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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
              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
     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
                   NHDP Phases I,II,III
    Phase                                     Approved Cost


NHDP – I     Cess and Market borrowings   : 18,846 (US$ 4.18 b)            30,300
             External Assistance          :  7,862 (US$ 1.74 b)      [1999 Prices]
             BOT/ SPV                      :  3,592 (US$ 0.79 b)      (US$ 6.73 b)



NHDP – II    Cess and Market borrowings   : 23,420 (US$ 5.20 b)            34,339
             External Assistance          : 7,609 US$ 1.69 b)        [2002 Prices]
             BOT/ SPV                      : 3,310 (US$ 0.73 b)       (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)            86,639
             External Assistance         : 15,471 (US$ 3.43 b)     (US$ 19.25 b)
             BOT/ SPV                    : 28,902 (US$ 6.42 b)
                        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         27,800
Phase-IV) on BOT (Annuity)

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        16,680
etc. (NHDP Phase-VII) on BOT

                                 Total                                    2,20,000
                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
         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%.
    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.
                           BOT (Toll) Projects

• Concessionaire’s Responsibilities:

    •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.
               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.
    Summary of BOT Toll based Projects
 Category        Under Implementation              Total         Grant              Completed
                                                    Project       (Rs.
                   No of           Length           Cost           crore)     No of        Length
                 Contracts         (in km)       (Rs. crore)    [US$ b]     Contracts     ( in km)
                                                  [US$ b]

NHDP Phase I          9              464               3443      718.99        6            287
                                                      [0.76]      [0.15]
                                                                (20.88%)
NHDP Phase            16           812.86             5371.06    -103.38        -               -
      II                                               [1.19]    [-0.02]
                                                                (-1.92%)
NHDP Phase            17             1090              5752      491.91        1                30
     III                                              [1.27]     [0.10]
                                                                (8.55%)
   Total              42          2356.86         14566.06      1107.61        7            317
                                                   [3.23]        [0.24]
                                                                (7.6%)

 Though allowed upto 40% the overall grant was 7.6%
        Summary of BOT (Annuity) based
                   Projects
   Category         Awarded            Total       Annuity          Completed
                                         Projec   (Rs. crore)
                                            t      [US$ b]
                  No of     Length     Cost                      No. of      Length
                Contracts   (in km)     (Rs.                    Contracts   ( in km)
                                         crore)
                                      [US$ b]
NHDP Phase I       8          476       2354          2888         8          476
                                       [0.54]        [0.64]
                                                   (12.23%)


NHDP Phase II      4          299       2121         199            -           -
                                       [0.47]       [0.04]
                                                   (9.38%)



Total              12         775      4475          487           8          476
                                      [0.99]        [0.97]
                                                  (10.88%)
           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…
       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.
       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
           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
          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
Infrastructure
Improvement
Jaipur- Kishangarh – Service Road
Thank You

				
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