 1. Nodal
Department : Transport Department 2. Computerisation of RTOs/Check
Posts in Karnataka 3. Financing, Supply, Installation and
Maintenance of Hardware and Application Software at
locations all over Karnataka 4. Private developer to issue smart
cards for driving licences and vehicle registration certificates 5.
Estimated capital investment of Rs.30 crores 6. Bid process
underway
BOT Projects 1. Sandur Bypass 2. Tornagallu-Kudligi, Sandur-Hospet
& other roads 3. Ring Road in Bellary City 4. Elevated Corridor
for IT City – Bangalore
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Key Constraints in PPP
Lack of PPP friendly enabling policy and regulatory framework
Inadequate instruments and capacity to meet long-term equity and
debt financing Incapability of public institutions and officials to
manage the PPP process. Lack of shelf of credible, bankable
infrastructure projects
A few examples of PPP based projects
Chennai
• Services: O& M :WS& S, Treatment Plants & Pumping
Stations • Management Option : Service Contract • Capital Finance
:CMWWSB • Time: 1-3 Yrs
Case study The Greater Noida Industrial Development
Authority(GNIDA) has described various steps which have lead to the
scientific management of solid waste in Greater Noida. The active
participation of the private sector and Community Based
Organisations and proper sharing of the tasks among the private
sector, Neighbourhood Management Committees and GNIDA Officials are
crucial factors for success. While collection of garbage and
maintenance of cleanliness of the city is the task of the Private
Operator, Monitoring and Supervision is carried out by the
Neighbourhood Management Committees and GNIDA Officials. With the
success of this model, the GNIDA has decided to extend the process
of involvement of private sector, Neighbourhood committees in the
operation and maintenance of Urban Infrastructure Services. Another
important aspect in the success of the project is a joint and
consultative approach among various departments to obtain expert
views of all the departments while formulating project documents
which ultimately smoothened the implementation process.
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Bangalore
• SERVICES : Bulk water Supply • Mgt. Option: BOT (
Biwater-Preferred Bidder) • Capital Finance :Private Agency • Time
: 30 Years • Project Cost : 1600 Crores
Pune
• SERVICES WS & Sewerage • Mgt. Option Const. and O & M •
Capital Finance :HUDCO/Pune Munc.
Corpn./ICICI • Time : 5 yrs for O & M • Project Cost : Rs. 715
Crores
Alandur
Steps in PPP Project Development Process
Project Identification
Bid Documentation
Bidding Process
Case study The Alandur municipality has developed the project on
the partnership model of Build Own Operate and Transfer with
assistance from the Tamil Nadu Urban Development Fund (TNUDF) and
the Government of Tamil Nadu. Technical consultants for the project
are Consulting Engineering Services. In order to minimize
construction and design risks, the municipality plans to implement
the project through an innovative contractual arrangement. In this
arrangement the private operator will: (a) construct the sewer
collection system and pumping station through a regular contract;
(b) construct and operate the sewage treatment plant on a
build-own- operate-transfer (BOOT) basis. The estimated cost of the
project is Rs. 480 million. TNUDF proposed to fund about Rs. 180
million. The rest of the project cost was proposed to be funded
through loans from other financial institutions, internal resources
of the municipality, and deposits to be collected through new
sewerage connections.
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TEMPLATE (Indicative)
• Name of the project • Location of Project • Justification for the
Project • Unbundling of Project
Identify parts amenable to PPP
1. Identify Service/Project 2. Break the service into pieces 3.
Identify parts amenable to PPP
eg. Water Supply can be broken into
• Source of supply • Headworks • Purification • Supply to
distribution network • Metering and Collection of charges •
Operation and Maintenance
Solid Waste Management Can be broken into
• Door to door collection and segregation • Secondary storage •
Transportation • Processing and recovery • Landfilling
• Select Mode of Privatisation for each part or whole of the
project Type of PPP (BOT, BOOT, BOLT, OMT etc.)
- Divestiture of assets/Rights are Sold or - Transferred for BOO,
BOOT etc.)
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• Financing
Total cost Source of Financing Phasing of Investment Returns on
Investment IRR, BCR, NPV at 12% etc. Social & other
environmental benefits
• Screening of Project through GoI PPP Toolkit Yes/No
Whether Full Feasibility study is done?
• Deregulation
• Assess the Bidding • Selection of Bids
• Preparation of Contract
• Award of Contract
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• Checklist of implementation schedule
No. Information to be covered in the implementation schedule
Included? (yes, no)
1 In-principle clearance timeline:
1A First draft of tender documents and other key project documents
(eg, EoI, RFQ, RFP)
1B Application for in-principle clearance for the PPP
2 Pre-qualification and final document preparation timeline:
2a Issue RFQ
2b Pre-qualification of bidders
2c Final draft of tender documents, and feedback on bid documents
from bidders for complex / new sector projects
3 Application for Final Approval of the PPP
4 Procurement and award timeline:
4a Issue RFP, allowing adequate time to respond to bidder
queries
4b Evaluation of bids
4c Negotiation and award
5b Obtaining clearances
6 Engineering, procurement and construction (EPC) activities and
timeline (for projects that involve a capital expenditure
component)
6a Detailing each major milestone through the EPC process
7 Post-construction activities
9 Major milestones in the operating lifecycle of the project
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QUIZ
Chapter 4
1. What does PPP stands for a. Public Private Partnership b. Public
People Partnership c. Public Place Partnership d. None of the
above
2. PPP incorporate following characteristic a. Contractual
agreement b. Risk sharing among the public & private partners
c. Financial rewards to the private party based on achievements/
output d. All of the above
3. PPP has following advantages a. Access to private sector finance
b. Transferring risk to the private sector & increased
transparency c. No responsibility to public sector d. a &
b
4. PPP envisages a. Reduced user fees & better quality of
service to people b. Profit & return on investment private
party c. Sometimes only profit & private monopoly d. All of the
above
5. Generally PPP is required a. When government has less resources
& funds b. When government could not manage the project on its
own c. When government has better capacity to manage d. a &
b
6. In management contract capital investment in the project is made
by private party
a. True b. False
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[
8. The commercial risk in case of service & management
contracts lies with public entity
a. True b. False
9. Commercial risk in case of concession & BOT projects lies
with private party a. True b. False
10. The duration of service contract would normally be between 1 to
3 years a. True b. False
11. In any PPP project penalties & rewards are important to
ensure performance a. True b. False
12. In some of the major PPP based projects Government agency needs
to a. Ensure necessary environmental & other clearances b. No
need to provide any support to private party c. Have clear
regulated functions d. a & c
13. Viability Gap Funding (VGF) scheme of Government of India
considers a. All types of projects b. Only PPP projects c. Only
Public projects d. None of the above
14. Under VGF scheme following sector is eligible
a. Urban transport, Airports, water supply & other
infrastructure project b. Bridges, Roads, Water supply, Sewerage
& Solid waste management c. Housing schemes d. a & b
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15. The objective of India Infrastructure Project Development Fund
(IIPDF) is to a. Encourage PPP & assist states b. Assist all
schemes c. Only profit based projects d. None of the above
16. In case of IIPDF scheme ------- % equity is with private
partner a. 40% b. 51% or more c. 61% d. None of the above
17. Unbundling, Identifying parts amenable to PPP, selecting mode
of privatization are important steps in PPP
a. True b. False
18. The process of PPP involves a. PPP identification b. PPP
preparation project clearance & procurement c. Contract
management & Monitoring d. All of the above
19. Government of India has developed web based resource tool kit
for decision making & to improve quality of PPP
development
a. True b. False
20. Following are the tool for analysis of PPP project a. PPP
family indicator tool b. PPP mode validation tool c. PPP
suitability filter d. All the above
21. Assessment of risks with the projects, capacity to bear the
risk & subsequent
refinement of PPP mode at prefeasibility stage is an important step
a. True b. False
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22. Environmental clearance must be obtained for all physical
infrastructure project that meet certain thresholds a. True b.
False
23. EIA( Environmental Impact Assessment) is required to be carried
out for giving Environmental Clearance a. True b. False
24. EC (Environmental Clearance) is mandatory EIA notification of
MOEF (Ministry Of Environmental Forest ) for all major
infrastructure projects taken up on PPP mode a. True b. False
25. In principle clearance for any PPP based project is given only
after full feasibility analysis & FSR to the concerned
clearance authority a. True b. False
26. Before applying for in principle clearance, the sponsor should
decide which procurement method would be best suited a. True b.
False