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PRESENTATION ON PUBLIC PRIVATE PARTNERSHIP (PPP) IN NATIONAL HIGHWAYS BySECRETARY, DEPARTMENT OF ROAD TRANSPORT & HIGHWAYS GOVT. OF INDIA Conference of.

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Presentation on theme: "PRESENTATION ON PUBLIC PRIVATE PARTNERSHIP (PPP) IN NATIONAL HIGHWAYS BySECRETARY, DEPARTMENT OF ROAD TRANSPORT & HIGHWAYS GOVT. OF INDIA Conference of."— Presentation transcript:

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

2 EXISTING ROAD NETWORK IN INDIA Road Category Length Percentage (km) (%) (km) (%) Expressways National Highways (NHs) 65,600 2% State Highways (SHs) 1,37,700 4% Major& other District Roads 7,25,425 21% (MDRs/ODRs) (MDRs/ODRs) Rural & other Roads 24,62,100 73% TOTAL 33,91, %  Roads carry 85% of passengers & 61% of freight traffic  Less than 2 % length of NHs but carry 40% of traffic

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

4 NHDP Phases I,II,III Phase 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] [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$ b)

5 Future Phases for NHDP Programme ProgrammeEstimate (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 Total2,20,000 Mostly through Public Private Partnership

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

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

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

9 BOT (Toll) Projects Concessionaire’s Responsibilities: Concessionaire’s Responsibilities: DBFO (Design, Engineering, Financing, Procurement, Construction, Operation & Maintenance)DBFO (Design, Engineering, Financing, Procurement, Construction, Operation & Maintenance)  Concessionaires rights  Demand, collect and appropriate the users fees (toll)  Concessionaire’s Risk:  Financing, Construction, Partial Traffic Risk, Operation & Maintenance.

10 BOT (Annuity) Project Concessionaire’s Responsibilities : Design, Engineering, Financing Procurement, construction and Maintenance Concessionaire’s Risk : Financing, Construction and Maintenance (No Traffic risk) Award Criteria: Minimum Annuity Payment over Fixed Period.

11 Summary of BOT Toll based Projects Category Under Implementation Total Project Cost (Rs. crore) [US$ b] Grant (Rs. crore) (Rs. crore) [US$ b] Completed No of ContractsLength (in km) No of ContractsLength ( in km) NHDP Phase I [0.76]718.99[0.15](20.88%)6287 NHDP Phase II [1.19] [-0.02](-1.92%)-- NHDP Phase III [1.27]491.91[0.10](8.55%)130 Total [3.23] [0.24](7.6%)7317 Though allowed upto 40% the overall grant was 7.6%

12 Summary of BOT (Annuity) based Projects CategoryAwarded Total Projec t Cost (Rs. crore) [US$ b] Annuity (Rs. crore) [US$ b] Completed No of ContractsLength (in km) No. of ContractsLength ( in km) NHDP Phase I [0.54]2888[0.64](12.23%)8476 NHDP Phase II [0.47]199[0.04](9.38%)-- Total [0.99]487[0.97](10.88%)8476

13 HIGHLIGHTS OF NEW MCA Partial guarantee of traffic risk to the Concessionaire. Concessionaire’s 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 User’s 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…

14 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.

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

16 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

17 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

18 Infrastructure Improvement

19 Jaipur- Kishangarh – Service Road

20 Thank You


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