PRESENTATION ON PUBLIC PRIVATE PARTNERSHIP (PPP) IN NATIONAL HIGHWAYS

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PRESENTATION ON PUBLIC PRIVATE PARTNERSHIP (PPP)
IN NATIONAL HIGHWAYS By SECRETARY,
DEPARTMENT OF ROAD TRANSPORT HIGHWAYS GOVT.
OF INDIA Conference of Chief Secretaries on PPP
in Infrastructure 20th May, 2006
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EXISTING ROAD NETWORK IN INDIA

• Road Category Length
  Percentage
• (km) ()
• Expressways 200 -
• National Highways (NHs) 65,600
  2
• State Highways (SHs)
  1,37,700 4
• Major other District Roads 7,25,425
  21
• (MDRs/ODRs)
• Rural other Roads
  24,62,100 73

• TOTAL
  33,91,025 100
• Roads carry 85 of passengers 61 of freight
  traffic
• Less than 2 length of NHs but carry 40 of
  traffic

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Major Initiatives for Highways Development

• CRF revamped to create dedicated fund
• National Highways Authority of India (NHAI)
  created and made functional
• National Highways Development Project (NHDP)
  launched
• Requisite legislative and legal provisions made
  for facilitating PPP in road sector

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NHDP Phases I,II,III
Phase Approved Cost Approved Cost
NHDP I Cess and Market borrowings 18,846 (US 4.18 b) External Assistance 7,862 (US 1.74 b) BOT/ SPV 3,592 (US 0.79 b) 30,300 1999 Prices (US 6.73 b)
NHDP II Cess and Market borrowings 23,420 (US 5.20 b) External Assistance 7,609 US 1.69 b) BOT/ SPV 3,310 (US 0.73 b) 34,339 2002 Prices (US 7.63 b)
NHDP III BOT 22,000 (US 4.88 b) 22,000 2004 Prices (US 4.88 b)
Total Cess and Market borrowings 42,266 (US 9.39 b) External Assistance 15,471 (US 3.43 b) BOT/ SPV 28,902 (US 6.42 b) 86,639 (US 19.25 b)
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Future Phases for NHDP
Mostly through Public Private Partnership
Programme Estimate (Rs. crore)
Balance work of GQ and NS-EW corridors (NHDP Phase-I II) 8774 km 52,443
Upgradation of 10,000 km of NHs (NHDP Phase-III) on BOT (Toll) 65,197
Upgradation of 20,000 km of NHs to 2-lane with paved shoulders (NHDP Phase-IV) on BOT (Annuity) 27,800
6-laning of selected stretches 6500 km (NHDP Phase-V) on BOT (Toll) 41,200
Development of 1,000 km Expressways (NHDP Phase-VI) on BOT (Toll) 16,680
Construction of Ring Roads, Bypasses, Grade Separators, Service Roads etc. (NHDP Phase-VII) on BOT 16,680
Total 2,20,000
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ROAD PROJECT FINANCING

• Budget
• Normal
• Dedicated Fund (Cess on Petrol/Diesel)
• Lending from International Institutions
• World Bank
• ADB
• JBIC
• Public Private Partnership
• BOT (Toll)
• BOT (Annuity)
• SPV with equity from NHAI
• Market Borrowings

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INCENTIVES FOR PRIVATE SECTOR PARTICIPATION

• Road Sector has been declared as an Industry.
• 100 tax exemption in any consecutive 10 years
  out of 20 years.
• Foreign Direct Investment (FDI) up to 100.
• Provision of Capital Subsidy up to 40 of the
  project cost to make projects viable.
• Provision of encumbrance free site for work, i.e.
  Government bears expenses for land and
  pre-construction activities.
• Easier external commercial borrowing norms
• Exemption of Capital gains tax for the bonds
  issued by NHAI.
• Duty free import of high capacity and modern
  construction equipments.
• NHAI Equity upto 30.

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Potential Advantages to the Government in PPP

• Encourage private investment in the
  infrastructure sector.
• Reducing public direct spending.
• Public budget could be used in other priority
  areas and projects, such as education and social
  programmes.
• Risks are allocated to the party, which is best
  suited to handle it.
• Introduce innovation and increased efficiency
  from the private sector.
• Involvement of experienced and creditworthy
  sponsors and commercial lenders, guaranteeing
  project viability.
• Tapping of advanced technologies and expertise
  with possible capacity building of contractors
  and consultancy firms.
• Development of local capital market.
• Right sizing of public institutions.
• Better road services to users and early delivery.

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BOT (Toll) Projects

• Concessionaires Responsibilities
• DBFO (Design, Engineering, Financing,
  Procurement, Construction, Operation
  Maintenance)
• Concessionaires rights
• Demand, collect and appropriate the users fees
  (toll)
• Concessionaires Risk
• Financing, Construction, Partial Traffic Risk,
  Operation Maintenance.

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BOT (Annuity) Project

• Concessionaires Responsibilities
• Design, Engineering, Financing Procurement,
  construction and Maintenance
• Concessionaires Risk
• Financing, Construction and Maintenance (No
  Traffic risk)
• Award Criteria
• Minimum Annuity Payment over Fixed Period.

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Summary of BOT Toll based Projects
Category Under Implementation Under Implementation Total Project Cost (Rs. crore) US b Grant (Rs. crore) US b Completed Completed
Category No of Contracts Length (in km) Total Project Cost (Rs. crore) US b Grant (Rs. crore) US b No of Contracts Length ( in km)
NHDP Phase I 9 464 3443 0.76 718.99 0.15 (20.88) 6 287
NHDP Phase II 16 812.86 5371.06 1.19 -103.38 -0.02 (-1.92) - -
NHDP Phase III 17 1090 5752 1.27 491.91 0.10 (8.55) 1 30
Total 42 2356.86 14566.06 3.23 1107.61 0.24 (7.6) 7 317
Though allowed upto 40 the overall grant was 7.6
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Summary of BOT (Annuity) based Projects
Category Awarded Awarded Total Project Cost (Rs. crore) US b Annuity (Rs. crore) US b Completed Completed
Category No of Contracts Length (in km) Total Project Cost (Rs. crore) US b Annuity (Rs. crore) US b No. of Contracts Length ( in km)
NHDP Phase I 8 476 2354 0.54 2888 0.64 (12.23) 8 476
NHDP Phase II 4 299 2121 0.47 199 0.04 (9.38) - -
Total 12 775 4475 0.99 487 0.97 (10.88) 8 476
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HIGHLIGHTS OF NEW MCA

• Partial guarantee of traffic risk to the
  Concessionaire.
• Concessionaires interest protected in competing
  roads.
• Performance standards of the highways clearly
  spelt out.
• Provision for change in scope, if any, required
  during construction and operation period
  included.
• Utilities to be relocated by the Concessionaire
  but it will be excused from failure in case of
  delay by owning agencies.
• Focus on road Users safety
• Users fee charges, revision thereof and
  concession to local traffic clearly spelt out.
• NHAI has to provide land free from all
  encumbrances. NHAI to bear cost of all
  pre-construction activities.
• Risks are allocated to the party, which is best
  suited to handle it.
• Contd

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HIGHLIGHTS OF NEW MCA (contd.)

• Lowest subsidy/grant quoted by the bidders
  towards viability gap funding or earliest
  premium quoted by the bidder is the basis for
  award.
• Force Majeure conditions and relief to the party
  under such conditions clearly spelt out.
• Strong dispute resolution mechanisms.
• BOT bids are invited for 6 lane with 20 years
  concession period. However, exist option exists
  for Concessionaire and the NHAI after 8 years if
  not interested for 6 laning. In such case,
  concession shall be terminated after four laning
  with 12 years concession period.

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State Support Agreement

• Provide applicable permits to the Concessionaire
• Assist access to infrastructure facilities and
  utilities
• Erect no barriers to interrupt free flow of
  traffic
• Assist in regulation of traffic
• Police assistance in the form of Highways Petrol
  Parties
• Not to undertake any act which violates
• State to pay claims on any breach
• No competing facility within 8 years

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Institutional Strengthening

• COI headed by PM.
• COS to resolve inter-ministerial issues and
  problems.
• Restructuring of NHAI to be a multidisciplinary
  body.
• Planning, standardization and quality assurance
  (PSC) cell
• Project appraisal Group/cell headed by Financial
  Analyst, and supported by Transport Economist,
  Transport Planner.
• Human Resource (HR) cell
• Monitoring cell
• Sensitization to PPP

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Role of State Govt. in National Highways BOT
Project

• State Support Agreement - Pre-requisite for
  success of PPP
• Land Acquisition
• Utility Shifting Speedy action
• Forest Clearance
• NOC from State Pollution Control Board
• Development of 2-lane Highways and levy of user
  fee

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Infrastructure Improvement
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Jaipur- Kishangarh Service Road
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Thank You