Public Private Partnership for Infrastructure Development Lessons by dfhercbml

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									  MAY         2006                                                                                 VOL. 2     NO. 3


 l Public    Private Partnership for Infrastructure Development: Lessons for India
 l Alternative       Paths to Power Reforms: Orissa, Delhi and West Bengal
 l Modernising          Indian Airports: Has the Action Begun?
 l Infrastructure        News

Participating Institutions

l The National Council of Applied Economic Research (NCAER), New Delhi

l Centre for Economic Policy Research (CEPR), London

l Institut d'Économie Industrielle (IDEI), Toulouse

l European Centre for Advanced Research in Economics and Statistics (ECARES), Brussells

   *Efficiency, Equity and Access in Indian Infrastructure: Blending Competition and Regulation (Project Co- funded by The European Union
   under the "University & Studies" dimension of the EU-India Economic Cross Cultural Programme). The contents of this newsletter are the
   sole responsibility of contributors and can in no way reflect the views of participating institutions or the European Union.

                  Public Private Partnership for
                  Infrastructure Development: Lessons
                  for India
                  The need for public-private partnerships in        India, Bhutan and Nepal, noted the need for
                  infrastructure has now become widely accept-       learning from international experience for
                  ed. Inaugurating a workshop on PPPs in             policy making and drew attention to the EU-
                  Infrastructure Industries and Regulation held      India Economic Cross-Cultural Program
                  on April 10-11, 2006, Mr. Montek Singh             that has provided an opportunity for interac-
                  Ahluwalia, Deputy Chairman, Planning               tions between European and Indian civil soci-
                  Commission, argued that this was mainly            ety organisations.
                  because of the greater efficiency with which
Injection of      private investors manage risks. Governments        PPPs in Indian Infrastructure Projects
private capital   can raise funds in a variety of ways, but public
and manage-       entities tend to under-price risks and conse-      An analysis of public-private infrastructure
ment with         quently levy low, insufficient and unsustain-      investment globally (by the Public Private
superior tech -   able user charges for public services; private     Infrastructure Advisory Facility) shows that
nologies leads    investors on the other hand are better             India's share of global investment is still very
to more effi-     equipped to assess market risks and to antici-     low. Only 131 of the 2,712 projects initiated
cient utilisa -   pate changing needs, and respond with              globally between 1990 and 2003 were located
tion of           appropriate solutions. Injection of private        in India, and the country received only $33
resources         capital and management with superior tech-         billion of the total $786 billion investment in
thus releasing    nologies leads to more efficient utilisation of    infrastructural PPPs. The overwhelming pro-
public            resources thus releasing public finances for       portion (74 per cent) of India's PPP projects
finances for      alternative uses.                                  in infrastructure - apart from Independent
alternative                                                          Power Producers in power - were in roads and
uses              Mr Francisco da Camara Gomes, Head of the          bridges, followed by urban projects (13 per
                  Delegation of the European Commission to           cent) and ports (9 percent). But despite the
                                     PPPs in Water Supply: What Worked and What Did Not

                   The Tirupur water project is the first large commercial BOOT project (which had its finan-
                   cial closure in 2002) covering a 30-year period. The Project’s success is reflected in improved
                   living standards for about 800,000 residents in Tirupur town and its periphery, which
                   includes around 80,000 slum residents. It has met the water needs of 600 textile firms,
                   increased water supply to domestic consumers and given the town its first sewerage system.

                   The project's success can be attributed to the support given to the PPP by industry, stake-
                   holders and the donor community. The contract was based on reliable data; the project fol-
                   lowed a consensus-building approach; tariffs in the concession agreement allowed for infla-
                   tion-adjustments; there was appropriate allocation of risks; the financial health of local bod-
                   ies was addressed; the government played a major role as project enabler; and suitable regu-
                   latory mechanisms were set up.

                   The management-contract-based PPP in the water sector of Sangli (2000-03), on the other
                   hand, has not taken off. The main drawbacks were the absence of strong sustained political
                   commitment for the PPP, and the lack of transparency in the process - such as a proposed
                   five-fold increase in tariffs, without adequate supporting rationale. There were no institu-
                   tional mechanisms that allowed consultations with users, to which was added the lack of
                   involvement of lower-level local bodies' staff, and insecurity of the chief executive's tenure.

                   Source: From Presentation by S K Sarkar, TERI, 'Modes of PPP and Institutional Capacity
                          Requirements,' and web-based information.

              2   MAY 2006

low number of projects, PPPs in ports received the                 rehabilitation and resettlement issues, without
largest share of investment (55 percent), followed                 which expansion and upgrading of ports would be
by roads and bridges (36 percent), and airports (5                 almost impossible.
percent). The table shows government estimates
of investment needed in some of the main infra-                    Transparency in the creation of contracts is as
structure sectors, much of which is expected to                    important as design. Information gaps, for exam-
come by way of PPPs.                                               ple, have been blamed for the low level of private       State sup-
                                                                   participation in power, even after eight years of        port is
   Estimated Investment in Infrastructure                          sector reform. The corruption in public contracts        essential for
                                                                   could be minimised by greater transparency, which        establishing
           Sector              Investment          By when         well-designed PPPs could provide.                        land rights,
                                 (Rs cr)                                                                                    enabling and
                                                                   Flexibility: The commercial viability of an infra-       providing
  Energy                        5,40,000              2012
                                                                   structure project could call for higher paying           hinterland
  Ports                          50,000               2012         capacity than users currently have. Targeted subsi-      connectivity,
  Airports                       40,000               2010         dies to the poor and cross-subsidies through dif-        and address -
  National Highways             1,72,000              2012         ferential prices could add to the success of PPPs in     ing rehabili-
  Source: Estimates by the Committee on Infrastructure, from the   infrastructure. Differential pricing, while political-   tation and
  presentation by Arvind Mayaram, Joint Secretary, Department of   ly sensitive, has successfully been applied in the       resettlement
  Economic Affairs                                                 power sector, and cross-subsidies are an intrinsic       issues
                                                                   part of the Tirupur water project, where industrial
Successful PPPs in India                                           users subsidise domestic users.

The Workshop drew some lessons for successful                      Financing: Financing of a PPP in infrastructure is
Indian PPPs in infrastructure, based on experience                 different from traditional project financing, and
over the last decade. Some necessary pre-requisites                needs to be carefully engineered. The financing
are strong political commitment, transparency and                  plan has to be tailormade to an individual project's
consistency of policy, effective regulation, careful               needs, based on the risks and benefits at the differ-
design of the contract with appropriate risk appor-                ent stages of development, operation and phase-
tionment and attention to cost recovery, and clear-                out. In reality, even risks that should legitimately
ly defined stakeholder roles, project financing, and               be borne by the government are often transferred
extent of competition. Creation of a good infor-                   to the private contractor, which discourages the
mation base is also an important factor.                           latter from participating.

Political support is among the most important                      The policy and regulatory environments some-
elements for both the creation and smooth func-                    times act as a greater deterrent than financial con-
tioning of PPPs, especially in infrastructure areas                straints. PPP contracts often suffer from policy
that fall in the concurrent or state list. At the state            changes during project execution, and while pri-
level, third-tier institutions are still functionaries             vate investors are willing to live with a non-level
of the state government, and strong political will is              playing field, arbitrary changes during the course
needed to create and steer PPPs to successful com-                 of a project can have fatal implications.
pletion (see box on PPPs in Water Supply). An
example is the privatisation of power distribution                 PPPs have been shown to be successful in areas
in Delhi, where apparently weak political commit-                  such as telecommunications, where the pace of
ment to tackle power theft led to large-scale pub-                 reforms has been fairly rapid and steady. Lopsided
lic protests. On the other hand, the success of                    development of the power sector, which has
PPPs in the ports sector has been attributed to the                focussed on generation without a corresponding
strong interest taken by state governments, espe-                  strengthening of the transmission and distribution
cially Gujarat, in developing ports within their                   networks, with little attention to the financial
jurisdiction (the minor ports). State support is                   health of the incumbent off-takers, such as the
essential for establishing land rights, enabling and               state electricity boards even in their unbundled
providing hinterland connectivity, and addressing                  state, or the development of a fully functional

                                                                                                      MAY 2006   3

                  national grid has hampered the smooth func-              a clearly defined line of regulatory accountabili-
                  tioning and thus investor interest in PPPs in this       ty.
                                                                           Consensus-building is vital to the success of
PPPs are one      When policy is inconsistent, effective regulation        PPPs, so it is important to mobilise support from
way to tackle     becomes critical to protect users and attract pri-       different sections - apart from the government -
public concern    vate investors. The absence of appropriate regu-         for effective implementation of the project. PPPs
that welfare is   latory mechanisms in some sectors has been a             are one way to tackle public concern that welfare
adversely         major drawback to attracting private investment.         is adversely affected by private enterprise taking
affected by       In the monopoly provision of an infrastructural          over a "government domain," as it combines gov-
private enter-    service, efficiency gains from private provision         ernment and private functioning. The media and
prise taking      are often not transferred to users through lower         academic communities could play an important
over a "gov-      fees, better services, and so on; at the same time       role in spreading awareness and information
ernment           public delivery can also be inefficient as it often      about the outcomes and benefits from a PPP
domain," as it    entails higher costs. Whether regulators should          project. Civil society should be involved from the
combines gov-     be given complete autonomy to address these              inception of the project, as one of the stakehold-
ernment and       issues or be subject to some monitoring is debat-        ers, as they can be a very effective channel for
private func -    able, but there is a need for clearly stated rules for   communication, and also for ensuring that bene-
tioning           their functioning, funding and termination, and          fits accrue to users.
                                                    Challenges for NHDP Second Series

                      The proposed second-generation National Highway Development Programme (NHDP) at an
                      estimated cost of $50 billion is the largest PPP in highway development globally. Experience in
                      highway development so far has been mixed, because of the sector's intrinsic characteristics -
                      unique financial requirements and unpredictable pattern of risk. The government has assumed
                      responsibility for land acquisition and environmental clearances; provided grants for capital
                      investment; and guarantees to mitigate associated risks. Lessons from the experiences of large road
                      projects in Chile and Mexico are:

                      l Careful planning is vital. Large, long-term highway projects call for flexible terms that can be
                        adjusted over the time period to prevent snowballing of a problem.
                      l Tackling renegotiation: Bidders especially for high-profile, lucrative projects often offer
                        below-cost rates to win the contract, in anticipation of later renegotiation, and attempts
                        should be made to prevent this; a minimum bid price, for example, could prevent below-cost
                      l Realistic implementation schedule: Elected bodies are often eager to demonstrate results dur-
                        ing their administration, which places unrealistic pressure on implementing agencies for
                        speedy delivery.
                      l Strong O&M companies need to be developed. BOT projects are typically driven by con-
                        tractors, who try to recover all costs during construction and neglect service delivery. Without
                        strong O&M companies, a BOT contract may fail to deliver.
                      l Realistic traffic projections: Projections may fail to account for the impact of alternate routes,
                        competing modes of transportation and tolls on quantum of traffic.
                      l Engaging reputed foreign contractors. While the section-by-section approach continues to be
                        valid, a larger contract may be more efficient for some sections of NHDP's second phase.
                        This would require participation by larger foreign contractors, although caution would be
                        necessary in engaging them, based on the poor past performance of joint ventures.

                        Source: From Presentation by Shunso Tsukada, Principal Transport Specialist, Asian Development
                               Bank: ' NHDP Programs: Second Generation Challenges Ahead.'

                  4      MAY 2006
  Alternative Paths to Power                                                                       POWER

  Reforms: Orissa, Delhi and West
India is passing through its second decade of        provided a powerful demonstration effect with-
economic reforms. While the economy has seen         in the country. Many states have followed the
reforms in many sectors, there are certain areas     basic parameters of the Orissa model. But the         While private
where it seems that the winds of change have         results have not been promising. In Delhi, too,       power has
had no impact. Of the latter, the power sector is    where state monopolies have been converted            been seen as
most important, and this affects - and will con-     into private monopolies, complaints of inflated       one of the
tinue to affect - economic growth in the com-        bills and frequent power shutdowns have dis-          main pillars of
ing years. According to the Economic Survey,         credited the privatisation process. Though            power sector
2005-06, India's power shortage, at around 12        power shortages are a perennial feature of            reform, the
percent in peak and 8 percent in average terms,      Delhi, private monopolies have not invested in        scorecard on
is around 50 billion units, or (at Rs 3 per unit)    power plants to augment capacity.                     addition to
Rs 15,000 crore, of forgone revenue to utilities.                                                          generation
An assumption of 5 percent power-intensity of        It would interesting to compare the experience        capacity is
aggregate output in the economy yields a multi-      of West Bengal, probably the only electricity-        poor
plier of 20 providing an estimated GDP-loss of       exporting state, which took its own path to pri-
Rs 300,000 crore! Apart from shortages, high         vatisation. Since pre-independence days, power
transmission losses are also typical of the sys-     has been supplied in Kolkata by the private
tem, and these have not been tackled by              electricity company, CESC. Unlike the reform
reforms. Even after launching the Accelerated        path adopted by Delhi and the mandate of the
Power Development Programme (APDRP) to               Electricity Act 2003 which proposed SEB
assist states invest in distribution networks to     unbundling to decrease the number of tasks
reduce technical losses and improve the quality      they performed, CESC is a vertically integrated
of supply, the off-take by states under this pro-    company with own power-generating stations,
gramme was less than 30 percent of the total         supplemented with power from the State Elec-
budgeted outlay of APDRP at the end April            tricity Board. It is generally believed that verti-
2005. While private power has been seen as one       cally integrated firms are more efficient, and
of the main pillars of power sector reform, the      there is no reason why the same economic logic
scorecard on addition to generation capacity is      should not apply to the power sector. In fact, it
poor.                                                would be wrong to replace state monopolies by
                                                     private monopolies unless the private player
State Level reforms                                  promises to invest in power generation. Given
                                                     the supply bottlenecks that currently exist in
The scorecard of reforms at the state level is not   electricity, power companies will have to invest
too promising, either. In the mid-1990s, there       in generation - so that private players can
were attempts at fundamental reforms of SEBs,        improve the quality and duration of electricity
with Orissa taking the lead. By 1998, Orissa         supply. The case of Delhi against Kolkata is a
had managed to privatise its power distribution,     pointer to this fact. The frequent power cuts in
but the outcomes have not been positive. Since       the 1980s carried an important lesson for the
privatisation, the new owners have brought nei-      West Bengal government: there is economic
ther new funds nor discernible management            merit in investing in power generation to pro-
skills to the newly established companies. The       tect the interest of consumers, industry and
public has faced substantial tariff increases but    commerce; in the absence of this, one is at the
has seen few improvements in service, which          mercy of suppliers (such as other states, or the
has led to growing political discontent with the     National Thermal Power Corporation). The
reform process and a call to bring back the pub-     Delhi government has still to understand this
licly owned system.                                  logic. They continue to boost investment in
                                                     physical civic infrastructure rather than in
Despite these problems, the fact that Orissa         increasing power generation capacity, even
embarked on and went through several stages          though building a gas-based power station is
of the reform process, including privatisation,      feasible in Delhi.

                                                                                        MAY 2006   5

                        Modernising Indian Airports: Has the
                        Action Begun?
                  The poor state of India's airport infrastructure   The government changed its preference from
                  is common knowledge as is the need to              corporatisation to "long-term lease" to effect
                  improve upon it. The share of India in air pas-    faster revamping of the management struc-
                  sengers flown in 2003 was about 1 percent of       ture. In January 2000 the Union Cabinet
                  the world total compared with 5 percent for        approved the long-term lease route for air-
                  China. The airfreight carried by China was         ports owned and operated by the AAI. Initial -
                  4.4 percent of the world total compared with       ly four airports would be privatised (Chennai,
                  only 0.4 percent carried by India. There has       Delhi Kolkata and Mumbai).
                  now been an impetus to airport modernisation
In line with      after a long process of finding ways to achieve    The New Impetus
the global        public-private participation in this important
transition,       infrastructure sector.                             In September 2003 the Government
India was                                                            announced its intention to move forward
also expected     The Initial Moves                                  through the joint venture (JV) route with 26
to shift from                                                        percent participation by the public sector.
the monopoly      The Ministry of Civil Aviation's 1997 "Policy      Only Delhi and Mumbai airports were pro-
state-owner-      on Airport Infrastructure" outlined the need       posed for the first phase of modernisation
ship of air-      for modernisation and upgradation of the air-      through Public Private Partnership (PPP). In
ports to cor-     port infrastructure along with the possibility     December 2004, a committee set up by the
poratisation      of setting up Greenfield airports keeping in       new government recommended initiation of
and privati-      view the international standards and practices.    policies to ensure time-bound creation of
sation of         As the public funds for development of air-        world-class airports and evolve a policy and
ownership         ports had been getting scarcer the need for        regulatory framework for PPP in order to
and manage-       private sector involvement was emphasised. In      maximise capital inflows and efficiency.
ment              line with the global transition, India was also    Chennai and Kolkata airports were also rec-
                  expected to shift from the monopoly state-         ommended for modernisation. It suggested
                  ownership of airports to corporatisation and       setting up of a statutory body for economic
                  privatisation of ownership and management.         regulation and dispute settlement.
                  In principle, airports may be owned by the
                  government (centre as well as states), urban       The year 2004 also witnessed clearance for
                  local bodies, private companies and individu-      two greenfield international airports. The
                  als, and also by joint ventures (JV) involving     Bangalore International Airport is a JV
                  one or more of these. Greenfield airports          between three foreign and two domestic pub-
                  might have 74 percent of foreign equity            lic sector partners. The Hyderabad Interna-
                  through automatic route. The limit was raised      tional Airport is a JV between two private
                  to 100 percent in January 2006. All manage-        (one Indian and one foreign) and one domes-
                  ment options have been kept open. These            tic public sector partners.
                  include Build-Own-Transfer, Build-Own-
                  Lease-Transfer, Build-Own-Operate and              The process of modernisation and restructur-
                  Lease-Develop-Operate, among others.               ing of the Delhi and Mumbai airports is cur-
                                                                     rently under way through joint ventures. The
                  The implementation of good intentions draft-       management of the Delhi and Mumbai air-
                  ed in the 1997 Policy has, however, been rela-     ports has already been handed over to a new
                  tively poor. In January 1999 the Union Cabi-       JV consortium.
                  net gave the green signal for the corporatisa-
                  tion of five major airports (Bangalore, Chen-      India has lost time deliberating on what a new
                  nai, Delhi Kolkata and Mumbai). However,           civil aviation policy should be. Now that we
                  nothing much happened on the ground till           have the desire and inclination of the govern-
                  2004. Cochin International Airport, which          ment, it can only to be hoped that India gets
                  started operations in 1999, is an exception and    much need state-of-the-art airports infra-
                  it is the first to be developed through a public   structure in place at an early date.
                  limited company with the Govern ment of
                  Kerala as its single largest shareholder.

                    6   MAY 2006

Infrastructure News

                                                   TRAI has recommended that existing licensees
The Communication Convergence Bill 2001,           can deploy NGN without any new policy initia-
aimed at bringing licensing and regulation of      tives, but that the existing broadband policy be
telecom, information technology and broad-         reviewed and niche operators be created for
casting under one regulatory body has been         rural areas before the introduction of NGN.
rejected by Parliament. The absence of a Con-      Source:
vergence Act has increased discrimination
among service providers based on technology
used or services offered, and has resulted in      Electricity
imperfect competition, as sector-wise differ-
ences in regulation prevent operators from         Power Supply Shortage
compete directly. Similarly, varying FDI limits
among sectors gives an unfair advantage to cer-    There have been acute power shortages this
tain technologies and service providers.           summer in major parts of the country, particu-
                                                   larly the northern and the western regions.
The TRAI has been encouraging debate among Estimates suggest that the northern region
policy makers on various convergence-related comprising of Chandigarh, Delhi, Haryana,
issues such as type of changes are required in the Himachal Pradesh, Jammu & Kashmir, Punjab,
existing licensing system, development of a Rajasthan, Uttar Pradesh and Uttaranchal
comprehensive legal framework, steps needed experienced electricity supply deficit of 10.6
for efficient utilisation of spectrum, and har- percent in 2005-06. The shortages increased by
monisation of different economic policies of the more than 150% in this April over April 2005.
government.                                        Source:
(Details can be found in Consultation Paper
no.1/2006 of TRAI).                                Delhi is going through one of the worst power
                                                   crises in its history as its summer demand is
Teledensity                                        3,900 MW whereas the power generating
                                                   capacity of the city is only 1,000MW.
There were about 140 million telephone con- Source:
nections in the country at the end of March
2006. About 5.33 million new telephones Maharashtra, the most industrialised state in
(about 13.5 percent of the total) were added in the country, is facing an energy deficit of about
March 2006, of which more than 94 percent are 20 percent with a peak deficit exceeding 4,200
mobile telephones. The new mobile subscribers MW. According to an ASSOCHAM study, in
are distributed between GSM and CDMA in the western region the target for capacity addi-
the proportion of 3:1. The resultant overall tele- tion during the tenth plan was 10,448 MW but
density at the end of March 2006 is 12.73 per- till now only 3,253.6 MW have been added
cent, and the number of broadband subscribers resulting in a shortfall of 7,194.4 MW.
is around 1.310 million.                 
                                                   Civil Aviation
Next Generation Networks
                                                   Promoting Regional Connectivity
Communication services are expected to
change with the use of Next Generation Net-        To increase regional air connectivity within the
works (NGN), which are essentially Internet-       country, the new draft Civil Aviation Policy
based multi-services, which will be implement-     (CAP) is looking at major incentives to feeder
ed in phases beginning with laying of core net-    operators with smaller aircraft operating from a
works, then access networks, and then service      single metro city. The policy, which has to be
provision.                                         cleared by the Union Cabinet, will include a

                                                                                      MAY 2006   7

    clause requiring all aircraft that is imported or   completed by December 2007.
    leased by an Indian carrier to be below a cer-
    tain age.                                           The Committee on Infrastructure has pro-                              posed an expanded programme for highway
                                                        development over the next seven years which
    Jet Airways' Acquisition of Air Sahara              includes completion of the GQ and the
                                                        NSEW Corridor, four-laning of 10,000 km
    The probe by the Monopolies and Restrictive         under NHDP Phase III, two-laning of
    Trade Practices Commission (MRTPC) into             20,000 km of national highways under
    the Rs 2,300-crore acquisition of Air Sahara        NHDP Phase IV, six-laning of selected
    by Jet Airways has been delayed as both com-        stretches and development of 1,000 km of
    panies have asked for time to respond to            expressways.
    queries. The Director-General Investigations
    and Registrations (DGIR) has been entrust-          NHAI Incentives for Private Investment
    ed with the task of determining the monopo-
    listic implications of the buy-out, and will        The government has outlined incentives to
    submit its report by the end of May. However,       attract private investment in road infrastruc-
    even while the DGIR has been examining the          ture projects. Some incentives for the NHAI
    transaction, the Aircraft Acquisition Com-          are:
    mittee cleared the transfer of all Air Sahara's      l The government will be responsible for
    assets to Jet Airways, on March 30, including           preparatory work, including land acquisi-
    properties and rights to parking bays and               tion and utility removal. Concessionaires
    slots.                                                  will be given right-of-way without any                                  encumbrances.
                                                         l To increase project viability, the
    Reducing the Cost of ATF                                NHAI/central government will give capi-
                                                            tal grants of up to 40 percent of the project
    The Civil Aviation Ministry has moved a                 cost on a case-by-case basis.
    cabinet note on the draft Civil Aviation poli-       l Full tax exemption is allowed for 10 years.
    cy, in which it proposes to shift aviation tur-      l The concession period has been extended
    bine fuel (ATF) to the declared goods catego-           to 30 years.
    ry. Under the Central Sales Tax (CST) Act, a         l In BOT projects, the concessionaire will
    declared good cannot attract sales tax above 4          be allowed to collect and retain tolls.
    percent, and this move should reduce ATF             l Specified modern high-capacity equip-
    sales tax, which is currently as high as 39 per-        ment for highway construction can be
    cent in some states. The outcome would be to            imported without duty.
    reduce the cost of airline operations, as ATF
    currently accounts for 35-40 percent of the
    cost of a domestic air ticket.                      Rural Roads
                                                        ADB has set up a US$750 m financing facili-
                                                        ty to assist the central government's nation
    Roads And Highways                                  wide rural roads program, the Pradhan
                                                        Mantri Gram Sadak Yojana (PMGSY),
    Progress on the NHDP                                which builds all-weather roads to connect
                                                        rural villages. The financing facility will also
    Around 85 per cent of the 5,846 km Golden           help in planning, designing and operating the
    Quadrilateral (GQ) project connecting               infrastructure, and in safeguards, road safety
    Delhi, Mumbai, Chennai and Kolkota is               and road maintenance
    reported to be complete, with the remaining
    sections expected to be completed by Decem-
    ber 2006. The 7,300 km North-South-East-            NHAI will undertake a Rs. 325-crore project
    West (NSEW) Corridor is expected to be              to six-lane a 10-km stretch in Panipat city

8      MAY 2006

which includes construction of a 3.4-km elevat-            Organisation (RDSO), Lucknow, have devel-
ed highway. The project to be constructed over             oped technology to detect flat wheels in trains,
the next three years would be built on a BOT               which will greatly enhance railway safety. Flat
basis on the North-South corridor. The contract            wheels, technically called "wheel flats" result
for the project has been signed with L&T Pani-             from continuous sliding of train wheels on
pat Elevated Corridor Pvt. Ltd. National High-             tracks which damages tracks and lead to railway
ways Authority of India (NHAI) has allotted a              accidents.
20-year concession, including the construction   
period of three years to L&T to finance, design,
built, operate and maintain the project.
Source:                                Shipping
Bangalore Expressway                                       National Maritime Policy

The Supreme Court upheld a Karnataka High                  The government has formulated a National
Court order giving a go-ahead to the Rs.2,250              Maritime Policy for the shipping and port sec-
crore ($49 m) Bangalore-Mysore Infrastructure              tors. The National Maritime Development Pro-
Corridor Project. The four-lane, 111 km con-               gramme (NMDP) aims at focused, accelerated
crete expressway connecting Bangalore with                 investment in specific infrastructure including
Mysore is expected to reduce driving time                  ports, tonnage acquisition and institutional
between the two cities from the present four               capacity building projects for the integrated
hours to 90 minutes.                                       development of the sector till 2011-12. This is
                                                           to meet the government target of expanding
Railways                                                   exports to $ 150 billion by 2008-09, which will
                                                           double India's share in world exports from 0.8
Modernisation                                              per cent to 1.5 percent. Ports provide a platform
l During this year the Railways will add 150               for about 95 percent of India's global merchan-
  PRS locations to the 705 computerised                    dise trade by volume and 70 per cent by value, so
  reservation centres that already exist across the        the entire sector will need to expand capacity
  country, which make 9.5 lakh reservations                and modernise infrastructure to achieve this tar-
  every day.                                               get.                       

l Siemens Communications Group has received                Shipping will receive Rs 40,000 crore from the
   two more contracts from the Railways to                 centre to acquire ships, develop inland water
   equip 2,200 km of the rail network with                 transport, coastal vessels, navigation aids, ship
   GSM-Railway (GSM-R) technology. The                     design and ship building and to set up a mar-
   contracts will cover Delhi, Haryana, Punjab             itime university. Ports will receive Rs 60,000
   and Jammu and Kashmir. This is part of the              crore for the construction of berths, purchase of
   Railway plans to convert its rail                       port equipment, and the development of special
   communication to GSM-R to increase the                  economic zones. Private sector investment in
   safety, security and reliability of its rail traffic.   ports would be Rs 39,000 crore.                        

l RailTel is launching a broadband wireless                Indian Flag Vessels To Have Foreign Crew
   solution to create a wireless network that
   will provide voice and data services to ISPs,           The Directorate General of Shipping (DGS)
   service providers and corporations throughout           has approved the proposal to allow foreign offi-
   the railway route.                                      cers to be employed on board Indian flagged                      vessels, after complying with the minimum
                                                           manning requirements for Indian officers.
Safety                                                     However, the DGS will give its approval on a
                                                           case-by-case basis.
The Indian Institute of Technology, Kanpur,      
and Research Designs and Standards

                                                                                              MAY 2006   9

Workshop on PPP in Infrastructure Industries
and Regulation, April 10-11, 2006

Francisco da Camara Gomes and Montek    Vinayak Chatterjee, Rajiv Lall and Sunil
Singh Ahluwalia                         Jain

Montek Singh Ahluwalia and Elisabetta   Anna Roy, Cherian Thomas and Pradeep
Iossa                                   Singh

Ashwini Mehra, Cherian Thomas and       Jerome Pouyet, Emmannuelle Auriol, Richard
Suman Bery                              Portes, S.L. Rao and Bhavna Bhatia

         10   MAY 2006

 Project Activities

Workshop on Public-Private Partnership in Infrastructure Industries and Regulation

The National Council of Applied Economic Research (NCAER) organized a workshop on "Public Private
Partnership in Infrastructure Industries and Regulation" on April 10-11, 2006. This workshop was one of the
ongoing activities under its project entitled "Blending Efficiency and Competition in Infrastructure" under the
EU-India Economic Cross Cultural Program. The workshop was supported by a number of organizations both
in the public and private sectors. The Planning Commission, Infrastructure Development Finance Company
(IDFC), Public-Private Infrastructure Advisory Facility (PPIAF), and Confederation of Indian Industries (CII)
provided both financial and intellectual resources for the workshop. The grant from European Commission
under its Economic Cross Cultural Program has provided support for the program as a whole.

The workshop focused on some of the overarching themes in PPPs such as design and regulation. To focus on
specific experiences, power and transportation sectors were discussed in one of the sessions. Distinguished speak-
ers from India and abroad provided a wide spectrum of perspectives.

Mr. Montek Singh Ahluwalia, Deputy Chairman, Planning Commission inaugurated the workshop. Mr
Francisco da Camara Gomes, Head of the Delegation of European Commission in India noted the need for
learning from international experience for policy making. The EU-India Economic Cross Cultural Program has
provided an opportunity for interactions between European and Indian civil society organizations.

Presenters at the workshop included speakers from CEPR (London), IDEI (Toulouse), University of Brunel and
University of Bristol. In addition speakers and discussants included professionals from a wide spectrum of relat-
ed fields, including multilaterals, such as the World Bank, the ADB; project financing institutions such as IDFC,
IL&FS and State Bank of India; institutions, such as TERI and CRISIL; senior business journalists; and offi-
cials from the Ministry of Finance, Planning Commission and the state government of Gujarat.

“Public Private Partnership for Infrastructure Development: Lessons for India” by Anuradha
Bhasin, Consultant, NCAER
“Alternative Paths to Power Reforms: Orissa, Delhi and West Bengal”, by Sanjib Pohit, Senior
Fellow, NCAER
“Modernising Indian Airports: Has the Action Begun?” by Rajesh Chadha, Senior Fellow/ Chief
Economist, NCAER
Infrastructure News: Telecommunication by Sambasiva Rao, Associate Fellow, NCAER; Electricity
by Nandini Acharya, Research Associate, NCAER and Transport by Saurabh Bandyopadhyay, Associate
Fellow, NCAER .
The Statistics Section is contributed by Centre for Infrastructure and Regulation, NCAER.

Connexions also available at: &
For information on the newsletter, email at : OR

                                                                                 MAY 2006   11

           Cargo Handled in Indian Ports (million tonnes)                                                                                                 Performance in Major Ports: Average Turn-around
                                                                                                                                                             Time and Pre-berth Retention Time (Days)
600                                                                                                                                     14
500                                                                                                                                     12
400                                                                                                                                     10
100                                                                                                                                         2
  0                                                                                                                                         0






















                               major                                            minor + major                                                                         Turn around time                                        Pre-berth retention

                                                                                                            Major Ports in India in 2003-04

                Name of the Port Employment                                     Revenue                                                                                                                           Passenger    % of Idle
                                 in Numbers                                       (Rs                                                                                                                             Traffic in Time at Berth
                                                                                million)                          Cargo handled(000 Tonnes)                                     Ship Traffic                         000      to Time at
                                                                                                           Bulk       Petroleum Container             Total             No.                 Size (GRT
                                                                                                                        Items                                                                 in'000)
                Chennai                                 10329                         41358            27510                9200      8628            45338            1595                   28240                105.4                 26.6

                Cochin                                    4353                        21746                3612             9960      2125            15697             910                   14243                118.3                 29.4

                Ennore                                      17                        8732                 9277                 --     --                 9277          166                   5709                    --                 10.3

                Haldia                                    4285                        77801            21024               20236      2275            43535            1841                   39669                 56.1                 32.9

                J.L.Nehru                                 1810                        64854            29251                1939      27785           58975            3917                   51746                   --                 12.5

                Kandla                                    3788                        38783            17898               23625      2406            43929            1823                   33033                   --                 16.8

                Kolkata                                   7551                        21454            21024               20236      1746            43006             751                   7532                  56.1                 37.5

                Mormugao                                  3385                        21516            26553                1321       133            28007             677                   19646                  2.8                 20.2

                Mumbai                                  21480                         49269            11419               18576      2816            32811            1800                   30620                  3.6                 24.2

                New Mangalore                             2124                        23803                8719            17954       96             26769             876                   20805                   --                 19.1

                Paradip                                   3407                        43150            23946                1365       61             25372            1030                   23494                   --                 27.2

                Tuticorin                                 2788                        14994            13120                    558   2687            16365            1479                   15346                   --                 31.6

                Visakhapatnam                             5889                        46541            30309               17427       277            48013            1678                   40082                 17.6                 19.7

                Note: GRT- Gross Registered Tonnage
                Source: Basic Ports Statistics of India 2003-04,Transport Research Wing, Ministry of Shipping,
                Road Transport & Highways,Govt. of India, New Delhi

                                     12          MAY 2006

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