News Clippings on Public Private Partnershiprtichennai.cag.gov.in/download/PPP_news_Booklet_Jun_15.pdfNews Clippings on Public Private Partnership June 2015 REGIONAL TRAINING INSTITUTE

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News Clippings

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Public Private Partnership

June 2015

REGIONAL TRAINING INSTITUTE CHENNAI


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

http://economictimes.indiatimes.com/topic/hybrid%20annuity%20model

http://economictimes.indiatimes.com/topic/PPP


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


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


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


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.


"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


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.


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."


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


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


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


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


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


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.


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-


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".


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

http://timesofindia.indiatimes.com/toireporter/author-Abhijeet-Patil.cms


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


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.


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


"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


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."


Mundra Ultra Mega Power Project,

Gujarat

*****

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News Clippings on Public Private Partnershiprtichennai.cag.gov.in/download/PPP_news_Booklet_Jun_15.pdfNews Clippings on Public Private Partnership June 2015 REGIONAL TRAINING INSTITUTE