Public private partnership

ABSTRACT

Public private partnerships (PPPs) are a recent extension of what has now become well known
as the ―new public management‖ agenda for changes in the way public services are provided.
PPPs involve organizations whose affiliations lie in respectively the public and private sectors
working together in partnership to provide public services. This special issue of the Accounting,
Auditing & Accountability Journal explores this new development, which, in its most advanced
form, is contained in the UK‘s Private Finance Initiative (PFI) but is now spreading across the
world in multiple forms. This introduction provides an overview of this development as well as an
outline of the seven papers that make up this special issue. These seven p apers are divided into
two parts – the first four looking at different aspects of PFI and the latter three providing three
country‐based (from the USA, New Zealand and Australia) studies of PFI/PPP. Many questions
about the nature, regulation, and pre‐decision analysis and post‐project evaluation are addressed in
these papers but many research questions remain unanswered, as this Introduction makes plain.

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CHAPTER 1

INTRODUCTION

1.1 GENERAL
Indian economy is growing at a very fast pace and it has a dynamic and robust financial system. A
stable policy environment is ensured by its democratic status and its independent institutions guarantee
the rule of law. This highly diversified economy has shown rapid growth and remarkable resilience
since 1991, when economic reforms were initiated with the progressive opening of the economy to
international trade and investment.

The most significant criteria for a continued growth rate of an economy is the provision of a quality
infrastructure. According to the Planning Commission, an approximation of 8 percent of the Gross
Domestic Product needs to be invested

This would help in acquiring a prospective economy as stated in the 11th Five Year Plan. Fund
investment of over US $ 494 billion has been conceived of according to the 11th Five Year Plan with
effective from 2007 to 2012. The investment sectors under consideration are inclusive of
telecommunications, electric power, transport, road, rail, air, water supply as well as irrigation.
In order to meet such demands, various Public Private Partnerships or PPPs are being promoted for
implementation of infrastructure projects. PPP is often described as a private business investment
where two parties comprising government as well as a private sector undertaking form a partnership.
The deficit can be overcome by ensuring much more private capital investment. Expert guidance is the
only way out for enabling efficiency through subsequent reduction in cost.
Governments embarking on PPP programs have often developed new policy, legal and institutional
frameworks to provide the required organizational and individual capacities. These go beyond that
needed to originate and financially close PPP deals, as they must also ensure that these deals are
affordable to users and the public sector and provide ex-post evaluation of the success of PPPs in
meeting their objectives. This framework needs to be in place in India to ensure a robust and successful
PPPs program.

PPPs are used to deliver public services in many countries including the United Kingdom, South
Africa, Australia, France, Canada, the United States of America, South Korea, Ireland, Portugal, etc.
With Governments across the world inclined towards development through the PPP framework, it is
useful to understand PPPs development in the country, with a planned pedicure of $1 trillion on
infrastructure in this period.
This level of growth requires rapid improvements and additions to the capacity of economic
infrastructure. However, the ability of infrastructure to keep up with the economy‘s fast expansion has
been constrained by the availability of investment. As a means to overcome this challenge, the
Government of India initiated a strategy for encouraging private investment in the development of
public services, especially in the infrastructure

Given the massive investments in infrastructure proposed by the Government and the thrust on PPP
projects, it is crucial for the Government to justify every project in technical, financial, economic,
social and environmental aspects. Infrastructure projects involve long gestation periods; once
developed, the projects have a lasting impact on the lives of people. Therefore, conducting feasibility
studies for a project is a necessary step in the project development process. Feasibility studies include
assessing the technical, financial, and legal suitability of a project.
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The do-ability of a project must be determined at the early stages of the project and technical feasibility
studies enable the Government to justify the do-ability of the project from technology, environment,
social and market perspectives. Technical feasibility studies are generally undertaken by the public
entity once a project is identified and prior to project structuring stage. It is to be remembered that at
this point, the public entity need not make a decision on the mode of implementation of the project.
However, the studies need to be undertaken keeping in mind the possibility of implementation under a
PPP framework.

Historey of PPP in India

The public–private partnership (PPP or 3P) is a commercial legal relationship defined by the
Government of India in 2011[1] as "an arrangement between a government / statutory entity /
government owned entity on one side and a private sector entity on the other, for the provision of
public assets and/or public services, through investments being made and/or management being
undertaken by the private sector entity, for a specified period of time, where there is well defined
allocation of risk between the private sector and the public entity and the private entity receives
performance linked payments that conform (or are benchmarked) to specified and pre-determined
performance standards, measurable by the public entity or its representative".

The Government of India recognizes several types of PPPs, including: User-fee based BOT model,
Performance based management/maintenance contracts and Modified design-build (turnkey) contracts.
Today, there are hundreds of PPP projects in various stages of implementation throughout the country.

As outlined in its XII Five Year Plan (2012–2017), India has an ambitious target of infrastructure
investment (estimated at US$1 trillion). In the face of such an enormous investment requirement, the
Government of India is actively promoting PPPs in many sectors of the economy. According to the
World Bank, about 824 PPP projects have reached financial closure since 1990 in India.

Advantages of PPP
Governments worldwide have increasingly turned to the private sector to provide infrastructure
services in energy and power, communication, transport and water sectors that were once delivered by
the public sector. There are several reasons for the growing collaboration with the private sector in
developing and providing infrastructure services, which include:
• Increased efficiency in project delivery, and operation and management;
• Availability of additional resources to meet the growing needs of investment in the sector
• Access to advanced technology (both hardware and software).
Properly executed planning and development of a project also allows better screening of options, and
helps in deciding appropriate project structure and choice of technology considering cost over the
whole life cycle of the project.

Limitations of PPP
There are many important economic, social, political, legal, and administrative aspects, which need to
be carefully assessed before approvals of PPPs are considered by the government. PPPs have various
limitations which should also be taken into account while they are being considered. The major
limitations include:

• Not all projects are feasible (for various reasons: political, legal, commercial viability, etc.).

• The private sector may not take interest in a project due to perceived high risks or may lack technical,
financial or managerial capacity to implement the project.

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• A PPP project may be more costly unless additional costs (due to higher transaction and financing
costs) can be off-set through efficiency gains.

• Change in operation and management control of an infrastructure asset through a PPP may not be
sufficient to improve its economic performance unless other necessary conditions are met. These
conditions may include appropriate sector and market reform, and change in operational and
management practices of infrastructure operation.

Important Characteristics of PPP Projects

 Promise of better project structure and design.

 Allows better screening of projects. A bad project is a bad project no matter whether it is
implemented by the public or the private sector.
 Better choice of technology based on life-cycle costing.
 Better service delivery, especially if performance based payment is considered.
 Better chances of completion on time and within the budget.
o Risk of default.
o Project risks can easily turn into government risks.
o Various liabilities on government (direct and indirect).
o A long-term contract management system needs to be in place.
o An administrative mechanism and special skills in the government are required to
develop and implement PPP projects.

1.2. NEED OF STUDY

Infrastructure is the back bone of economic development of any Nation. Road infrastructure plays key
role for trade and commerce, connecting the production and consumption centers. Road and
transportation infrastructure construction is highly capital intensive, wherein the government alone
cannot meet its ends and initiated Public Private Partnership (PPP) for its execution right from planning
and designing to its maintenance through various PPP models. Over the last few years many of the
awarded road projects through PPP model are get in trouble because of various reasons. To cope up the
gap between the successful implementation of PPP road projects the various reasons should find out
and get the feasible solution for that reasons.

1.3 OBJECTIVE OF STUDY

 To Study Basic Concept Of PPP
 To Study And Compare Models Used In PPP Project
 To Final Critical Success and Risk Factor For PPP Project

1.4 Public Private Partnership Contracts concept

Public-private partnerships include a range of agreements, which can be described in

different ways. The three main aspects of a PPP contract is whether the PPP is for a new
or existing asset, what functions the private party is responsible for, and how the private
party is paid. The functions for which the private party is responsible depend to some
extent on the type of asset and service involved. Some of the functions that may or may
not be transferred to the private party, depending on the project may include

o Design for developing the project from initial concept and output
requirements to construction-ready design specifications. When the private

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party is responsible for building or rehabilitating an asset, as described below,

it is typically also responsible for design

o Build, when PPPs are used for new infrastructure assets, they typically require
the private party to construct the asset and install all equipment. Where PPPs
involve existing assets, the private party maybe responsible for extending the
asset

o Finance when a PPP includes building or rehabilitating the asset, the private
party is typically also required to finance all or part of the necessary capital
expenditure

o Maintain, PPPs assign responsibility to the private party for maintaining an

infrastructure asset to a specified standard over the life of the contract. This is
typically considered a defining feature of PPP contracts

o Operate, the operating responsibilities of the private party to a PPP can vary
widely, depending on the nature of the underlying asset and associated
service. For example, the private party could be responsible for:
o Technical operation of an asset, and providing a bulk service to a
government off-taker—for example, a bulk water treatment plant
o Technical operation of an asset, and providing services directly to
users—for example, a PPP for a water distribution system
42

o Providing support services, with the government agency remaining

responsible for delivering the public service to users—for example, a
PPP for a school building that includes janitorial service

The payment mechanism in a PPP agreement is an important feature. The private party
can be paid by collecting fees from service users, by the government, or by a combination
of the two. The options for a payment mechanism can depend on the functions of the
private party
.
o Under ―user pays‖ PPPs, such as toll roads, the private party provides a service to
users, and generates revenue by charging users for that service. These fees can be
supplemented by subsidies paid by government, which may be performance-based
or output-based

o In ―government pays‖ PPPs, the government is the sole source of revenue for the
private party. Government payments can depend on the asset or service being
available at a contractually-defined quality. They can also be output-based
payments for services delivered to users
The above aspects can in various ways create a wide range of PPP contracts

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CHAPTER 2

LITERATURE REVIEW

2.1 literature survey

Abhishek C. Bramhankar comcluded that,—Public-private partnership (PPP) is an effective and
established strategy for executing infrastructure projects in most efficient manner. In recent years,
many countries have implemented PPPs in various sectors for infrastructure development, but not all
projects have been successful. Day by day popularity of Public Private Partnerships (PPPs) models for
delivering public transportation infrastructures increases, but the international experiences shows that
there are many problems and partnership failures in road projects. To implement PPPs efficiently,
government as well as private sector agencies need to be aware of their various success and failure
factors. However, sector specific PPP guidance is scarce. This research is mostly focuses on road sector
of PPP development. 40 success factors and 46 failure factors were identified through literature review,
interviews with PPP professionals and various case studies from various the countries. A questionnaire
survey form containing these factors was sent out to 580 respondents with relevant insight in PPP road
projects, in the government sector, private sector and academic researchers all over the world.
According to preferences given by respondents, the data is analyzed descriptive statistics using SPSS
software and the critical factors were identified are traffic revenue risk, land acquisition risk, demand
risk, construction cost overrun and sharing of risk and responsibility between government and private
sectors. Furthermore, assessment of critical factors is done by finding all possible risk occurring events
to that factor. This study also provides possible risk and responsibility sharing option between both
sectors considering private point of view. The result of this study may useful to the PPP policy makers,
executers, contractors for structuring PPP model and carrying out infrastructural projects in road sector.

Ankit kumar concluded that,- India has the second largest road network in the world, with over 5.53
million kilometer including all expressways, highways, MDR, ODR. Due to insufficient fund the road
development fails to meet the growing up needs .This raise to involvement of private sector in
development of road. In most developing countries public private partnership is relatively new trend in
urban infrastructure. Government both at national level and state level are focusing to implement their
projects through PPP model. The public private partnership models that have been used currently in
execution of national highway projects are built operate transfer (BOT)toll, BOT annuity and hybrid
annuity models .This paper focuses on the concept and current status of PPP in India and study of
various PPP models

Ms. Ruchi Sharma concluded that, The PPP is defined as ―the transfer to the private sector of
investment projects that traditionally have been executed or financed by the public sector‖ (IMF, 2004).
The term PPP has not been defined exhaustively. Different organisations / economies may have
different views of PPP. The term and level of collaborative efforts guides the entity as being PPP.
Essentially the term refer to a contractual agreement between public sector entity and private sector
entity towards the achievement of some pre-defined and fixed aim. Normally it includes performance
of the past which are commonly the responsibility of the public sector. (Gupta Arjun P (2011). PPP
combines the development of private sector capital and sometimes, public sector capital to improve
public services or the management of public or the management of public sector assets. (Michael,
2001). PPP has been considered as an important vehicle of growth in an economy. It may take various
forms to reap the benefits of the Public sector aims trust and private sector‘s expertise and funds

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nd
Vijay Pal Singh Gill concluded that,-India has 2 highest road network in world (4.6 million km in
2013).Earlier, Government was major financing source for development of road network but by
passage of time, Demands of other sector increases which lead to low financial conditions of
Government, by which government was unable to meet the demands of road sector. So, for overcoming
from this situation, Government of India preferred PPP-Public Private Partnerships route for the
development of road sector especially national highways. BOT (Toll) and BOT (Annuity) are two
models of PPP which are offered by government for the development of national

Dr. Vidya Telang Assistant Professor sated that, The Public Private Partnerships (PPPs) have emerged
as a very feasible, viable, and growing mode of creating infrastructure for our country. Though public sector will
continue to play a dominant role in building of infrastructure, the PPPs have enabled us to channelize private
sector investment in infrastructure. Keeping in mind that our country is still starved of adequate infrastructure
required for high level development, the opportunities for the growth of joint venture between both the sectors
are huge and desirable. The anticipated percentage participation of the private sector in the twelfth plan is much
higher than the eleventh plan. The Indian PPP scenario as it stands today presents an optimistic picture. However
several bottlenecks and challenges have been encountered in PPP model development. Some of the major
challenges also relate to regulation and availability of finance for the private sector. The Government of India on
its part has been fully aware of the benefits that such partnerships can offer to our country and has been taking
steps to remove some of these problems. The present study is an attempt to peek into the scope, future growth
and risks that such partnerships may hold for our country.

Mr. Tharun Shastry L concluded that Infrastructure is a fundamental sector that every country needs to
develop in order to achieve overall development, but governments in developing countries have limited
resources for it. This has also been the case with India due to the sluggish pace of Indian economic growth. To
overcome this challenge, the Government of India has been striving hard to mobilise investments for
infrastructure in order to double its GDP from 3.986% to almost 9%. This implies that nearly $450bn will be the
requirement to develop Indian infrastructure in the next 5 years (2012-2017). However, considering the
government‘s limitation to raise such finances on its own, it has resorted to an innovative practice known as
Public-Private Partnership (PPP) in various sectors. PPP refers to a form of a contract between the public and the
private sector for a specific duration in order to facilitate projects that require a huge capital outlay.This research
article is a conceptual study with explorative methodology. The study examines various types of partnership
projects at work for Infrastructural development in India. The paper aims at providing an insight about PPP in
Indian infrastructural projects while the second part of the study evaluates the positive or negative impact of the
present Infrastructural projects on the Overall development of the nation in order to suggest an efficient PPP
Policy.

Sarang Murlidhar Dhawade state that ,According to the National Public Private Partnership Policy 2011,
a Public Private Partnership (PPP) means an arrangement between the governments or statutory entity or gover
nment owned entity on one side and a private sector entity on the other. For the provision of public assets or
public services, through investments being made and management being undertaken by the private sector entity,
for a specified period of time, where there is well defined allocation of risk between the private sector and the
public entity and the private entity receives performance linked payments that conform to specified and pre-
determined performance standards, measurable by the public entity or its representative. st We are in 21 century
and still India is an infrastructure deficit country. The need of the hour is to transform India into a developed
economy by the integration of vital sectors, networking, technological advancement and connecting the
ruralurban economies. The government sector both at the central and at state level itself helpless to cope with the
growing demands of the economy on its own funds. Hence, need is to look for other sources of development and
private participation through PPP which is the best viable and reliable option available.

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CHAPTRE 3
METHADOLOGY

3.1 Basic knowledge of PPP

PPPs are used to deliver public services in many countries including the United Kingdom, South
Africa, Australia, France, Canada, the United States of America, South Korea, Ireland, Portugal, etc.
With Governments across the world inclined towards development through the PPP framework, it is
useful to understand PPPs development in the country, with a planned pedicure of $1 trillion on
infrastructure in this period.
This level of growth requires rapid improvements and additions to the capacity of economic
infrastructure. However, the ability of infrastructure to keep up with the economy‘s fast expansion has
been constrained by the availability of investment. As a means to overcome this challenge, the
Government of India initiated a strategy for encouraging private investment in the development of
public services, especially in the infrastructure

3.2 Stages of Report

Stape 1
Firstly we taken the introduction of ppp and what is the concept of ppp

Stape2
Then from different research paper we are taken literature survey

Stape3
There is data collection we collect data means take case studies of different project
Of PPP in india

Srep4
Then knowing the analysi sconcept of ppp in india

Step 5
Conclusion of project

Step 6
referance

3.2 study of PPP models

1. Build Operate Transfer (BOT Toll): In the BOT model, public sector offers work to a private
sector entity to design, build, operate and maintain these infrastructure facilities for a certain period of
time called as concession period. During this concession time the private sector or entity has the
responsibility to arrange the required funds for the project and is authority to collect revenues generated
by the project in terms of toll from end users. The service will be then transferred to the public
authority at the end of the concession period, without any remuneration of the private sector involved.

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2. Build Operate Transfer (BOT Annuity): In this BOT model, public sector offers work to a
private sector entity to design, build, operate and maintain these infrastructure facilities for a certain
period of time called as concession period. During this concession time the private sector or entity has
the responsibility to arrange the required funds for the project and then after completion of project
public authority provide finance as per decided annuity basis; it may be six term or one year annuity
period, till the completion of concession period. The service will be then transferred to the public
authority at the end of the concession period, without any remuneration of the private sector involved
3. Build Own Operate Transfer (BOOT): In a BOO model ownership of the infrastructure services
remains usually with the project company for example a mobile phone network. The government grants
a franchise to a private partner to finance, design, build and operate a facility for a specific period of
time. Ownership of the facility is transferred back to the public sector at the end of concession period.
Therefore, the private company gets the benefits of any residual value of the project. Usually this PPP
arrangement is used when the physical life of the project and concession period is short.
4. Design Build Finance Operate Transfer (DBFOT): In this model, the private party assumes the
entire responsibility for the design, construction, finance, and operate the service for the period of
concession and transfer it to public authority at the end of that period. This model is somehow same as
BOT arrangement.
5. & M (Operate & Management): The term "management contract" has been applied to cover a
range of contracts from technical assistance contracts through to full-blown operation and maintenance
agreements and so it is difficult to generalize about them. The main common features are that the
awarding authority engages the contractor to manage a range of activities for a relatively short time
period (2 to 5 years). Management contracts tend to be task specific and input rather than output
focused. Operation and maintenance agreements may have more outputs or performance requirements.
6. The simplest management contracts involve the private operator being paid a fixed fee by the
awarding authority for performing specific tasks - the remuneration does not depend on collection of
tariffs and the private operator does not typically take on the risk of asset condition. Where the
management contracts become more performance-based, they may involve the operator taking on more
risk, even risk of asset condition and replacement of more minor components and equipment.
7. HAM: The newly launched HAM is a combination of BOT Annuity and EPC models. As per
concession agreement, the government will contribute to 40% of the project cost in the first five years
through annual payments (annuity). The remaining payment will be arranged on the basis of the assets
created and the performance of the developer. Here, hybrid annuity means the first 40% payment is
made as fixed amount in five equal installments whereas the remaining 60% is paid as variable annuity
amount after the completion of the project depending upon the value of service created. As the
government pays only 40%, during the construction stage, the developer should find money for the
remaining amount.
8. Design Build Operate Transfer (DBOT): This model is similar somehow with BOT only
funding option is common when the client has no knowledge of what the project entails. Basically
finance is arranged by public authority. Hence he contracts the project to a company to design, build,
operate and then transfer it. Examples of such projects are refinery constructions.

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CHAPTER 4
DATA COLLECTION

CASE STUDY 1
Aulander Underground Sewerage Project

Sr.no. particular Discription

1 Client authority Chairman of the Alandur
Municipality (AM),chennia
2 Independent Engineer M/s.AARVEE-VAX(JV)
3 EPC Contractor IVRCL
Infrastructures and
Projects Ltd and
Va Tech Wabag
Technologies Ltd.
4 Total Project Cost RS.45.31Cr.
5 Date of Sign in Concession 27/01/1999
Agreement
6 Construction Completion 31st March, 2005
Period
7 Concession Period 14 Years

Introduction

The Aulander Sewerage Project (ASP) was initiated in the year 1996 by the Chairman of the Aulander
.Municipality (AM). AM, located adjacent to Chennai, forms a part of the Chennai Metropolitan Area.
With a population of around 165,000, the municipality is a residential suburb of Chennai with
predominantly residential and commercial activities. Approximately one-fourth of its population lives
in slums.Prior to 1996, the town did not have an underground sewerage system and all sewage was
managed with individual septic tanks. The largely unregulated disposal of sewage in storm water
drains was an environmental and health concern for the local residents and was frequently raised as a
political issue.

Around 98% of 19,800 households used either septic tanks or holding tanks collected periodically by
tankers and disposed in the low-lying areas outside the municipal limits. In 1996, AM announced an
ambitious plan to construct an underground sewerage system and waste water treatment facility with
the participation of the private sector, contribution from the public, and payment to be provided by the
city. The proposal was ‗transformational‘ as it involved a service never before made available by
the municipality, with financial and management responsibilities being shared by the municipality,
the residents, the private sector, and state government bodies. A Special Project vehicle (SPV) called

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‗First Sewerage Treatment Plant Pvt Ltd‘ (First STP) was incorporated and was the concessionaire
company with whom the BOT Agreement was signed.

Objectives

1. To improve the standard of living of the residents of Alandur (on par with that of Chennai);
2. To provide the most essential basic facility to all the residents of the town;
3. To eradicate the mosquito menace;
4. To avoid the recurring expenditure on septic tank cleaning; and
5. To avoid ground water contamination.

Current status

As per the Agreement the date of completion was 31sMarch 2003. By end 2001, the laying of the sewer
pipes and main sewers was completed, as also the construction of the Pumping Station, Pumping Mains
and the Sewerage Treatment Plant. The overall date of completion was October 2003.The management
contract for the operations and management of the sewerage system expired in 2005, after the
stipulated contract period of 5 years. Following this the operations and management function has
reverted to the municipality. The AM is currently in the process of sourcing an O&M manager for the
operations of the sewerage system. The STP Agreement will terminate in the year 2019.

Advantages

1. Low cost sanitation

2. The procurement of private contractor for the execution of the project was carried out as per the
standards prescribed by the World Bank.
3. Project Management Consultants for the detailed supervision and quality control.People‘s
participation in the project, including
4. the fact that almost 29% of the project cost was garnered from public contributions, was
the most outstanding aspect and learning from the ASP.
5. political will and quick decisions make projects happen

Disadvantages

1. its concession terms were modified to bridge the gap.

2. The port already had external linkages in terms of connecting roads, etc. There was only a
necessity for upgrading the existing facilities which did not translate into high risk.
3. private entity faced difficulties in achieving financial closure due to the unfavourableterms
in the concession agreement.
4. Any costs arising out of force majeure because of non-political events have to be borne by
the Concessionaire. The same are restricted to the extent of insurance.

Finacing information

initially, the cost of the project was estimated to be `45.31 crore, which was later revised to 40.86
core. To finance the municipality‘s portion of the capital cost, a package of loans and grants was
structured as shown in the table 1. All loans were from domestic sources and denominated in Indian
rupees. A unique aspect of the project funding was the initiative of bringing in people‘s money to
fund public infrastructure by generating public awareness and interest right from inception.

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Source Amount ( CRORE)

Grant from TNUIFSL 3.00

Loan from TNUIFSL 6.00

Loan from TUFIDCO 16.00

Grant from TUFIDCO 1.00

Deposits from public 12.40

Interest from deposits 2.46

Total 40.86

Final Result

At the end of the concession (presently March 2029), KSPL shall transfer all the immovable project
assets to GoAP free of cost. The movable assets are to be transferred to GoAP subject to payment of
the book value of assets at the time. However, the concession period is extendable by 20 years in two
blocks of 10 years each.

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Case Study 2

Latur Water Supply Project

Sr.No. Particular Discription

1 Client authority Latur Munciple Council
2 Managing Associate Maharashtra Jeevan
Pradhikaran
3 EPC Contractor ―Latur Water Management
Company Ltd.‖
4 Total Project Cost Rs.182 crore
5 Date of Sign in Concession June 2008
Agreement
6 Construction Completion January 2007
Period
7 Concession Period 10 Years

Introduction:

Located in the Maratwada region, Latur city is a district headquarter covering an

area of 32.56 sq kms and a population of 3.5 lakhs (2001 census). The city is anticipated to witness
a significant decadal growth in population of about 52%

The Latur Municipal Council (LMC) is responsible for water supply to Latur City. Prior to May
2005, the primary sources of water supply to the city were 2 weirs on Manjra river that supplied
about 35 million litres per day (mlpd) of water. LMC operated two water treatment plants and a
distribution network covering 350 kms. In addition, the city was also drawing about 3 mlpd of
ground water through borewells and open wells.

Subsequently, LMC resolved to transfer the existing water supply scheme for the entire Latur city
to MJP. Based on the resolution passed by LMC, MJP was given the right to operate the water
supply scheme for Latur city for a period of 30 years. It was responsible for the operations and
maintenance of existing water supply schemes as well as raising finance for completing the water
supply scheme through a private operator. MJP was also given the right to charge water tariff as
necessary and collect the revenue from the water users.

For the state of Maharashtra, the Maharashtra Jeevan Pradhikaran (MJP) is the nodal
agency responsible for development and regulation of water supply and sanitation. To overcome the
source limitation of Latur city, in May 2005, MJP commissioned a source augmentation project for
the city through the Stage V water supply scheme – a bulk water supply and distribution project.
This included bulk water transmission over 65 kms at a capital cost of approximately `130 crores.
With the commissioning of this scheme, MJP increased the total length of the water distribution
system of Latur city by an additional 126 kms.

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Current status:

The management contract between MJP and the private operator was signed in
June 2008 and subsequently the tripartite agreement was also entered into between LMC, MJP and
the private operator in June 2008.

Subsequent to entering into the contract, MJP undertook a campaign to educate consumers on the
new initiative and to inform them of the new metering policy. This was however met with stiff
resistance and led to the formation of an Opposition Committee which started a severe agitation
campaign against what they termed ―privatisation of water supply‖. A number of protests ensued,
which included rallies against the project and call for a ―Bandh‖ in Latur. MJP took a number of
steps to hold dialogues with various stakeholders to highlight the benefits of the contract.

The study committee was expected to review the tripartite agreement and contract terms. The
committee found the contract in favour of the residents of Latur city and the Government of
LWMC was expected to restart operations. However the opposition to the project continued with
agitators vandalizing and closing down the LWMC office in Latur. LWMC is now operating out of
the MJP premises. MJP and LWMC also initiated an ―information, education and communication‖
campaign to increase consumer awareness on metering policy.

Objectives

1. .Icreasing coverage of piped water supply and achieving 100% metering. In that context provide
andinstall EEC marked water meters and recover its expenditure from consumers includig
establishment of meter workshop
2. .Deployment of operations and maintenance staff including some key employees under
deputation fromMJP and Latur Municipal Council.Manage requests for new connections
including receiving applications, connection fees etc
3. .Collecting water supply system related data and performance reporting to MJ
4. .Providing a minimum average water supply to residents at adequate pressure and ensuring
24*7 pressurised water supply within 2 years of the contract period

Advantages:

1. . Set up a customer service and support centre which is to situated at a location easily
2. accessible to residents of the given area and is to be operated on a 24-hour basis
3. The project has brought about strong socio economic benefit
4. . Implementing the pre agreed investment plan. Supporting the Operato
5. . Service standards have to met without any significant fresh investments
6. achieving regularisation of illegal connections and metering of atleast 10000 connections

DISADVANTAGES:

1. .Emergency stoppages to reduce to maximum of four for less than 12 hours in a year and
redressal of customer complaints
2. System connection requests to be fulfilled within 7 days of directions being issued by the
Corporation subsequent to the payment of connection fee
3. The private developer was allowed to subcontract the construction activity
4. Set up a customer service and support centre which is to situated at a location easily accessible
to residents of the given area and is to be operated on a 24-hour basis

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5. .wihich is the difference between the quantity of treated water in the distribution system and the
quantity of water that is actually billed to consumers, was also very high for LMC.

Final result :

The management contract that has been entered into by MJP and LWMC is for a period of 10 years.At
the time of expiration of the agreement term, all water supply and distribution assets of LWMC would
transfer back to MJP free of cost and without any encumbrances

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Case Study 3

Salt Lake Water Supply And Sewerage Network:

Sr.no. particular Discription

1 Client authority Kolkata Metropolitan
Development Authority and Naba
Diganta Industrial Township
Authority
2 Managing Associate Jamshedpur Utilities and Services
Company Limited and Voltas
Limited
3 EPC Contractor Kamal contractor
4 Total Project Cost 70.09 crore
5 Managing Associate Jamshedpur Utilities and Services
Company Limited and Voltas
Limited
6 Construction Completion 30 Years
Period
7 Concession Period 30 years

Introduction

The Government of West Bengal (GoWB) had identified Sector V, Salt Lake City in Kolkata
as the IT & ITeS (Information Technology / Information Technology Enabled Services) hub of West
Bengal and intended to upgrade Sector V to international standards. This site was spread over an area
of 300 acres in the eastern fringes of Kolkata. The consumer mix at Sector V included office spaces of
the IT companies, government institutions, and office spaces owned by other private firms. However,
Sector V was devoid of an organized water supply and sewerage system. Due to the lack of proper
water supply and sewerage systems, the industrial units of Sector V had to depend on ground water for
water supply and developed on-site sanitation facility at their own costs. This practice resulted in
indiscriminate extraction of underground water

KMDA and NDITA selected a private developer on a competitive basis. The private
developer formed a SPV – the Nabadiganta Water Management Limited (NBWML). The SPV

was required to undertake part-financing; design the specified components of the water supply and
sewerage system; plan; undertake its construction; and operate and manage the system including the
purchase of water, generation of bills and collection for the concession period. The project
infrastructure was planned to be developed within a total time period of 18 months. Post completion of
the construction works, the SPV was to undertake the operation and maintenance of the water supply
system for a concession period of 30 years.

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Objective

 Absence of Water Supply and Sewerage System

 Unhygienic water drawn from bore-wells
 Indiscriminate withdrawal of water causing depletion of natural ground water table and harming
the environment
 Disposal of untreated sewage to soakpits polluting underground water.

current status

The contract was awarded in December 2007 to a consortium of private developers, viz.,
Jamshedpur Utilities and Services Company Limited (JUSCO) and Voltas Limited. The
chosen bidder was required to undertake the construction of the water supply and sewerage assets
within a period of 18 months and post construction commence the operations of the system. The
actualconstruction activity commenced by May 2008 and is expected to be completed by March
2010. (The reasons for the delay have been explained in detail in the following sections) The
operations and maintenance of the system is expected to commence once the construction works are
completed.

Financing Information

The total project cost was estimated to be `62.2 crores by KMDA and NDITA at its inception, of
which the water supply component was estimated to cost `26.06 crores, and the sewerage
component estimated to be ` 36.15 crores. The scope of the water supply component was
increased to include the creation of a UGR and an additional pumping station resulting in an
increase of the cost by `7.87 crores. The revised capital cost was thus `70.09 crores. However, it is
to be noted here that prior to the expansion of scope, the funding arrangement was such that of the
total capital cost, 35% was to be funded under the JNNURM scheme and the remaining 65% by the
private developer. With the increase in costs due to the scope expansion, the funding pattern only
for the increased cost was reworked as - 35% of the funding to cover the increased cost of `7.87
crores, would come via the JNNURM scheme, 32.5% from NDITA and the remaining 32.5% from
SPV-NBWML.

Project IRR -
Equity IRR 16.4%
Average DSCR 1.9
Average DSCR 0.9
Debt Equity Ratio 60:40
NPV Rs.1.4 crore

Advantages:

1. .Post completion of the construction phase, the private developer is required to purchase the
treated water from NDITA and supply water to all the connected units and collect sewage
2. The chosen bidder was required to undertake the construction of the water supply and sewerage
assets within a period of 18 months and post construction commence the operations of the
system.
3. he private developer is also authorised to charge a one time connection fee of Rs 10/- per sq. ft.
of the built up area
4. The financial risk involved in the project is to be borne by the private developer.

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Disadvantages

1. . its concession terms were modified to bridge the gap.

2. The port already had external linkages in terms of connecting roads, etc. There was only a
necessity for upgrading the existing facilities which did not translate into high risk.
3. private entity faced difficulties in achieving financial closure due to the unfavourableterms in
the concession agreement.
4. Any costs arising out of force majeure because of non-political events have to be borne by the
Concessionaire. The same are restricted to the extent of insurance.

Final Result

The private developer needs to be provided with maximum cooperation

in implementation of the project. There were delays in handing over of land free of cost
to the private developer which resulted in delays in commencement of the construction
works. It is important for the government agencies to avoid such delays. However, in all
other areas, the private developer has received substantial assistance from KMDA and
NDITA to ensure smooth implementation of the project

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Case Study 4.

Timarpur Okhla Integrated

Municipal Solid Waste
Management Project

Sr.no. particular Discription

1 Client authority Urban infrastructure- municipal
solid waste
2 PPP Project Structure BOT (incude design and finance)
3 Government/public sector New Delhi Muncipal Corporation
And Muncipal Corporation Of
Delhi
4 Total Project Cost RS 200 CRORE
5 Date of Sign in Concession 14 AUG 2007
Agreement
6 Construction Completion 25 Years
Period
7 Concession Period 25 Years

Introduction
Delhi generates 7,000 metric tonnes (MT) of Municipal Solid Waste (MSW) daily, which is expected
to increase to 18,000 MT by 2021. The present landfill sites that are being utilized for disposing the
garbage are approaching their full capacity and even with the envisaged capacity addition, the situation
is unlikely to improve.
The Municipal Corporation of Delhi (MCD) has thus embarked on a project to reduce the amount of
MSW being disposed in the landfill sites and utilizing the waste for productive purposes such
asgeneration of power from waste. MCD has identified two locations, namely Timarpur and Okhla,for
implementing this project.

Current status

M/s Jindal Urban Infrastructure limited (JUIL), was awarded the project in January 2008. JUIL was
among the six bidders which had submitted their bids from 30 potential bidders. JUIL was awarded the
contract on the basis of the lowest levelised power tariff of ` 2.83 per unit, which was the financial bid
parameter as per the bidding documents.
The project is currently under development and is expected to commence operations with a delay of six
months. Accordingly, original start date of mid-2010 has now been postponed to the end of calendar
2010.

Finacing information

JUIL had estimated the project cost to be ` 200 crores, ` 25 crores more than the stated DPR
cost of ` 175 crores. The increase in cost was principally due to the increase in the capacity of th

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power plant from 16 MW to 20 MW. JUIL arranged finance through a mixture of equity and debt, with
the debt being raised from financial institutions. Axis bank was the lead consortium bank for lending
towards the project.

Perticular Without CDM With CDM

Project IRR 9.6% 16.5%
Average DSCR 1.08 1.96
Minimum DSCR 1.06 1.21
Debt Equity Ratio 70:30 70:30

Note: The financial indicators mentioned above have been taken from the application for carbon credits
to
the UNFCCC. The financial indicators with CDM Support were calculated considering the sale of
energy at
` 4.75 per kwh. However the final selected bidder quoted a levelised tariff of ` 2.83 per kwh.

Observation
Involvement of multiple stakeholders increases the complexity of the project. In case
of this project, the SPV had to take clearances from multiple government departments,
appraise different departments about the progress and at the same time achieve financial
closure.

Learning
It is essential to have a single clearance window, which will facilitate smooth flow on
information and transactions. Even if this is not possible, a government entity could be
appointed to take care of such formalities. With this the private entity could focus more
on the core development issues rather than being entangled in administrative processes

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Case study 5
Delhi Gurgaon Expressway

Sector Roads Express way

PPP project Structure BOT [includes design and finance]
State and Year PPP contract Signed Delhi and Haryana 2002
Government/Public Sector National Highways Authority of India
Private sector promoter DS Construction and Jaiprakash
Industries
Project cost RS 1,175 Crore
Concession period 20 years

Project Discription
The National Highways Authority of India (NHAI), under the Ministry of Road Transport & Highway
(MoRT&H), was entrusted the responsibility for implementation of the Golden Quadrilateral project
(Highway Project connecting the four metro cities of New Delhi, Mumbai, Chennai and Kolkata). As a
part of this project, it proposed the conversion of a very busy section of NH-8 connecting Delhi to
Gurgaon into a 6/8 lane access controlled divided carriageway.
The then existing 4 lane, 27.7 km section of NH-8 between Delhi and Gurgaon with as many as
20 intersections, experienced high vehicular density (145,000 Passenger Car Units (PCUs)/day in
2000) and non-segregation of traffic that led to increase in accidents, acute congestion, wastage of fuel
and excessive pollution. The project was awarded to the consortium of Jaypee Industries and DS
Construction Ltd to

design, finance, construct, operate and maintain the facility for a concession period of 20 years. As in a
typical BOT highway project, the Concessionaire is allowed to collect toll from the users of the project
facility during the operation period to recover his investment and the expressway is required to be
transferred back to the Government at the end of the concession period.
This was the first BOT project in India to have been awarded on negative grant basis where in
the concessionaire offered to pay an upfront fee to NHAI in return of the concession as against
a capital grant from the Government. In consideration of robust traffic projections, the selected
bidder offered to pay ` 61.06 crore to NHAI.
The expressway was commissioned in January 2008 after much delay primarily owing to issues in land
acquisition and changes in the scope of work. It carries more than 180,000 PCUs per day as on date.

Current Status

The expressway has been operational for two years now after it was opened to traffic in January
2008. It carries more than 180,000 PCUs per day, which is much higher than the traffic estimates
for the project by 13,000 to 15,000 PCUs per day. The substantially higher number of vehicles using
the facility has often led to a queuing up of vehicles at the toll plazas.
The expressway consists of 9 flyovers, 4 underpasses and 2 foot-over bridges and 3 toll-plazas.
Smart tags have been introduced to enable cashless automatic payment.

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Financial Information Table 18

Particulars Amount
The funding for the project at the time of financial closure (9 May 2003) is provided in table

Perticular Amount

Debt 383.3 crore

Equity ` 164.2 crore*

TOTAL ` 547.5 crore

` 200 crore of the debt was provided by the Housing and Urban Development Corporation Limited
(HUDCO). The other lenders included State Bank of Mysore (` 30 crore), Punjab National Bank
(` 30 crore), Srei International Finance (` 25 crore) and Jammu & Kashmir Bank (` 15 crore). The SPV
also issued non convertible debentures amounting to ` 50 crore to LIC and ` 37.30 crore to UTI Bank.
The actual cost of the project was eventually ` 1,175 crore. The project cost overrun was funded
by the promoters, by withholding payments to DSC Limited (EPC contractor) and from the amount
received from NHAI (` 155.25 crore) on account of changes in scope.

* Including a grant of ` 61 crore.

Note: The financing information is sourced from rating rationales for the SPV available in the public
domain.

Delivery

The project was commissioned on 25 January, 2008. The expressway is fully operational and is
handling a significant traffic volume of more than 180,000 PCUs per day, growing at 9% year-on-year

Key Learning and Observations

1. Land Acquisition process: The government had committed to the promoters for
providing substantial area of land, prior to actually acquiring the land. Due to the thickly
populated surrounding areas of the expressway, there were certain pockets of land that
were difficult to acquire. This exposed the government to the risk of not providing the
land within reasonable time impacting the overall schedule of the project. It would have
been better if uncontrollable concerns such as these were addressed before the project
procurement stage itself to ensure smooth functioning of the project.

2. Support from Stakeholders for the project: For a project of this magnitude, it
is important for the government agency to garner adequate public support to ensure
smooth implementation. Public support for land acquisition and road expansion activities
should be ensured through a continuous dialogue with the affected individuals. Such an
effort shall create a feeling of ownership through involvement among the public and
reduce resistance leading to delays and other complexities. Moreover with the project
spread across 2 states, various government agencies made demands for changes in the
project alignment and design that resulted in a substantial change in scope, project cost
and consequent delay in project execution. Ideally, such issues should be resolved during
the project preparation stage through consultation.

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3. Approvals from multiple entities: More than 15 government agencies/civic bodies

etc., that were affected in one way or other by the development of this highway, had
to grant various approvals for the project. This became a complex and time consuming
process during the construction period. The government could have provided a single
window clearance for a project of this magnitude.

4. Traffic Risk is lower in case of brown-field projects: Though traffic risk is the
biggest risk to the viability of a typical toll road project, the risk is substantially lower
in case the project involves improvement and tolling of an existing highway since traffic
flow is more or less established. The Delhi Gurgaon section of NH-8 has been one of the

Result

: NHAI relied on the traffic study conducted in 1998 at the

time of the project procurement. Thus, the actual traffic volume grossly outnumbered
the projections from the very beginning of commercial operations. In fact as soon as
the expressway was opened to traffic, the unexpected high number of vehicles led to
heavy queuing at the toll booths and delays in traversing the stretch. This appeared to
have defeated the very purpose of the expressway to reduce travel time, fuel cost and
congestion making the project socially unviable. However, timely action and necessary
measures by authorities and the Concessionaire improved conditions.

Table

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Case Study 6

Mumbai Metro

Sr.no. particular Discription

1 Client authority Urban infrastructure- municipal
solid waste
2 PPP Project Structure BOT (incude design and finance)
3 Government/public sector New Delhi Muncipal Corporation
And Muncipal Corporation Of
Delhi
4 Total Project Cost RS 200 CRORE
5 Date of Sign in Concession 14 AUG 2007
Agreement
6 Construction Completion 25 Years
Period
7 Concession Period 25 Years

Project Description

To address both present and future public transportation needs, the Government of Maharashtra
(GOM) through the Mumbai Metropolitan Region Development Authority (MMRDA) has planned a
146 kilometre long rail based Mass Rapid Transit System (MRTS) for Mumbai.
This project is the first corridor of the proposed MRTS. The Versova Andheri Ghatkopar line shall be
an elevated line with a route length of 11 kms, with 12 stations and a car depot situated at D.N. Nagar.
The line will have a minimum curvature of 100 meters and minimum ground clearance of 5.5 meters.
The length and width of the coaches that shall ply on the route will be 22 metres and 3.2 metres,
respectively. Other technical features of the project include 25 KV AC overhead equipment, cab
signalling with automatic train protection, and a maximum speed of 80 kmph with an average speed of
33 kmph.
Mumbai Metro One is going to run on a dedicated elevated corridor and shall have high levels
of comfort for the passengers viz. fully air-conditioned world class coaches, provision for lifts
and escalators at stations, modern automatic fare collection system and high levels of passenger
security systems. The existing sub-urban trains connect the northern and southern parts of the city. This
project will provide East-West rail based connectivity to Central and Western suburbs. The total time
taken for the journey from Versova to Ghatkopar would be approximately 21 minutes, as against a
typical time taken of 90 minutes by other modes of transport.

Current Status

The construction has commenced from February, 2008 and the project achieved financial closure in
October 2008. The completion date for the project construction is expected by mid 2011.
At present, the construction of the viaduct is underway with 773 piles being dug up. The construction
of the Depot, Substation and Stations has also commenced along the route of the project. Work has also
commenced on the construction of 2 overhead bridges at Andheri Station and the Western Express
Highway.

Financing Information

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The total project cost is estimated at ` 2,356 crores. The project shall be financed on the basis of
a Viability Grant of ` 650 crores contributed by the Government of India (` 470 crores being 20%
of the project cost) and Government of Maharashtra (`180 crores being 7.5% of the project cost).
The remainder is to be financed by 70% debt, 30% equity. The private operator and MMRDA
shall provide equity contribution of ` 466 crores in proportion of their equity stake. The private
operator has also arranged debt of ` 1240 crores for the project. This has been tied up from a
consortium of banks led by IDBI, Corporation Bank, Karur Vysya bank, Canara Bank, Indian Bank and
Oriental Bank of Commerce. IIFCL (U.K.) is providing the foreign currency loan for the project.

Perticular ` RS in crore
Viability Gap Funding 650
Debt 1240
Equity 466
Total 2356

The cost of borrowing for the rupee component, which constitutes about 75 per cent of the total
debt, will be 12.25 per cent, while the foreign currency loan will be at 3.5 per cent above LIBOR
(London Inter-Bank Offered Rate). The loan has been secured for a moratorium period of 2 years
and a total loan repayment period of 15 years.
The project has also taken into consideration a service debt facility of around ` 70-80 crore in the
project cost to ensure that cost overruns are taken care of during the tenure of the project. Senior
Lenders have also been notified of and have approved of these provisions

Key Learning and Observations

1. Expediting the bid process is critical to ensuring a good response to the proposal: The
entire bid process for choosing the successful bidder took more than 2 years. This led
to a lesser number of bidders to bid for the project. Similar hurdles were experienced
in the bid process for the Metro Line 2 as the concession agreement was based on
the model concession agreement. This agreement however had to be tailored for use
for implementation of a metro system. These delays resulted in only one bidder finally
submitting a bid for the project.

2. Delay in Obtaining VGF approval: There was substantial delay in obtaining approval for
VGF from the Government. While this was attributed to the model concession agreement
not being in place, the PPP Appraisal Committee not be constituted and only tentative
guidelines with respect to VGF approval being available at the time, this issue was a
deterring factor for developers and is also likely to have impacted the level of interest in
the Phase 2 bid.

3. Delay in approvals can potentially derail the project: There was a delay in obtaining
approvals for the over bridge that passed over the railway line from the railway authorities.
This had the potential of delaying the project schedule. This was due to the railways
exploring the feasibility of another project invading the path of the metro line. However a
quick resolution of this issue ensured that work was able to continue. It is recommended
that authorities be cognizant of all other upcoming infrastructure projects that have the
potential to affect operations of the planned project while bidding out such projects and
resolve the same prior to the appointment of a developer.

4. Land Acquisition process can lead to issues in the project: The government committed that
the land for the project which essentially consists of land allocated for the depot would be

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procured as per the land procurement schedule provided in the agreement. However, this
land was under private ownership and under dispute. This exposed the government to the
risk of land not being available for the depot thereby bringing in a possibility of derailing
the project. The issue was finally resolved by the private owner of the land agreeing to
allocate 75% of the land for the development of the project on the condition of the
government granting him the right to the Floor Space Index (FSI) available over the entire
plot of land for 25% of the land. This land has been provided on a nominal lease rent to
the concessionaire for the concession period. It is recommended in the future concerns
such as these are addressed before the project procurement stage itself to ensure smooth functioning of
the project

Result

Mumbai is the capital of Maharashtra, one of the most economically developed states of India. It is
among the largest cities in the world, with a total metropolitan area population of over 20 million as of
2011,[14] and a population growth rate of around 2% per annum.[15] Mumbai has the advantage of a high
modal share of the public (88%) in favour of a public mass transport system.[citation needed] The existing
Mumbai Suburban Railway carries over 7 million passengers per day,[16] and is supplemented by the
Brihanmumbai Electric Supply and Transport (BEST) bus system, which provides feeder services to
station-going passengers to allow them to complete their journeys. Until 1980s, transport in Mumbai
was not a big problem. The discontinuation of trams resulted in a direct increase of passenger pressure
on the suburban railway network. By 2010 the population of Mumbai doubled. However, due to the
city's geographical constraints and rapid population growth, road and rail infrastructure development
has not been able to keep pace with growing demand over the last 4-5 decades.[17] Moreover, the
Mumbai Suburban Railway, though extensive, is not built to rapid transit specifications. The main
objective of the Mumbai Metro is to provide mass rapid transit services to people within an approach
distance of between 1 and 2 kilometres, and to serve the areas not connected by the existing Suburban
Rail network.

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Case Study 7

Amritsar Intercity Bus Terminal

Project

Sr.no. particular Discription

1 Client authority Urban infrastructure- municipal
solid waste
2 PPP Project Structure BOT (incude design and finance)
3 Government/public sector New Delhi Muncipal Corporation
And Muncipal Corporation Of
Delhi
4 Total Project Cost RS 200 CRORE
5 Date of Sign in Concession 14 AUG 2007
Agreement
6 Construction Completion 25 Years
Period
7 Concession Period 25 Years

Project Description

Located along the Grand Trunk (G.T.) road, Amritsar city is not only the spiritual centre for the
Sikh community but has traditionally been a hub for trade related activities in this region. Given
the city‘s religious heritage, Amritsar attracts large number of tourists (as high as 50,000 per day) who
visit the Golden Temple. The proximity of Amritsar to the Wagah (India-Pakistan) border has also
provided an opportunity for it to develop as a trading centre for cross border commercial activities. In
addition, a significant section of the local population uses public transport such as buses for movement
across the state. These factors have had a growing impact on the existing urban infrastructure,
especially the transport infrastructure.
Spread on an area of 8.5 acres, the existing bus terminal of Amritsar city, which functioned as an
intercity terminus, was established in 1965 on the G.T. Road. This bus terminal complex included all
administrative areas, passenger waiting areas as well as amenities. As per the bus schedules drawn up
by the Department of Transportation (DoT), Government of Punjab (GoP), there were as many as 1,800
to 2,000 bus arrivals per day at the Amritsar bus terminal. With the growing demand pressures, traffic
at the terminal far outstripping the available facilities and the existing terminal building being in a state
of disrepair, the DoT, GoP facilitated by the Punjab Infrastructure Development Board (PIDB) decided
on modernising and developing the existing Amritsar bus terminal through the Build, Operate, Transfer
(BOT) route. This project was among the first bus terminal projects in India to be built and operated by
the private sector through the BOT route.

The Intercity Bus Terminal of Amritsar city was developed at the same location as the existing
bus terminal. The project involved demolishing the existing terminal building and complex and
development of a modern state of the art Intercity Bus Terminal to cater to the growing demands
of the city. The project is under operation by a private operator for a period of 11 years and 5
months, which includes the construction period. At the end of the concession the project wil transfer
back to the concessioning authority free of all encumbrances.

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Current Status

Subsequent to the signing of the concession agreement in February 2004, Rohan Rajdeep
Infrastructure (India) Pvt. Ltd. was able to complete project development before the predetermined
time frame and the Amritsar Intercity Bus Terminal complex was commissioned in October 2005. The
project is operational. The bus terminal presently services, on an average, 1,100 normal buses and 600
mini buses a day and about 80-100 buses are parked within the Terminal complex overnight. While the
Bus Terminal was expected to handle 2,000 to 3,000 buses per day, it presently handles approximately
1,700 buses a day. One of the reasons for these lower bus numbers is the inability of the private
operator to ensure that all buses use the Intercity Bus Terminal facilities as per the

Financing Information

The project cost for the Amritsar Intercity Bus Terminal was expected to be approximately ` 19
crores at the time of project conception. But on account of an escalation in input costs during the
construction period and quality assurances maintained by the private operator, the project cost
finally worked out to ` 21.34 crores. Of this amount, the debt component was ` 12 crores of 11
years tenure while the equity component was ` 9.34 crores.

Key Learning and Observations

1. Facilitation provided by Government to ensure efficient execution. In case of the

development of the Amritsar Intercity Bus Terminal, necessary facilitation was provided
by the Government through ensuring efficient leasing of land to the private operator,
necessary approvals for project development and providing support to the private
operator during the construction stage as well as the O&M stage of the project. This was
a critical element in the timely execution of the project and the private operator was able
to complete the construction ahead of time and largely within the budgeted costs.

2. Favourable policy environment to ensure revenue stream. As a part of the terms

of the concession agreement, the Government issued notifications to the effect that all
intercity buses would be required to pickup and drop off passengers at the new Inter
City Bus Terminal. The concession terms also specified ―adda fees‖ and the user charges
for specific passenger amenities with assured escalations during the concession period.
Additionally, uncertainties relating to the policy environment were also addressed in
the concession agreement wherein any policy level changes having a direct impact on
the project viability and which happened subsequent to the signing of the concession
agreement would be compensated by the concessioning authority.

3. Flexible project structuring was undertaken to facilitate funding of the project.

In case of the Amritsar Intercity Bus Terminal project, the Government made necessary
provisions within the concession agreement to facilitate funding of the project through
borrowing. Since collection of ―adda fees‖ was similar to toll collections on road projects,
the lenders were provided enough security through access to the revenue streams of the
project and were provided substitution rights in case of a default by the private operator.

4. Need to develop a monitoring and implementation mechanism. As per the

preliminary estimates, the Amritsar Intercity Bus Terminal was expected to be handling
2000 to 3000 buses per day based on the predefined schedules of the Department of
Transportation, Government of Punjab. However presently the Intercity Bus Terminal only
handles approximately 1700 buses a day. While the recent slow down in the economy has
impacted the bus arrivals, part of these lower bus numbers is attributable to the inability
of the private operator to ensure that all buses use the Intercity Bus Terminal facilities

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as per schedules. A number of buses pick and drop passengers outside the Intercity
Bus Terminal complex, thereby avoiding payment of ―adda fees‖. In addition to issuing
146

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CHAPTER 5

ANALYSIS OF PPP

PPP Model Wise Responsibility Matrix

In Indian scenario of PPP road sector, there are seven PPP models use frequently. These models are
differs only by their risk and responsibilities sharing characteristics. The government sector and
private entity shares the responsibilities according to the sanction agreement of PPP model.
Following table shows the various PPP model and responsibilities distribution between government
sector and private entity.

PPP Models BOT BOT HAM DBFOT O&M BOOT DBOT

(Toll) (Annuity)

Responsibilities

Ownership G G G G G P G

Financial P P P/G P P/G P G

Construction P P P P P P P

Design or
P P P P P P P
Technical

Operation and
P P P/G P P/G P P

Maintenance

Traffic revenue
P G G P P P P
collection

Cost overrun P P P P P P P

Time overrun P P P P P P P

Political risk G G G G G P G

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Current Status Of PPP

As per Ministry of Finance, Government of India, total 745 PPP projects are awarded and carried out
from year 2005 to 2018. Following table shows the frequently used PPP models and respective project
awarded in India.

PPP BOT BOT

HAM DBFOT O&M BOOT DBOT
Model (Toll) (Annuity)

Total
Projects 335 138 60 147 58 3 4

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Finance Structures and Funding Analysis for Public Private Partnerships

The private party to PPP contracts is a specific project company formed for that purpose
referred to as Special Purpose Vehicle (SPV). This project company raises finance through a
combination of equity provided by the project company‗s shareholders and debt, provided by
banks, or through bonds or other financial instruments. The finance structure is the
combination of equity and debt, and contractual relationships between the equity holders and
lenders

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Funding Analysis
It is important to explore viable options to address a clearly defined business needs.
According to the CAMF, capital business cases should include financial information,
including a year-by-year breakdown of forecast costs, revenues and funding sources for the
asset‗s full, risk-adjusted life cycle.

The Private Sector and the sponsoring entity work together to develop a comparative
quantitative analysis that forms part of the business evaluation and Finance Board
Submission. This comparative analysis will inform decision makers on the potential financial
impacts of the proposal. Decision makers must rely on estimated cost calculations when
granting approval for a contract. It is not until a contract is awarded, after a competitive
bidding process and much negotiation that the contracted project cost is available. The
decision to embark on a project and issue an RFP is based on estimated amounts. The two
bases of comparison that should be utilized throughout the approval and procurement process
are the Shadow Bid Model and the Public Sector Comparator.

The Shadow Bid Model is an estimate of how much the bids from the private sector are
expected to be. Prices are calculated based on delivery of the project by the private sector.
Costs include risk, insurance, taxes, debt servicing and profit. The shadow bid analysis can
be useful for negotiators and decision makers in evaluating bids that come in from the private
sector.

The Public Sector Comparator (PSC) estimates the cost where the private partner constructs
the asset and the public sector provides facility maintenance, rehabilitation and

financing. A PSC is an estimate of the costs and financial impacts of procuring a project,
similar to the one under consideration for a PPP where the public sector retains substantially
all management responsibility and exposure to risk. A PSC provides a benchmark against
which a Shadow Bid, and eventually a PPP proposal, can be evaluated.

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A PSC should capture the costs of assets, services, staff and other elements required to
deliver the project to the same standards as anticipated under a PPP arrangement

Success Factor

SR NO FACTOR DISCRIPTION

1 Appropriate project The PPP project should be properly identified

identification[8 by knowing its needs,
market demand, future scope and feasibility.
Capacity and The concessionaire should be well capable
experience of the and have much experience in
2 concessionaire doing PPP projects.

3 Proper arrangement Pre analysis should be done for arrangement

of cash of funds with its sources to
reduce financial crisis risk
4 Transparent Transparency in tender processes, or
procurement negotiation, lies with the public
policy[ client, private contractor and their advisers,
which further suggests that
three features are important for transparency:
good communication
between the public and private contractor and
their advisers; the private
sector openly consulting with the public sector
and its adviser, while
keeping responsibility for all decisions; and
the private sector
establishing a clear basis for making
decisions.

5 Availability of There should be a ready Standard Model

standard concession Concession Agreement which
agreement spells out the policy and regulatory
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framework for implementation of a

PPP project
6 land Land acquisition refers to the process by
acquisition[ which the government acquires
private land for the purpose of development of
infrastructural facilities of
the private land, and provides compensation
to the affected land owners
and their rehabilitation and resettlement. For
in time completion of work
acquisition of land should be done prior to
starting on any work.
7 Sharing of risk The commitment and responsibility of both
between public and public and private
private sector participants are important for successful PPP
projects. All parties should
commit their best resources (financial, human,
etc.) to the partnership
project. Commitment should be established
throughout all management
levels
8 Less environmental PPP project and construction activities for
impact those projects should be less
harmful to environment and preserved its
biodiversity

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Risk factor

SR NO FACTOR DISCRIPTION
1 Public opposition to Opposition by local public for giving land or
project[8][ doing further work because
of their local issues or may be personal.
2 Unstable/ change of Frequent changes in government; agitation
government for change of government or
disputes between political parties or
different organs of the state
3 Delay in land Land acquisition refers to the process by
acquisition[ which the government acquires
private land for the purpose of development
of infrastructural facilities of
the private land, and provides compensation
to the affected land owners
and their rehabilitation and resettlement
4 Construction cost Proper planning will prevent many problems
overrun that can haunt a project all
the way to completion. Of course, this is the
plan for almost all projects,
but circumstances occur that causes some
projects to go astray which
make cost overruns inevitable.
5 Environmental impact Many construction activities will have a
risk negative impact on environment
and degrades biodiversity.
6 Maintenance cost Because of misinterpretation in forecasting,
risk inflation, fluctuating traffic,
low quality materials, etc. maintenance cost
can be increases considerably
7 Lack of government Lack of government support at operation
support phase like collection of toll, its
maintenance leads to many conflicts &
disputes and affects the revenue
stream, relationship of both sectors.

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CHAPTER 6

CONCLUSION

sharing of risk between public and private sector is most critical factor amongst all successful
factors for PPP road projects and capacity and experience of the concessionaire is second most
critical factor. Amongst all risk factors, construction cost overrun is the most crucial factors for
failure of PPP road projects and traffic revenue risk, inadequate distribution of responsibilities
and risk between both sectors are second most crucial factors. So, for successful implementation
of PPP road projects we have to mainly focus on private sector commitments, previous work
experience and shared authority and their responsibility between public and private sectors. For,
reduce the risk of failure for PPP road

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CHAPTER 7

REFERANCE

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