Tamilnadu Urban Development Fund (TNUDF) A Presentation October, 1999

Tamilnadu Urban Tamilnadu Urban Development Fund Development Fund (TNUDF)(TNUDF)

A PresentationA Presentation

October , 1999October , 1999

Scheme of PresentationScheme of Presentation

IntroductionIntroduction• Purpose of the fundPurpose of the fund• ObjectivesObjectives• Eligible borrowers / sectorsEligible borrowers / sectors• Lending policies and proceduresLending policies and procedures• Grant FundGrant Fund


Performance (as on date)Performance (as on date)• Lending volumes and profitsLending volumes and profits• Sector-wise investmentsSector-wise investments• Status of projectsStatus of projects• Project prototypeProject prototype• FinancialsFinancials


ProspectsProspects• Infrastructure demand situation in Infrastructure demand situation in

TamilnaduTamilnadu• Financial ProjectionsFinancial Projections• VisionVision

IntroductionIntroduction

IntroductionIntroduction

A Trust established under the Indian Trusts A Trust established under the Indian Trusts Act, 1882, by GoTN, ICICI, HDFC and IL&FS Act, 1882, by GoTN, ICICI, HDFC and IL&FS with a line of credit from the World Bankwith a line of credit from the World Bank

Purpose of the FundPurpose of the Fund

TNUDF is a trust fund engaged in the development TNUDF is a trust fund engaged in the development of urban infrastructure in the state of Tamilnadu. of urban infrastructure in the state of Tamilnadu. This trust was created as part of a restructuring This trust was created as part of a restructuring exercise of an existing World Bank credit to the exercise of an existing World Bank credit to the Government of Tamilnadu (GoTN) in September Government of Tamilnadu (GoTN) in September 1996.1996.

Under the World Bank credit of Rs.167 crores, the Under the World Bank credit of Rs.167 crores, the Municipal Urban Development Fund (MUDF) was Municipal Urban Development Fund (MUDF) was set up in 1988 to fund urban infrastructure needs. set up in 1988 to fund urban infrastructure needs. The fund has been in existence for 8 years and had The fund has been in existence for 8 years and had extended loans of about Rs.200 crores to 74 Urban extended loans of about Rs.200 crores to 74 Urban Local Bodies (ULBs) upto September 30, 1996.Local Bodies (ULBs) upto September 30, 1996.


Financial discipline, strict project accounting Financial discipline, strict project accounting and strong management enabled the fund to and strong management enabled the fund to perform successfully, ending up with a net perform successfully, ending up with a net worth of Rs.140 crores as on September 30, worth of Rs.140 crores as on September 30, 1996. Repayment from ULBs to the fund was 1996. Repayment from ULBs to the fund was also an impressive 96%also an impressive 96%

The projects funded varied from commercial The projects funded varied from commercial ventures, such as markets etc, to core civic ventures, such as markets etc, to core civic amenities including sanitation and solid amenities including sanitation and solid waste management.waste management.


Successful track record enabled GoTN to broaden the Successful track record enabled GoTN to broaden the scope of the fund so as to attract private capital into scope of the fund so as to attract private capital into urban infrastructure, and facilitate better performing urban infrastructure, and facilitate better performing ULBs to access capital markets.ULBs to access capital markets.

In 1996, GoTN, with the assistance of World Bank, In 1996, GoTN, with the assistance of World Bank, invited three financial institutions namely, ICICI, HDFC invited three financial institutions namely, ICICI, HDFC and IL&FS to convert MUDF into a full fledged trust, and IL&FS to convert MUDF into a full fledged trust, namely TNUDF with a private fund manager to deploy namely TNUDF with a private fund manager to deploy the resources of the trust.the resources of the trust.

Accordingly, TNUDF was established as a trust under the Accordingly, TNUDF was established as a trust under the Indian Trusts Act 1882, and is managed by an Asset Indian Trusts Act 1882, and is managed by an Asset Management Company, Tamilnadu Urban Infrastructure Management Company, Tamilnadu Urban Infrastructure Financial Services Limited (TNUIFSL)Financial Services Limited (TNUIFSL)


GoTN’s equity in the venture is restricted to GoTN’s equity in the venture is restricted to 49%, based on the motivation to facilitate 49%, based on the motivation to facilitate private sector management in investment private sector management in investment decisions.decisions.

Other shareholders of TNUIFSL are ICICI Other shareholders of TNUIFSL are ICICI (21%), HDFC (15%) and IL&FS (15%). ICICI, (21%), HDFC (15%) and IL&FS (15%). ICICI, the lead institution, has taken up the lead institution, has taken up management responsibility, putting in place management responsibility, putting in place appraisal systems and key personnel.appraisal systems and key personnel.

Fund ObjectivesFund Objectives

Fund urban infrastructure projects which Fund urban infrastructure projects which improve the living standards of the urban improve the living standards of the urban population;population;

Facilitate private sector participation in Facilitate private sector participation in infrastructure through joint venture and infrastructure through joint venture and public-private partnerships;public-private partnerships;

Operate a complementary window, the Operate a complementary window, the GRANT FUND, to assist in addressing the GRANT FUND, to assist in addressing the problems of the urban poor.problems of the urban poor.

Eligible borrowers / Eligible borrowers / sectorssectors

Urban Local Bodies (ULBs), statutory boards, Urban Local Bodies (ULBs), statutory boards, public sector undertakings and private public sector undertakings and private corporates are the eligible borrowers of the corporates are the eligible borrowers of the Fund.Fund.

The eligible sectors include water supply, The eligible sectors include water supply, sanitation, solid waste management, roads / sanitation, solid waste management, roads / bridges, transportation, sites and services bridges, transportation, sites and services and integrated area developmentand integrated area development

Lending policies & Lending policies & proceduresprocedures

Eligible items for TNUDF fundingEligible items for TNUDF funding• Only for capital expenditureOnly for capital expenditure

– Civil worksCivil works– Services Services – Goods / MaterialsGoods / Materials

• TNUDF will not fundTNUDF will not fund– Land acquisition costsLand acquisition costs– O&M expenditure / other revenue expenditure such O&M expenditure / other revenue expenditure such

as salaries etc.as salaries etc.

Eligibility CriteriaEligibility Criteria

For ULBs etc.For ULBs etc.• TE / TR < 1TE / TR < 1• Annuity / Total revenue < 30%Annuity / Total revenue < 30%

In case where ULBs fail to meet above criteria, the In case where ULBs fail to meet above criteria, the project specific returns (IRR) should be greater than project specific returns (IRR) should be greater than 18.5% p.a.18.5% p.a.

For private sector borrowersFor private sector borrowers• Long term debtLong term debt < 1.5 < 1.5

Net worthNet worth• Net fixed assetsNet fixed assets > 1.5 > 1.5

Long term debtLong term debt• Average DSCR > 1.5Average DSCR > 1.5

Lending termsLending terms

Interest rate structure :(From 1998-99 onwards)Interest rate structure :(From 1998-99 onwards) - Water supply and Sewerage projects : 16% pa- Water supply and Sewerage projects : 16% pa-Other projects : 16.5% pa -Other projects : 16.5% pa

-Market determined rates for private sector borrower.-Market determined rates for private sector borrower. Overdue interest : 18.5% p.a. on overdue amount charged Overdue interest : 18.5% p.a. on overdue amount charged

from the date of scheduled repayment till the date of from the date of scheduled repayment till the date of actual payments.actual payments.

Annuity : Consistent with MUDF - 1 year moratorium, 15 Annuity : Consistent with MUDF - 1 year moratorium, 15 year repayment for service projects and 5 year year repayment for service projects and 5 year moratorium, 16 year repayment for water supply and moratorium, 16 year repayment for water supply and sewerage projects.sewerage projects.

Repayment terms fixed on basis of cash flows (for Repayment terms fixed on basis of cash flows (for commercial ventures).commercial ventures).

Project CycleProject Cycle

Letter of intent from ULBLetter of intent from ULB Issue of loan application form by TNUDFIssue of loan application form by TNUDF Preparation of initial screening reportPreparation of initial screening report Preparation of detailed project reportPreparation of detailed project report AppraisalAppraisal Issue of sanction letterIssue of sanction letter Signing of loan agreementSigning of loan agreement DisbursementDisbursement Sample audit / monitoring / site visitSample audit / monitoring / site visit Project completion reportsProject completion reports

Security MeasuresSecurity Measures

Special recovery mechanism such as escrow Special recovery mechanism such as escrow accounts of property tax, water charges etc. accounts of property tax, water charges etc. and hypothecation of movables are being and hypothecation of movables are being put in place.put in place.

In case of commercial complexes,default In case of commercial complexes,default option of conversion of upto 40% of loans option of conversion of upto 40% of loans outstanding into office space is being outstanding into office space is being stipulated.stipulated.

Grant FundGrant Fund

TNUDF also operates a complementary TNUDF also operates a complementary GRANT FUND fully owned by GoTN with GRANT FUND fully owned by GoTN with following objectives:following objectives:• Strengthening and upgradation of ULB’s financial, Strengthening and upgradation of ULB’s financial,

technical, managerial and service capabilities, technical, managerial and service capabilities, training and computerisation of municipal training and computerisation of municipal accounts and basic records e.g. birth and death accounts and basic records e.g. birth and death register (Category I);register (Category I);

• Meeting the cost of Resettlement and Meeting the cost of Resettlement and Rehabilitation related to sub-projects to be Rehabilitation related to sub-projects to be financed by TNUDF (Category II);financed by TNUDF (Category II);

Grant FundGrant Fund

Financing projects which directly benefit Financing projects which directly benefit urban low income populations such as water urban low income populations such as water supply, sanitation, storm water drain, street supply, sanitation, storm water drain, street lighting, sewerage systems etc. (Category lighting, sewerage systems etc. (Category III);III);

Meeting cost of project preparation for Meeting cost of project preparation for TNUDF financed projects as well as to TNUDF financed projects as well as to facilitate private sector participation facilitate private sector participation (Category IV).(Category IV).

Grant Fund (as on Grant Fund (as on 30.09.99)30.09.99)

Rs. in croresRs. in crores

Stage / CategoryStage / Category I I II II III III IV IV

ApplicationApplication 16.7516.75 0.40 0.40 79.30 79.30 13.05 13.05

SanctionedSanctioned 10.32 0.20 26.23 13.03 10.32 0.20 26.23 13.03

DisbursedDisbursed 6.21 0.20 13.56 5.49 6.21 0.20 13.56 5.49 Cat I - Strengthening and upgradation of ULBs Cat I - Strengthening and upgradation of ULBs

Cat II - Resettlement and Rehabilitation of urban poorCat II - Resettlement and Rehabilitation of urban poor

Cat III - Capital grantsCat III - Capital grants

Cat IV - Meeting the cost of project preparation, technical assistanceCat IV - Meeting the cost of project preparation, technical assistance

and consultancyand consultancy

Performance (as on date)Performance (as on date)

Lending Volumes & Lending Volumes & IncomeIncome

050

100150200250300350400450500

1991-92 1992-93 1993-94 1994-95 1995-96 uptosep 96

Nov 96 -Mar 97

1997-98 1998-99

Rs. in million

Lending Volume Income

PerformancePerformance

Loan Fund / Grant FundLoan Fund / Grant Fund• TNUDF has appraised projects costing Rs.316.47 TNUDF has appraised projects costing Rs.316.47

crores and approved loans of Rs.186.82 crores crores and approved loans of Rs.186.82 crores upto September 30, 1999.upto September 30, 1999.

Status of Projects as on Status of Projects as on 30.09.9930.09.99

Rs. in CroresRs. in Crores

StageStage Cost Cost LoanLoan Grant Grant

Applications received 1034.94 733.76 Applications received 1034.94 733.76 109.51109.51

ClosedClosed 117.98 100.63 3.86 117.98 100.63 3.86

SanctionedSanctioned 316.47 186.82 49.78 316.47 186.82 49.78

Loan agreements signed 169.47 109.85 Loan agreements signed 169.47 109.85 41.3441.34

Disbursed Disbursed 148.67 87.64 148.67 87.64 25.4725.47

Ratio of sanctions to applicationsRatio of sanctions to applications - 25.46%- 25.46%

Ratio of disbursement to sanctionsRatio of disbursement to sanctions - 46.91% - 46.91%

Project PrototypesProject Prototypes

BOT projects - Karur Municipality BridgeBOT projects - Karur Municipality Bridge Public Private Partnership - Madurai Inner Public Private Partnership - Madurai Inner

Ring RoadRing Road Loan - Grant BlendingLoan - Grant Blending

Public - Private PartnershipPublic - Private Partnership

In general factors enabling private In general factors enabling private investments are:investments are:• where cashflows of projects are predictable and where cashflows of projects are predictable and

assured;assured;• where regulatory framework is in place;where regulatory framework is in place;• where contractual obligations amongst the various where contractual obligations amongst the various

participants are clear cut with respect to risks, participants are clear cut with respect to risks, performance and returns; andperformance and returns; and

• where scarce resources of ULBs can be freed up where scarce resources of ULBs can be freed up for pressing investments in basic civic amenities.for pressing investments in basic civic amenities.

Karur Toll / BOT BridgeKarur Toll / BOT Bridge

Based on these principles, TNUDF has facilitated Based on these principles, TNUDF has facilitated the first BOT / Toll bridge, contracted by an ULB in the first BOT / Toll bridge, contracted by an ULB in India at an estimated cost of Rs.16 crores.India at an estimated cost of Rs.16 crores.

The users of the bridge are freight traffic with the The users of the bridge are freight traffic with the capacity to pay. As the bridge would substantially capacity to pay. As the bridge would substantially reduce vehicle operation costs (VOC) and time, reduce vehicle operation costs (VOC) and time, cash flows to the operator is expected to be cash flows to the operator is expected to be predictable.predictable.

The enabling provisions of Tamilnadu State Toll Act The enabling provisions of Tamilnadu State Toll Act has been amended allowing ULBs to enter into BOT has been amended allowing ULBs to enter into BOT style operation, thus offering the investor a stable style operation, thus offering the investor a stable regulatory framework.regulatory framework.

Karur Toll / BOT BridgeKarur Toll / BOT Bridge

This project would enable Karur Municipality, the This project would enable Karur Municipality, the project sponsor, to use its resources for pressing project sponsor, to use its resources for pressing public investments in core civic amenities.public investments in core civic amenities.

The concession has been awarded to East Coast The concession has been awarded to East Coast Constructions and Industries Private Limited Constructions and Industries Private Limited (ECCI) on the basis of competitive bid for a 14 (ECCI) on the basis of competitive bid for a 14 year period, including the construction period.year period, including the construction period.

TNUDF has already sanctioned Rupee loan of TNUDF has already sanctioned Rupee loan of Rs.100 lacs to meet a part of the cost of the Rs.100 lacs to meet a part of the cost of the project.project.

BOT Bridge Across BOT Bridge Across Amaravathi at KarurAmaravathi at Karur

Madurai Toll RoadMadurai Toll Road

TNUDF is also funding a 27 km Madurai bye-pass at TNUDF is also funding a 27 km Madurai bye-pass at an estimated project cost of Rs.47 crores. Madurai an estimated project cost of Rs.47 crores. Madurai Corporation, the project sponsor, would auction out Corporation, the project sponsor, would auction out the toll collection at the end of the 2 year the toll collection at the end of the 2 year construction period.construction period.

GoTN has indicated its willingness to meet the GoTN has indicated its willingness to meet the shortfall if any, between the toll revenue and shortfall if any, between the toll revenue and annuity payments.annuity payments.

This project structure allows for a major This project structure allows for a major transportation facility where project benefits flow transportation facility where project benefits flow directly to Madurai Corporation, without recourse to directly to Madurai Corporation, without recourse to the Corporation’s cashflows.the Corporation’s cashflows.

Madurai Bypass - Linking Madurai Bypass - Linking Highways and PeopleHighways and People

Madurai Toll RoadMadurai Toll Road

Consultants appointed to review designs, Consultants appointed to review designs, validate traffic data, prepare bid documents, validate traffic data, prepare bid documents, valuate bids, design of toll plazas / tolling valuate bids, design of toll plazas / tolling mechanisms and secondary level supervision mechanisms and secondary level supervision of work.of work.

Further the II and III phases of the bye-pass Further the II and III phases of the bye-pass are being developed on a BOT basis, with are being developed on a BOT basis, with recourse to revenues from phase I. This recourse to revenues from phase I. This would clearly enhance the entry conditions would clearly enhance the entry conditions for private participation.for private participation.

Madurai Bypass - Under Madurai Bypass - Under ConstructionConstruction

Solid Waste Management Solid Waste Management ContractsContracts

Conversion of Municipal Solid Waste into Conversion of Municipal Solid Waste into Organic Manure (50 tpd plant)Organic Manure (50 tpd plant)

Supply of pay contract between ULB and Supply of pay contract between ULB and Private Sector operator at Rs.3.50 pt + lease Private Sector operator at Rs.3.50 pt + lease rentalsrentals

Pressure / Incentive for the ULB to keep the Pressure / Incentive for the ULB to keep the streets clean.streets clean.

Veeranam Water Supply Veeranam Water Supply ProjectProject

180 mld, Rs.200 crore Water Supply to 13 180 mld, Rs.200 crore Water Supply to 13 cities and Industrycities and Industry

Project IRR of 16.31% at prices of Rs.25 per Project IRR of 16.31% at prices of Rs.25 per 1000 litres for industry and Rs.3.50 for 1000 litres for industry and Rs.3.50 for Municipalities.Municipalities.

Consultants appointed for RFP Consultants appointed for RFP documentation.documentation.

Storm Water Drain in Storm Water Drain in Valasaravakkam - Loan Grant Valasaravakkam - Loan Grant BlendBlend

PROJECT MANAGEMENT PROJECT MANAGEMENT CONSULTANCY - VALASARAVAKKAMCONSULTANCY - VALASARAVAKKAM

Valasaravakkam a selection grade Town Valasaravakkam a selection grade Town Panchayat located on the Western Boundary of Panchayat located on the Western Boundary of Chennai.Chennai.

First Urban Local Body implementing service First Urban Local Body implementing service schemes by appointing a Project Management schemes by appointing a Project Management Consultant (CES) to undertake the following:Consultant (CES) to undertake the following:• Preparation of detailed designs and Bill of Quantities.Preparation of detailed designs and Bill of Quantities.• Bid Evaluation and recommendation of contractorBid Evaluation and recommendation of contractor• Project SupervisionProject Supervision• Quality controlQuality control• Payment recommendationPayment recommendation

PROJECT MANAGEMENT PROJECT MANAGEMENT CONSULTANCY - VALASARAVAKKAMCONSULTANCY - VALASARAVAKKAM

Cost of ProjectCost of Project• Improvement to Roads Improvement to Roads - -

Rs.113.00 lacsRs.113.00 lacs• Construction of Storm Water Drains - Rs.153.00 Construction of Storm Water Drains - Rs.153.00

lacslacs

Work was awarded for construction in Work was awarded for construction in October 1998 and construction was October 1998 and construction was completed by March 1999.completed by March 1999.

Underground Sewerage Underground Sewerage Projects Projects

TNUIFSL, through consultants, has TNUIFSL, through consultants, has undertaken detailed study for design of undertaken detailed study for design of underground sewerage systems for 14 towns underground sewerage systems for 14 towns / cities in Tamilnadu/ cities in Tamilnadu

Most of the consultancy assignments have Most of the consultancy assignments have been completed and the schemes are ready been completed and the schemes are ready for tendering out.for tendering out.

The schemes have been developed on user The schemes have been developed on user charge basis.charge basis.

Underground Sewerage Underground Sewerage ProjectsProjects

Works at Alandur and Coimbatore are proposed Works at Alandur and Coimbatore are proposed to be taken up initially to assess viability of to be taken up initially to assess viability of these schemes on user charge basis;these schemes on user charge basis;

Suggested tariff rate to cover O&M expenses, Suggested tariff rate to cover O&M expenses, debt servicing and sinking fund allocation;debt servicing and sinking fund allocation;

Deposit mobilisationDeposit mobilisation• From household : Rs.5,000/-From household : Rs.5,000/-• From commercial and industrial customers : From commercial and industrial customers :

Rs.10,000/-Rs.10,000/- Cross-subsidy scheme for fixation of tariff:Cross-subsidy scheme for fixation of tariff:

• Household : Commercial : Industrial Users = 1:3:5Household : Commercial : Industrial Users = 1:3:5


Initial tariff in Alandur fixed at Rs.150 per house per Initial tariff in Alandur fixed at Rs.150 per house per month as required tariff of Rs.180 phpm. GoTN month as required tariff of Rs.180 phpm. GoTN would fund the gap of Rs.30 phpm. Tariff to would fund the gap of Rs.30 phpm. Tariff to increase at 6% per annum.increase at 6% per annum.

Innovative contracting procedure to be adopted; Innovative contracting procedure to be adopted; The successful bidder would undertake all the The successful bidder would undertake all the following:following:• Construction of conveyance system through regular World Construction of conveyance system through regular World

Bank Works’ ContractBank Works’ Contract• Construction of STP through BOT format backed by Supply Construction of STP through BOT format backed by Supply

or Pay mechanism.or Pay mechanism.• O&M Contract at fixed annual fees over a five year period.O&M Contract at fixed annual fees over a five year period.


Administrative sanction has already been Administrative sanction has already been issued to GoTN for Alandur and Coimbatore issued to GoTN for Alandur and Coimbatore Underground Schemes;Underground Schemes;

Tendering process underway for Alandur Tendering process underway for Alandur UGS Project and contract expected to be UGS Project and contract expected to be awarded in Nov ‘99.awarded in Nov ‘99.

The supervision of works would be The supervision of works would be undertaken by an independent private sector undertaken by an independent private sector Project Management Consultant;Project Management Consultant;

Loan Grant BlendingLoan Grant Blending

TNUDF has structured investments in basic TNUDF has structured investments in basic civic amenities on the basis of debt servicing civic amenities on the basis of debt servicing capabilities of ULBs. This implies elementary capabilities of ULBs. This implies elementary budgeting based on demand analysis of civic budgeting based on demand analysis of civic needs.needs.

Project preparation by way of technical Project preparation by way of technical support through the Grant Fund has been a support through the Grant Fund has been a feature of all TNUDF activities in these feature of all TNUDF activities in these sectors.sectors.

Bus Stand at Rajapalayam Bus Stand at Rajapalayam - During construction- During construction

Loan - Grant BlendingLoan - Grant Blending

Further when the ULBs have established a clear Further when the ULBs have established a clear geographical-demographic linkage in terms of direct geographical-demographic linkage in terms of direct benefit to the urban poor, TNUDF has supplemented benefit to the urban poor, TNUDF has supplemented its debt with a Grant component, thereby reducing its debt with a Grant component, thereby reducing the effective rate of interest.the effective rate of interest.

In the longer term, TNUDF believes that these In the longer term, TNUDF believes that these investments can be sustained only by improved investments can be sustained only by improved project management performance by ULBs. project management performance by ULBs. Pursuant to this, TNUDF has supported capacity Pursuant to this, TNUDF has supported capacity building efforts such as computerisation of accounts building efforts such as computerisation of accounts and training programs to manage environmental and training programs to manage environmental and social issues etc.and social issues etc.

Drinking Water at Drinking Water at Madhavaram - Loan Grant Madhavaram - Loan Grant BlendBlend

KEY PROFITABILITY KEY PROFITABILITY INDICATORSINDICATORS

Rs. in CroresRs. in Crores

For the PeriodFor the Period 1.4.98 to 1.4.98 to 1.4.97 to 1.4.97 to 29.11.96 to29.11.96 to

31.3.9931.3.99 31.3.98 31.3.98 31.3.9731.3.97

Total IncomeTotal Income 44.51 44.51 39.0139.01 9.72 9.72

Net Interest Income Net Interest Income 24.81 24.81 20.4220.42 6.12 6.12

Profit before taxProfit before tax 23.44 23.44 19.6519.65 5.62 5.62

ProspectsProspects

Infrastructure Demand Infrastructure Demand situation in Tamilnadusituation in Tamilnadu

Urban Tamilnadu : Existing Urban Tamilnadu : Existing SituationSituation

Demography and UrbanisationDemography and Urbanisation In 1991, Tamilnadu had a population of 55.08 In 1991, Tamilnadu had a population of 55.08

million which makes it the 7th highest State in million which makes it the 7th highest State in the country and somewhat smaller in size to the country and somewhat smaller in size to countries such as Turkey, Thailand or France.countries such as Turkey, Thailand or France.

Tamilnadu has a relatively large urban Tamilnadu has a relatively large urban population. The percentage of States urban population. The percentage of States urban population in 1991 was 34%, significantly population in 1991 was 34%, significantly higher than the all India average of 26%, and higher than the all India average of 26%, and next only to that of Maharashtra.next only to that of Maharashtra.


Demography and UrbanisationDemography and Urbanisation Compared to other major States, such as Compared to other major States, such as

Maharashtra and West Bengal, the urban Maharashtra and West Bengal, the urban population in Tamilnadu is more evenly spread population in Tamilnadu is more evenly spread out among various size classes of urban out among various size classes of urban agglomerations and towns.agglomerations and towns.

Chennai had a population of 5 million in 1991 Chennai had a population of 5 million in 1991 accounting for 20% of State’s urban population accounting for 20% of State’s urban population of 19.02 millions. Other major agglomerations in of 19.02 millions. Other major agglomerations in the States are Coimbatore (9.89%), Madurai the States are Coimbatore (9.89%), Madurai (8.15%), Trichy (5.78%) and Salem (5.94%).(8.15%), Trichy (5.78%) and Salem (5.94%).


Demography and UrbanisationDemography and Urbanisation The pattern of urbanisation also seems to be related The pattern of urbanisation also seems to be related

to large scale industrialisation as a thin belt across to large scale industrialisation as a thin belt across the northern part of the State, consisting of large the northern part of the State, consisting of large urban agglomerations like Madras, Vellore, Salem, urban agglomerations like Madras, Vellore, Salem, and Coimbatore which accounts for the bulk of the and Coimbatore which accounts for the bulk of the urban population of the State.urban population of the State.

On the other hand, the State has dry, backward On the other hand, the State has dry, backward areas where the degree of urbanisation and the areas where the degree of urbanisation and the process of urbanisation appears to be a reflection process of urbanisation appears to be a reflection of recurring distress conditions in poor and unstable of recurring distress conditions in poor and unstable agricultural regions.agricultural regions.

Institutional FrameworkInstitutional Framework

The 74th Constitution (Amendments) Act, The 74th Constitution (Amendments) Act, 1992 has paved the way for significant 1992 has paved the way for significant devolution of powers to the ULBs. The spirit devolution of powers to the ULBs. The spirit of the amendment seeks to achieve a of the amendment seeks to achieve a paradigm shift in the role of a ULB from that paradigm shift in the role of a ULB from that of a constrained and indifferent service of a constrained and indifferent service provider to a freer and more responsive provider to a freer and more responsive developer of urban infrastructure.developer of urban infrastructure.

Institutional FrameworkInstitutional Framework

This amendment seeks to make municipalities This amendment seeks to make municipalities focal institutions in the provision of urban focal institutions in the provision of urban infrastructure through participation of people infrastructure through participation of people at the local level and by endowing it with at the local level and by endowing it with authority commensurate with responsibility.authority commensurate with responsibility.

In practical terms an annual statutory In practical terms an annual statutory devolution of about Rs.200 crores to all ULBs devolution of about Rs.200 crores to all ULBs has been put in place. This implies an has been put in place. This implies an opportunity to leverage resources for opportunity to leverage resources for substantive upgradation of basic civic substantive upgradation of basic civic services.services.


Primary Infrastructure RequirementPrimary Infrastructure Requirement Water supplies vary from 34 lpcd in Town Panchayats Water supplies vary from 34 lpcd in Town Panchayats

to 74 lpcd in Corporations, significantly below the to 74 lpcd in Corporations, significantly below the state norm of 90 lpcd.state norm of 90 lpcd.

Only 57% of population in Corporation areas, 32% in Only 57% of population in Corporation areas, 32% in Municipalities and 16% in Panchayats have access to Municipalities and 16% in Panchayats have access to sanitation.sanitation.

Although 70% of Solid Waste generated is collected, Although 70% of Solid Waste generated is collected, must local bodies do not have organised disposal must local bodies do not have organised disposal facilities.facilities.

Less than 50% of the roads are provided with Storm Less than 50% of the roads are provided with Storm Water Drains.Water Drains.


Financial ImplicationFinancial Implication

Investment needs by Local Body typeInvestment needs by Local Body type

Local BodyLocal Body Rs. in croresRs. in crores

CorporationsCorporations 2087.992087.99

MunicipalitiesMunicipalities 1063.581063.58

Town PanchayatsTown Panchayats 634.05634.05

TotalTotal 3785.623785.62 Sector wise break up of investment needs indicates Sector wise break up of investment needs indicates

that 64% of the requirement is for water and that 64% of the requirement is for water and sanitation sector, followed by 31% for roads, drains sanitation sector, followed by 31% for roads, drains & lighting.& lighting.


Financial Implications Financial Implications (Sectoral Investment requirements) (Sectoral Investment requirements)

Rs. in croresRs. in crores

Local BodyLocal Body Corporations Municipalities Town Total % Corporations Municipalities Town Total %

PanchayatPanchayat

Water SupplyWater Supply 522 522 212 212 167 167 901 24 901 24

Sewerage &Sewerage &

sanitationsanitation 875 875 520 520 127 127 1522 40 1522 40

Solid waste mgmt.Solid waste mgmt. 40 40 32 32 24 24 96 96 22

storm water drainsstorm water drains 287 287 81 81 192 560 15 192 560 15

RoadsRoads 337 337 197 197 62 62 596 16 596 16

LightingLighting 26 26 21 21 63 63 110 3 110 3

TOTALTOTAL 2087 1063 635 3785 2087 1063 635 3785 100100

SourceSource : State Finance Commission, 1996: State Finance Commission, 1996

NoteNote : Price Escalation - 12% p.a.: Price Escalation - 12% p.a.


Urban Local Body - Finance GapUrban Local Body - Finance Gap

Estimates of Finance Gap 1997-2002 Estimates of Finance Gap 1997-2002 Rs. in croresRs. in crores

Local BodyLocal Body Investment Investment Investment Borrowing Investment Borrowing Gap Gap

Class needs 1997-98 needs end Class needs 1997-98 needs end CapacityCapacity

costscosts 20022002

11 22 33 44 3-4 3-4

CorporationsCorporations 20882088 26532653 16981698 955 955

MunicipalitiesMunicipalities 10641064 13511351 419 419 932 932

TotalTotal 31323132 40044004 2117 2117 1887 1887

Financial projections for Financial projections for the plan period 1999-00 to the plan period 1999-00 to 2002-032002-03

Lending Volumes & ProfitsLending Volumes & Profits

144 144 144 144

3349

59

85

0

20

40

60

80

100120

140

160

1999-00 2000-01 2001-02 2002-03

Lending Volumes Net Profit

Evolution of TNUDF’s Evolution of TNUDF’s portfolioportfolio

Private Sector15%

Large ULBs35%

Small ULBs50%

March 31, 2003

TNUDF’s sanction’s as on TNUDF’s sanction’s as on 30.9.9930.9.99

30%

6%

38%

8%

13%5%

Bridges/RoadsSWMSWDCommercial ComplexWater SupplyOthers

TNUDF’s disbursements as TNUDF’s disbursements as on 30.9.99on 30.9.99

47%

5%5%

12%

28%

3%

Bridges/RoadsSWMSWDCommercial ComplexWater SupplyOthers

FinancialsFinancials

Projected Balance SheetsProjected Balance Sheets Rs. in Crores Rs. in Crores

As on March 31,As on March 31, 2000 2001 2002 2000 2001 2002 20032003

Total contribution Total contribution 209 226 248 285209 226 248 285

Term debt Term debt 443 573 696 816443 573 696 816

Loans and advances Loans and advances 526 657 785 908526 657 785 908

Investments Investments 129 150 177 222129 150 177 222

Debt-equity Debt-equity 2.12 2.54 2.80 2.86 2.12 2.54 2.80 2.86

Ownership patternOwnership pattern

- GoTN - GoTN 70% 67% 62% 57%70% 67% 62% 57%

- FIs - FIs 30% 33% 38% 44%30% 33% 38% 44%

FinancialsFinancials

Projected Profit and Loss StatementProjected Profit and Loss Statement Rs. in crores Rs. in crores

For the year 1999-00 2000-01 2001-02 2002-03For the year 1999-00 2000-01 2001-02 2002-03

IncomeIncome

- Operations - Operations 35.8 59.2 82.2 104.6 35.8 59.2 82.2 104.6

Total Income 47.7 73.1 98.5 Total Income 47.7 73.1 98.5 124.5124.5

Net profit 32.9 49.2 59.5 Net profit 32.9 49.2 59.5 84.884.8

Net profit /Net profit /

Networth 15.7% 21.8% 23.9% Networth 15.7% 21.8% 23.9% 29.7% 29.7%

AssumptionsAssumptions

The projected financial assumes a primary source of The projected financial assumes a primary source of long tenure finance as a line of credit from IBRD of long tenure finance as a line of credit from IBRD of US$ 80 million.US$ 80 million.

It is assumed that the entire drawal in a year is It is assumed that the entire drawal in a year is disbursed to sub-borrowers in the same year.disbursed to sub-borrowers in the same year.

The entire share of GoTN profit is assumed to be The entire share of GoTN profit is assumed to be transferred to the grant fund while the entire share of transferred to the grant fund while the entire share of the FI profits is ploughed back into the trust fund.the FI profits is ploughed back into the trust fund.

As on March 31, 2003 the debt equity ratio of the As on March 31, 2003 the debt equity ratio of the entity would be satisfactory at 2.86 and GoTN would entity would be satisfactory at 2.86 and GoTN would hold 56.5% of the paid up contribution whereas the FIs hold 56.5% of the paid up contribution whereas the FIs would hold 43.5%.would hold 43.5%.

The total income of the Fund would increase The total income of the Fund would increase from Rs.30.7 crores in 1997-98 to Rs.124.5 from Rs.30.7 crores in 1997-98 to Rs.124.5 crores in 2002-03.crores in 2002-03.

The profits of the Fund would increase from The profits of the Fund would increase from Rs.23.6 crores to Rs.84.8 crores during the Rs.23.6 crores to Rs.84.8 crores during the same period.same period.

The loan outstanding of TNUDF as on March The loan outstanding of TNUDF as on March 31, 2003 would be Rs.908 crores:31, 2003 would be Rs.908 crores:

VisionVision

VisionVision

TNUDF would position itself as a strategic intermediary TNUDF would position itself as a strategic intermediary linking capital markets with Urban Infrastructure needs.linking capital markets with Urban Infrastructure needs.

Positive performance during the plan period, Positive performance during the plan period, achievement of lending targets, high repayment rates achievement of lending targets, high repayment rates and quality infrastructure would demonstrate a track and quality infrastructure would demonstrate a track record enabling market access for the Fund.record enabling market access for the Fund.

Preparation for Pool Finance Structure would commence Preparation for Pool Finance Structure would commence by year 2001. Capacity building activities, financially by year 2001. Capacity building activities, financially disciplined ULBs and strong project pipeline are disciplined ULBs and strong project pipeline are enabling factors. Preparation includes rating of TNUDF enabling factors. Preparation includes rating of TNUDF risk assessment of ULBs, setting up a credit enhances, risk assessment of ULBs, setting up a credit enhances, revenue intercepts etc.revenue intercepts etc.

TNUDF - Institutional TNUDF - Institutional Positioning Positioning

Umbrella CrdEnchanc.

Sov. .Grant

Sov. Govt.TransferPayments

MLA

TNUDF

Reserve Account

RevenueIntercept

Partial Credit Guarantee

Technical Assistance

Investors

Co-finance

Bonds

Trustee

LocalGovt.

Project

LocalGovt.

Project

LocalGovt.

Project

Funds Market Rate Long term

Principal & Interest paymentsIf necessaryIf necessary

Documents

Tamilnadu Urban Development Fund (TNUDF) A Presentation October, 1999