Infrastructure DevelopmentDepartment (I D D )

Government of KarnatakaA Power Point Presentation on

Public Private Partnership Projects (PPP) in Infrastructure Sector

Presentation made by

Mr. Renuka Prasad T BJoint Secretary to Govt.,

( Retired ) G o KEmail:renukaprasad31@rediffmail.com

Mob. 9632780343

What is PPP• Public Private Partnerships (PPP)• Public Private Partnership means 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 pre-determined performance standards, measurable by public entity or its representatives

Why PPP? • PPP will endeavour to promote PPPs in order to increase faster delivery of infrastructure to the State. The Government would also explore ways and means of

attracting private investments in the sector with innovative project structuring, financial instruments/measure/credit guarantees. Projects will be taken up through the PPP route through streamlined processes and principles with appropriate public control and monitoring mechanism. The Government will ensure that a value-for-money (VFM) rationale is adopted with optimal risk allocation in project structuring through the life cycle.

Where PPP has to be adopted ?

• The guidelines formulated by Government of India or the Planning Commission of India PPPs will be adopted by the State Governments. Governance structures developed by Government of India for facilitation of competitiveness, fairness and transparency in PPP procurement will also be adopted by GoK.

How PPP could be adopted ?

• Departments/agencies choosing the PPP route would be responsible for: assessing the public need for Infrastructure Project, and undertaking the project in case the Project is found to satisfy a public need

What is public need ?• The “public need” means a substantial or obvious community need for the proposed project based on all attendant circumstances as compared to a mere convenience. The determination of “Public Need” shall be taken by the relevant administration department after considering a. Common use and needs of the community (b) Appropriateness of the project in relation to the

development plans of the department; (c) Possibility of the project otherwise not coming up

Public need contd..(2)• undertaking PPP projects through streamlined processes and principles;

• ensuring that a value-for-money rationale is adopted through the life cycle with optimal risk allocation;

• developing governance structures to facilitate competitiveness, fairness and transparency in procurement; and

• attaining appropriate public oversight and monitoring of PPP projects

Public need contd..(3)• In order to increase private participation in infrastructure projects Government will provide adequate comfort to investors in making available adequate land, timely approvals and clearances and formulate appropriating guidelines from time to time.

Public need contd..(3)• GoI recognizes that some projects, that are important from the perspective of providing a public service, may not offer adequate commercial returns for PPP. In such cases, Government would use other compensation mechanisms like Central Viability Gap Funding (CVGF), State Government Viability Gap Funding (K-VGF), annuity payments etc. In case of VGF/ K-VGF, the relevant guidelines issued by GoI/ GoK shall need to be adhered to. Alternatively, it may construct such projects with its own funds, allowing management of these assets under Private Sector Participation (PSP), wherever feasible

Options of PPP• Some of the common variants of this model are indicated below.

• Build-Own-Operate-Transfer (BOOT)• Build-Own-Operate (BOO)• Build-Lease-Transfer (BLT)• Build-Own-Lease-Transfer (BOLT)• Design-Build-Finance-Operate (DBFO)• Design-Build-Finance-Operate-Transfer (DBFOT)

Analysis, Sectors in PPP

• GoK will endeavor to first assess options for development of projects through the PPP route. In case Value for Money is not established, only then will the option of utilizing public funds for project development would be considered. The process for project

development under PPP framework would be considered

Analysis of PPP contd..(2)

Analysis contd…(2)• Step-5• Pre-Procurement Activities (Land Acqn./Utility Shifting/Funding Arrangements, Approvals and Clerances)

• Step-6• Bid-Documentation (RPQ/RFP/PMI/ Draft Agreement)• Step-7:• Procurement Process (Single/Two Stage, Evaluation of Bids Received)

Will result in----• Negative VFM>Post Bid VFM> Positive VFM

Post Analysis Period stage of PPP

• SELECTION OF PRIVATE PARTNER-• Step 8-• Post Award Governance--Appointment of Agency--Pre construction/post construction/

-Operation Period/ PPP Evaluation-Audit/ Construction Management

GoK Policies on PPP in Infrastructure Projects- 1997 & 2007.

• KARNATAKA has been the forerunner in India’s economic growth, and is constantly exploring initiatives to develop frameworks for improvement of sectoral performances. Government of Karnataka (GoK) recognizes the need to develop high quality infrastructure as a means to achieve rapid economic growth. For this purpose, the Infrastructure Development Department (IDD) had come out with an Infrastructure Policy in 1997. The Infrastructure Policy of 1997 was aimed at expanding and upgrading infrastructure to meet the growing needs of the industrial and agricultural sectors, inviting private investment in infrastructure, and adopting a co-ordinated approach. With the efflux of time there have been changes in institutional, financial and administrative setups. In line with these changes, the Infrastructure Policy, 1997 was REVISED and issued in 2007 and is currently operative.

• The main objective of the 2007 policy is to provide a fair and transparent policy framework to help facilitate the and integrated approach to development. The policy also had specific incentives and concessions for entrepreneurs who invest in infrastructure in Karnataka.

GoK Policies on PPP in Infrastructure Projects- 1997 & 2007- Contd..(2)

• The main objective of the 2007 policy is to provide a fair and transparent policy framework to help facilitate the PROCESS of economic growth and encourage Public-Private Partnership (PPP) in upgrading, expanding and developing infrastructure in the State. This policy and other initiatives of the Government of Karnataka has resulted in about 227 PPP projects across various sectors in different stages of development (Under planning or pipeline/under implementation/ completed).

Sectors/Sub Sectors & Projects

• Sectoral Strategies: The broad principles set out in this document would govern the various strategies to be developed for each sector. The concerned administrative departments would finalize the sector strategies and action plans there under within six months of the date this Policy comes into force. IDD would assist respective agencies in making a concerted effort to set out an action plan for already identified project development opportunities in various infrastructure sectors in the immediate term. For this purpose, IDD would interface with other departments concerned, such as the Public Works Department, Urban Development ,Department, Energy Department, Commerce & Industries Department, and Department of Information, Tourism & Youth Services, among others, to advise on and co-ordinate GoK agencies/ departments could procure services from independent third party consultants for project development and procurement process. The consultants may be suitably identified and selected by the concerned agencies/ developments for this purpose through a transparent bid process.

Sectors/Sub Sectors & Projects

• Agri-infrastructure -• Energy• Industrial Infrastructure• Irrigation• Tourism• Transportation & Logistics• Urban and Municipal Infrastructure• Telecommunication• Rural Development• Health• Education• Housing• Sports & Youth Services

Sub-Sectors• Industrial Parks• Industrial Estates• Industrial Townships• Biotechnology Parks• Information Technology Parks• Marine parks• Food Parks

2. Special Investment Region3. Development of Specific Zones

Special Economic Zones• Free Trade Zones• Export Promotion Zones• National Industrial and Manufacturing Zones

4. Corridor Development• Industrial Corridors• Infrastructure Corridors• Freight Corridors

5. IT Services

Sub-Sectors….2• Irrigation Infrastructure• Canals• Dams• Weirs• Tourism Infrastructure• Parks• Amusement parks• Entertainment parks• Theme parks• Hotels- Resorts• Trade fairs• Tourism Centers• Convention & Exhibition centers• Cultural centers• Golf Courses

Sub-Sectors…..3• Roads• Roads• Bridges• Interchanges• Flyovers• Railways• Railway systems• Tunnels• Viaducts• Bridges• Terminals• Urban transport systems• MRTS• LRTS• Monorail /HSRL• High capacity bus systems

Sub-Sectors…..4• Airports and airstrips• 5. Minor ports and harbours• 6. Inland water transport• 7. Transport Terminals• Bus/ Truck/ Urban terminals• Public amenities centres• Transport & Traffic Management Centers(TTMCs)

Sub-Sectors………5• Warehousing infrastructure• Warehouses• Container freight stations• Container depots• Cold storage facilities• Tank farms• Parking facilities: Mechanized/Multi-storey/On-ground/Underground

Sub-Sectors……6

• Development: Commercial development• 3. Water Supply & Sewerage• Desalination plants• Wastewater recycling and reuse• Underground drainage• 4. Waste Management• Solid waste/ Bio-medical waste/ Hazardouswaste• Collection/ transportation/ treatment and disposal facilities

• 5. Energy Efficiency Street Lighting• 6. Signage• 7. Abattoirs

Sub-sectors…..7• Telecommunication -Fixed network• Optic fibre/cable networks which provide broadband/ internet• 2. Telecommunication towers• Rural Development 1. Rural Roads• 2. Waste to Energy (agri-waste)• Health • 1. Infrastructure and facilities for healthcare• Primary• Secondary• Tertiary• 2. Diagnostic Centres• Education • 1. Primary, Secondary and Higher education• 2. Knowledge City

Sub-Sectors………8• Education Sector (contd.)• 3. Vocational training• 4. Skill Development• Housing 1. Low cost / EWS housing• 2. Affordable housing• 3. Old-age houses• 4. Working Women houses• Sports & Youth• Services• 1. Sports Infrastructure

Strategies & Projects•PPP cells were set up in twelve departments/agencieswith the help of the selected consultants. The objective of the exercise is also to draw up sector inventory of assignments and assist in undertaking capacity building in the sector in areas of appraisal of studies, appraisal of bid documents and MIS. The consultants have undertaken five pre-feasibility studies apart from assisting the concerned department in organizing sector specific workshop.

•IDD will endeavour to assist each department to set up a PPP Cell through which all infrastructure projects with private sector participation would be routed. This Cell could be the point of contact for all information relating to infrastructure projects. Some departments have already set-up PPP cells. These Cells would be responsible to monitor the development progress and document the same

Strengthening of IDD, PPP Cell

• Strengthening of PPP Cell in IDD was established in 2007. PPP Cell is headed by Principal Secretary, IDD with Director (PPP) managing the cell.

• Asian Development Bank (ADB) has provided Technical Assistance to PPP Cell in IDD. To strengthen the capacity of the Central PPP Cell, to manage all activities related to implementation of policy, technical, legal and other matters related to PPP projects.

• The State Government may appoint suitable qualified professionals on Contract basis for a period not exceeding 3 years which in exceptional circumstances in the opinion of the State Government, be continued for another 3 years.

 

Successful PPP Projects completed and under Pipeline in Karnataka• The aggregate value of investments from these projects is estimated at Rs. 1,61,750 Crores.

• The aggregate value of completed projects and the projects under implementation is estimated at Rs. 5,177 Crores.

• Certain projects like Bangalore International Airport, Bypass Road to Sandur Town,Hassan - Mangalore Gaugue Conversion, Wagdhari-Ribbanpally Road and Road from Hubli to Lakshmeshwara has been constructed and several projects like Modern Agricultural Market Complex at Byatarayanapura.Minor Airport at Gulbarga & Shimoga, 18 Hole Golf Course at Mangalore and Development of KSRTC site at Hassan, Puttur & Mangalore are in the Construction stage

2007 GoK Policy and its success story…

• Since the Infrastructure Policy, 2007 has come into effect, there have been multiple developments in the manner in which infrastructure services are being delivered. India, and Karnataka, has witnessed infrastructure project conceptualization, development, award and implementation under various formats. There has been a substantial progress in the ecosystem in terms of project development efforts, financing structure and sources, standardization of contractual documentation, formulation of policy and rules. There has been an increasing awareness of the implementation structures and a very noticeable public opinion on how the services are being delivered. Importance Value for Money (VFM) assessment in the decision making has been realized and the use of the VFM at various stages of the process has been increasingly stressed of

The new policy of 2013 (draft)

• To address the above mentioned aspects, Government of Karnataka intends to revise Infrastructure Policy 2007. GoK has come up with this Karnataka Infrastructure-The Policy, 2013 to encapsulate the developments, address the constraints being faced in delivering service and to provide a platform for greater economic growth of the state.

Investment Need in the State

• The infrastructure constraints have remained, or even become more severe as reflected in the sectoral indices set out below or even become more severe as reflected in the sectoral indices set out below:

• Sector Index Target Index• by 2020 Investment• Requirement by 2020• 1 Railways• (rail km/ 1000 sq km)• 16 41 Rs.25,600 Cr• 2 Roads• (km/ Sqkm)• 1.07 1.5 Rs.1,38,900 Cr• 3 Energy• (units per capita per annum)• 700 1400 Rs 85,000 Cr• 4 Ports• (MMT/annum)• 44• 142 & Rs. 7,500 crores

Citizen focus & PPP for good governance, Best practices, applications

• Government of Karnataka is committed to facilitate access to information, encourage participation raise awareness, strengthen citizens’ civic education and skills and to support capacity-building among civil society organizations. For every project, the focus of development shall be citizens and to that extent it shall be ensured that there are economic benefits for both the State as well as the the needs and expectations of individuals and local communities would be addressed in project preparation. Local communities shall be involved in the decision making. Reasonable effort should be made to engage with as wide a variety of citizens as possible.

• 8. Efficient Use of Assets: GoK would develop projects based on considerations of both social need and economic viability, the focus being integrated infrastructure development.

• 9. Payment for Services: GoK believes that the inculcation of the “provider-charges” and the “user-pays” principles is fundamentalto the success of PPPs. to the success of PPPs. To this end, GoK would, where necessary and appropriate, consider levy of user charges (tolls, fees, tariffs, cesses etc.)

PPP for Good Governance contd..(2)

• The levy of user charges would be based on one or more of the following criteria:

• Savings to users• Willingness to Pay• Need for explicit subsidies• Uniformity between various projects• Cost Recovery• Debt service & Equity returns

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