Experience on Public Private Partnership in Punjab Experience Sharing Workshop for State Road Agencies Nov 1-2 2006, New Delhi Punjab Roads & Bridges Development Board
Structure of Presentation Basic Information about Punjab Advent of PPP in Punjab Policy Initiatives Overview of Existing Provisions Results Summary-Issues/lessons Time 15 Minutes
India, Punjab Likely Gateway for Trade Opportunities with Central and Western Asia
Punjab Geographical area : 50,362 sq. km 1.5% of India's total area. Population : 24.35 Millions Urban-Rural ratio : 34:66 Topography : Flat Alluvial Plain Literacy rate : 70% Number of Registered Vehicles : 3.52 Million
Roads Constitutional Provisions in India Legislative Powers under Article 246- Seventh Schedule Union List (I) Entry 23 National Highways Entry 96 Fees CENTRAL GOVERNMENT State List (II) Entry 13 Roads, Bridges etc. Entry 59 Tolls STATE GOVERNMENT
Punjab Road Network National Highways State Roads Village Roads Urban Roads : : : : 1739 kms 7374 kms 42070 kms 3000 kms Dominance of Road Transport Share (70%)
9 Years back 60% of road network 3-5 IRI Fair to poor road surface 20% had IRI > 5, Roads unworthy of travel Receding funds from Budget
Strategy for Change Separate the planning and execution functions in road sector Create a dedicated source of funding Seek and secure alternate sources of funding
PRBDB Established as a statutory body in 1998 To improve the Quality of Roads & Bridges infrastructure in State of Punjab. To constitute a road fund. BOD Headed by Chief Minister, supported by Executive Committee
How it began? Debt based financing Private placed Bonds, Domestic Financial Institutions (HUDCO), Borrowings from NABARD Amounts raised Rs 550 crores Length Approx 1500 Km Barrowing backed by Govt Guarantees Project execution Item Rate Contracts Executing Agency PWD
PPP-Reasons for Change Inadequacy of Public resources Limit to debt financing Acceleration of infrastructure provisioning Efficiency improvements Faster Implementation Improved quality of service Around this time, PPP begins at National Level
Policy Initiatives for PPP in Road Sector Road Sector declared an Industry 100 % FDI Allowed External Commercial Borrowing (ECB) 35 % 100% tax exemption for 5 years 30% tax relief for another 5 years Duty free import of equipment
PPP in Punjab-Legal Framework 1998 The Punjab mechanical vehicles (B&R) Tolls Act 1999 Punjab Infrastructure Development Board set up 2002 Punjab Infrastructure Regulatory Act (PIRA) 2004 State Toll Policy 2004 Model Concession Agreement 2005 PRBDB Act amended
The Punjab Infrastructure (Development & Regulation) Act 2002 To create Apex body for overall planning of Infrastructure sector and Infrastructure projects To provide a regulatory framework to attract private sector into the Infrastructure sector Single window clearance Concession Periods up to 30 years allowed
PIRA Regulatory Authority Independent Punjab Infrastructure Regulatory Authority 3-7 member body Formulate policy/guidelines relating to tariff To conduct public hearings Adjudicate upon appeals against award/approval of projects disputes relating to concessions
PIRA Project Selection Process Selection process in consultation with State Government Public Consultations introduced Finalizing of scope, funding & structuring of Project Preparation of Final Feasibility Reports
PIRA Selection Procedures Competitive Public Bidding Two Staged Evaluation process Technical Evaluation followed by Financial Evaluation Negotiations only if single final bidder Unsolicited bid Swiss Challenge technique adopted Special Purpose Vehicles allowed Advertise Advertise Prequalification Prequalification Bidding Bidding Process Process Bid Bid Evaluation Evaluation Contract Contract Award Award
Procurement Method Competitive bidding Method adopted Single bidding element kept- Grant Element Simplicity Transparency Lack of capacity in Government
Toll Policy- July 2004 (FIRST OF ITS KIND IN INDIA) Open system of tolling Basic Toll Rates/ Km specified Automatic Annual revision of basic Toll Rates. Till 2011, 10% flat increase plus indexation to Inflation (WPI) Peak and Off Peak Toll Charge. up to 25% Premium during Peak hours Additional Charge for Evasion of Toll Charges Additional sum equal to applicable toll charges Penalty for Unauthorized collection. 5% penal interest per day
Toll Policy- July 2004 (FIRST OF ITS KIND IN INDIA) Additional Charges for overloading (if weighbridge exists at Toll Station) Up to 50% of toll if overloading < 20% Up to 100% of toll if overloading > 20% Local Users Proof of residence and Registration of car at local address required. Monthly fee = 5(single one way journey) Frequent Traveler discounted 20% discount on purchase of 20 or more tickets
User Charges ( Per Km) Sr. No. 1 2 3 4 5 Category of vehicle Car/ Three Wheeler LCV/ Tractor with Trailer Bus/ Truck/ Road Roller Heavy Truck Earth Moving & other self propelled equipment Basic Toll Rate per vehicle(rs per Km) 0.35 0.53 1.05 Initial toll 1.60 rates lower by 1/3 rd 2.00 Min. Toll charge (Rs per Trip) 10 15 30 40 50 Toll charged by NHAI (as on 01.04.04) 0.55 0.95 1.90 4.06 -
Model Concession Agreement Risk sharing allocation Bankable to avoid negotiations Involved all stakeholders upfront Prospective Concessionaires-2 Workshops Lenders-Single Workshop
MCA Construction Performance Security Typical 5% of Total Project Cost Reduced to 1% upon investment of 15% of Project cost Operation Performance Security Typical 1% of Total Project Cost Insurance covers
MCA Borrowing Guarantee by the State (Contingent Liability) Minimum 90% of the debt due Revenue Short fall Loan Indirect Political/ Political event/ Government event of default
MCA Change in scope Upto 5% of Total Project Cost Capacity Augmentation possible No competing facility in first 8 years Later Concession Period extended
MCA- Force Majeure Typically the Concession Period extended Cost during Force Majeure Events Non Political event- respective parties Indirect Political event- Half by Government Political Event- Fully by Government Deterrent Payouts to prevent Political Force Majeure Termination if Events persist for more than 120 days in a continuous period of 365 days
MCA- Other Features Capital Grant up to 40% of Total Project Cost (Estimated upfront by Govt) Entire Grant payable during construction phase only pro-rata release linked to releases of loan by lenders Conditional Equity Dilution permitted
Monitoring Performance Engineer appointed by State- PWD EEs Independent Quality Control Consultant paid by State Role limited to Performance Monitoring Service Quality Criteria defined (e.g Roughness) Measurement mode- (Use Bump integrator) Frequency of measurement prescribed ( To be done half yearly) Time allowed for repair (30 days)
What has been done so far ROB at Dera Bassi 4 BOT Road Works 2 O&M Contracts 7 BOT works Concessioning 3 Road Projects in Bidding, Screening & pipeline Selection Started Preliminary Assessment on effectively Year Concessions 2004-5 15 works bid Project Definition & out Feasibility Assessment Project Identification Financial Closure Infrastructure Project Policy & Guidelines Pre Private Participation Started in Year 1998-99
ROB at Dera Bassi - The First Step Towards Privatisation Project specific Length - Bridge portion = 49.60 m Approaches = 1507.40 m Project Cost - Rs 36.0 crores Bid Process details Bidding Element was concession period Bid awarded on Jan 18, 1999 Project Implementation Schedule Construction period - 2 years Actual commissioning date 13 th April 2002 Concession period - 7 years 5 months and 25 days
ROB Project Interesting Facts Project delayed initially due to forest clearance Interest rate fell 16.5% to 9.25% Traffic realized 60% Service roads acting as competing facility Project survived on renegotiations of loans
BOT Road Projects Total no. of roads 14 Total Length 760 kms Total Cost Rs 880 crore 2 ROADS ON O&M CONTRACT
BOT Corridors ( 14 No.) Tranche Road Corridor Length (kms) Project Cost (Rs. Crore) Grant (+) (Rs. Crore) Concessionaire I 1. Patiala Samana Patran 48.6 48.10 +19.23 Rohan & Rajdeep Tollways Ltd. Pune 2. Balachaur Dasuya 104.96 123.64 +49.54 Rohan & Rajdeep Tollways Ltd. Pune II 3. Ferozepur Fazilka 84.43 105.52 +42.15 Chetak Enterprises (P) Ltd. Udaipur 4. Patiala Malerkotla 55.77 63.56 +25.42 IDEB Projects (P) Ltd. Banglore 5. Moga BhagaPurana 47.70 62.09 +22.73 PD Aggarwal Infrastructure Ltd. Indore 6. Hoshiarpur Tanda 29.90 30.56 +7.76 PD Aggarwal Infrastructure Ltd. Indore 7. Kiratpur Sahib Una 35.72 41.84-48.15 Rohan & Rajdeep Tollways Ltd. Pune III 8. Sirhind Morinda Ropar 43.22 55.63-59.83 GPL Brahmaputra Consortium Ltd. (JV) New Delhi 9. Hoshiarpur Phagwara 32.50 32.53-75.33 GPL Brahmaputra Consortium Ltd. (JV) New Delhi 10. Gobindgarh Nabha Bhawanigarh 55.42 70.25 +13.74 Telecommunications Consultants India New Delhi 11. Dakha Raikot Barnala 57.94 78.66 +31.46 Rohan & Rajdeep Tollways Ltd. Pune IV 12. Batala Mehta Beas 37.27 45.00 13.Tanda Amritsar 77.89 74.60 14. Nakodar Kartarpur 48.92 49.00 TOTAL 760 880
Story so far Tranche No. of projects Length (kms) Project Cost Grant No. of concessiona ires I 2 154 Rs 171 crore 40% 1 II 5 253 Rs 306 crore Overall 25% 4 III 4 189 Rs 238 crore (-)8% 3
Private Sector Participation Way ahead Back ending with a road constructed in traditional way Ludhiana Malerkotla Sangrur Road (Rs 226 Cr/72 Km) under WB Project Sangrur to Haryana Border Road (Rs) under Phase II of WB Project Performance-Based Contracts for Management and Maintenance of Roads (PMMR))
Issues Procurement Issues: Aggressive timetables non-negotiated procurement process Based on traditional procurement principles Contingent liabilities of Government
Issues Payment of grant during Operation period Negative Grant Negative & positive grant in single offer Equivalent to top loading Refinancing benefits
To sum up Early days most of the projects under implementation phase Over emphasis on concessionaire taking revenue risk (high degree of risk transfer) Limited international developer / financier participation Primarily domestic contracting industry led very few developers Institutional capacity to handle increasing PPP projects across sectors likely to be important Availability of land, regulatory structure to become critical issues
Thank you