Mp Draft Ppp Policy

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Final Report

Policy Framework and Institutional Roadmap for PPP inMadhya Pradesh

Government of Madhya Pradesh and

Department for International Development, UK

May, 2011

Submitted by

Deloitte Touche Tohmatsu India Private Limited


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Policy Framework and Institutional Roadmap for PPP in Madhya Pradesh

Page | 1 2011 Deloitte Touche Tohmatsu India Pvt. Ltd.

TABLE OF CONTENTS

TABLE OF CONTENTS ......................................................................................................................................................... 1

1. INTRODUCTION ......................................................................................................................................................... 6

1.1 BACKGROUND .............................................................................................................................................................. 6

1.2 OBJECTIVES OF THE ASSIGNMENT ..................................................................................................................................... 7

2. PPP IN MADHYA PRADESH ........................................................................................................................................ 8

2.1 EXISTING SCENARIO IN MP ............................................................................................................................................. 8

2.2 PPP IN MP ................................................................................................................................................................ 11

3. INSTITUTIONAL ARRANGEMENTS FOR GOVT. OF INDIA FOR PPP ............................................................................ 19

3.1 PPPFRAMEWORK AT CENTRAL LEVEL.............................................................................................................................. 19

3.2 POLICY FRAMEWORK FOR PPP AT CENTRAL LEVEL ............................................................................................................. 22

3.3 ISSUES WITH PPPPROJECTS AND PROCESSES AT CENTRAL LEVEL .......................................................................................... 22

4. PPP IN OTHER INDIAN STATES ................................................................................................................................. 24

4.1 INTRODUCTION ........................................................................................................................................................... 24

4.2 GUJARAT ................................................................................................................................................................... 24

4.3 TAMIL NADU.............................................................................................................................................................. 26

4.4 MAHARASHTRA .......................................................................................................................................................... 28

4.5 ANDHRA PRADESH....................................................................................................................................................... 30

4.6 ORISSA...................................................................................................................................................................... 324.7 CONCLUSION .............................................................................................................................................................. 34

5. INTERNATIONAL PRACTICES IN PPP ......................................................................................................................... 38

5.1 INTERNATIONAL PPPEXPERIENCES ................................................................................................................................. 38

5.2 PPPFRAMEWORK FOLLOWED IN SOUTH AFRICA ............................................................................................................... 39

5.3 PPPFRAMEWORK FOLLOWED IN SOUTH KOREA................................................................................................................ 41

5.4 LEARNING FROM INTERNATIONAL EXPERIENCES................................................................................................................. 43

6. PROPOSED PPP POLICY FOR MADHYA PRADESH ..................................................................................................... 44

6.1 INTRODUCTION ........................................................................................................................................................... 44

6.2 DRAFTPPPPOLICY .................................................................................................................................................. 457. PROPOSED INSTITUTIONAL ROADMAP FOR PPP IN MP ........................................................................................... 61

7.1 INTRODUCTION ........................................................................................................................................................... 61

7.2 INSTITUTIONAL ARRANGEMENTS FOR PPP ........................................................................................................................ 65

7.3 POSSIBLE OPTIONS FOR PPPFACILITATION AGENCY........................................................................................................... 72

8. WAY FORWARD....................................................................................................................................................... 83


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9. ANNEXURES ............................................................................................................................................................ 84

9.1 ANNEXURE 1:LIST OF STAKEHOLDER INTERACTIONS ........................................................................................................... 85

9.2 ANNEXURE 2:DETAILS OF EXPERIENCE OF GOI IN PPP....................................................................................................... 86

9.3 ANNEXURE 3:DETAILS OF PPP IN OTHER INDIAN STATES.................................................................................................... 87

9.4 ANNEXURE 4:DETAILS OF INTERNATIONAL EXPERIENCE IN PPP............................................................................................ 999.5 ANNEXURE 5:VALUE FOR MONEY................................................................................................................................ 104

9.6 ANNEXURE 6:TYPICAL PPPMODELS ............................................................................................................................ 105

9.7 ANNEXURE 7:PROCESS OF APPOINTMENT OF TRANSACTION ADVISORS ............................................................................... 109

9.8 ANNEXURE 8:TERMS OF REFERENCE FOR THE STUDY ....................................................................................................... 111


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List of Tables

Table 1: Department wise targets for PPP given by Govt. of Madhya Pradesh ....................................................................... 15

Table 2: Mapping of PPP projects in pipeline on the PPP process map................................................................................... 17

Table 3: Institutional Framework for PPP at central level ....................................................................................................... 20Table 4: Comparison of Institutional Framework for PPP in 5 states ...................................................................................... 35

Table 5: Comparison of the previous and the new regulatory framework in South Korea ..................................................... 41

Table 6: Inter-se responsibilities of various institutions in a PPP project cycle in Madhya Pradesh ....................................... 69

Table 7: Sector wise details of PPP projects in Maharashtra ................................................................................................... 93

Table 8: No. of PPP projects at various stages of PPP cycle in Maharashtra ........................................................................... 93

List of Figures

Figure 1: Sector wise status of PPP projects in Madhya Pradesh (number & value) ............................................................... 12

Figure 2: Status of PPP projects in Madhya Pradesh ............................................................................................................... 12

Figure 3: Status of PPP projects in road sector in Madhya Pradesh ........................................................................................ 13

Figure 4: Status of PPP projects in urban sector in Madhya Pradesh ...................................................................................... 14

Figure 5: Status of PPP projects in water sector in Madhya Pradesh ...................................................................................... 14

Figure 6: PPP process map for Madhya Pradesh ..................................................................................................................... 16

Figure 7: Institutional Framework for PPP at central level ...................................................................................................... 22

Figure 8: Institutional Framework for PPP in Gujarat .............................................................................................................. 25

Figure 9: Institutional Framework for PPP in Tamil Nadu ........................................................................................................ 27

Figure 10: Institutional Framework for PPP in Andhra Pradesh .............................................................................................. 30

Figure 11: Institutional Framework for PPP in Orissa .............................................................................................................. 32

Figure 12: Existing Institutional Framework for PPP in Madhya Pradesh ................................................................................ 61

Figure 13: Existing PPP process and approval mechanism in Madhya Pradesh ...................................................................... 63

Figure 14: Issues / gaps identified in existing PPP arrangement in Madhya Pradesh ............................................................. 64

Figure 15: Roles and responsibilities of the proposed institutional framework for PPP in Madhya Pradesh ......................... 66

Figure 16: Key features of the proposed institutional framework in Madhya Pradesh .......................................................... 72

Figure 17: Proposed Institutional Framework Option 1: DIF becomes PPP Facilitation Agency .......................................... 74

Figure 18: Proposed Institutional Framework Option 2: A separate agency under Finance becomes Facilitation Agency for

PPP ........................................................................................................................................................................................... 76

Figure 19: Proposed Institutional Framework Option 3: A separate agency outside Finance becomes Facilitation Agency

for PPP ..................................................................................................................................................................................... 78


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Abbreviations

List of Abbreviations

ADB Asian Development Bank MPPDF

Madhya Pradesh Project Development

Fund

APIICAndhra Pradesh Industrial InfrastructureCorporation

MPRDCMadhya Pradesh Road DevelopmentCorporation

BEE Black Economic Empowerment MPSIDCMadhya Pradesh State IndustrialDevelopment Corporation Ltd

BOO Build Own Operate MSRDCMaharashtra State Road DevelopmentCorporation Limited

BOOT Build Own Operate Transfer MUIF Maharashtra Urban Infrastructure Fund

BOT Build Operate Transfer MUINFRAMaharashtra Urban InfrastructureDevelopment Authority

BTL Build Transfer Lease NRI Non-resident individuals

BTO Build Transfer Operate O&M Operations and Maintenance

CA Concession Agreement PDF Project Development Fund

CIDCOCity and Industrial DevelopmentCorporation of Maharashtra Ltd

PFI Project Finance Initiative

CoI Committee on Infrastructure PFMA Public Finance Management Act

DCA Draft Concession Agreement PICKOPrivate Infrastructure Investment Center ofKorea

DEA Department of Economic Affairs PIMACPublic and Private InfrastructureInvestment Management Center

DIF Directorate of Institutional Finance PMC Project Management Consultant

DLECDepartment Level EmpoweredCommittee

PPA Project preparatory assistance

DPI Directorate of Public Instruction PPP Public private partnership

DPR Detailed Project Report PPPAC PPP Appraisal Committee

ECIEmpowered Committee onInfrastructure (Orissa)

PPPAU PPP Appraisal Unit

FDI Foreign Direct Investment PSC Public Sector Comparator

FOB Foot over-bridges PWD Public Works Department

GID Act Gujarat Infrastructure Development Act RFP Request for Proposal

GIDBGujarat Infrastructure DevelopmentBoard

RFQ Request for Qualification

GOAP Government of Andhra Pradesh SA Sponsoring Agency

GoI Government of India SLEC State Level Empowered Committee

GoMP Government of Madhya Pradesh TA Transaction Advisor


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List of Abbreviations

HLCAHigh Level Empowered Committee(Orissa)

TC Technical Consultant

IA Andhra Pradesh Infrastructure Authority TNRDC Tamil Nadu Road Development Company

IDEAAndhra Pradesh InfrastructureDevelopment Enabling Act

TNUDF Tamil Nadu Urban Development Fund

IDFCInfrastructure Development FinanceCompany

TNUDP Tamil Nadu Urban Development Project

IIFCLIndia Infrastructure Finance CompanyLimited

TNUIFSLTamil Nadu Urban Infrastructure FinancialServices Limited

IIPDFIndia Infrastructure ProjectDevelopment Fund

TPC Total Project Cost

IL&FSInfrastructure Leasing & FinancialServices Ltd

UADDUrban Administration & DevelopmentDepartment

INCAP Infrastructure Corporation of AndhraPradesh

UK United Kingdom

JnNURMJawaharlal Nehru National UrbanMission

ULB Urban Local Body

MCA Model Concession Agreement USD US Dollars

MFMA Municipal Finance Management Act VFM Value for Money

MMRDAMumbai Metropolitan RegionDevelopment Authority

VGF Viability Gap Funding

MoF Ministry of Finance

MP Madhya Pradesh

MPIIFBMadhya Pradesh InfrastructureInvestment Fund Board


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1. INTRODUCTION

1.1 Background

Madhya Pradesh has undertaken several measures in terms of investments in physical and social

infrastructure and many policy changes to strengthen the enabling environment for infrastructure

development in the last few years. However, there are enough indications that capital expenditure by

government is not enough to meet the infrastructure deficit in the state. Investments and

development in physical and social infrastructure therefore remains the key to economic growth in the

state, which the GoMP also recognizes the urgency and need for. Even where investments have been

made, adequate provisions have not been made for maintenance of these assets and the quality of

services to the ultimate users also needs substantial improvements.

A strong public private partnership (PPP) framework has been identified as critical to providing a thrust

in the development of infrastructure and provision of infrastructure services in the state. TheGovernment of Madhya Pradesh (GoMP) has taken several initiatives in the last few years to develop

infrastructure through PPP mode and develop enabling environment for encouraging PPP in the state.

For example:

Directorate of Institutional Finance (DIF) has been formed to serve as the Nodal agency for

PPP projects. A PPP Cell under DIF has been created which constitutes a state level

committee for PPP. The Committee is chaired by Chief Secretary, GoMP. The PPP Cell offers

hand-holding assistance in planning and bidding out PPP projects. Apart from being the nodal

agency for PPP projects in the state, it is also responsible for strengthening performance

management in government.

Madhya Pradesh Infrastructure Investment Fund Board (MPIIFB) has been constituted to

mobilize resources for infrastructure projects including roads, irrigation, water supply, solid

waste management and drainage or a multipurpose project comprising two or more such

areas. MP Project Development Fund (MPPDF) for funding preparatory activities of PPP

projects is also constituted.

At the state level, Madhya Pradesh has been one of the pioneers in building roads under PPP mode.

However other transport sectors, urban sectors and social sectors need more focus on PPP in MP. It

is reported that, in the last few years PPP projects worth Rs. 8,600 crores have been awarded and

projects of Rs. 5,000 crores are in the pipeline. To accelerate the development of social and physical

infrastructure and to substantially enhance the delivery of services to the public in many sectors,GoMP has decided to give a major thrust to the PPP formats in many of these initiatives. It is with this

background that GoMP, with the assistance of DfID, UK, appointed consultants Deloitte to formulate a

PPP policy and suggest Institutional arrangements for effective PPP implementation.


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1.2 Objectives of the Assignment

The objectives of the study are to:

develop an overarching PPP policy framework focusing on both social and physical

infrastructure, encompassing all the sectors.

prepare an institutional roadmap for the implementation of the provisions of the PPP Policy

including infrastructure development fund, project development fund, appraisal authority,

approving authority etc.

This draft report presents a draft PPP policy and a roadmap for suitable institutional arrangements,

along with tracing the current situation of PPP in Madhya Pradesh and providing a backdrop of what

are good PPP practices elsewhere in the country and overseas.


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2. PPP IN MADHYA PRADESH

2.1 Existing Scenario in MP

2.1.1 Existing Infrastructure Scenario in MP

As of March 2010, a cumulative infrastructure investments of over USD 16.6 billion has been made in

Madhya Pradesh. Out of this, more than USD 14 billion worth of investments have been made in

generation and distribution of electricity. A total installed generation capacity of more than 8200 MW is

available with the state.

The adjacent diagram shows investments in six

hard infrastructure sectors in the state. It is seen

that power and roads has about 95% share of

investments in the hard infrastructure sectors.The total road length maintained by PWD in the

state is more than 72,000 kms. It has 16 national

highways. However, there is a huge potential for

further improvement. The national average for all

types of road network is 83 km/100 sq. km.,

whereas in M.P. it is only 53.68 km/100 sq. kms.

It has 5900 kms of railway network and 5 airports

(Bhopal, Jabalpur, Gwalior, Indore and

Khajuraho).

Under the Jawaharlal Nehru National Urban Mission (JNNURM), 22 projects (of value US$ 479 million)have been sanctioned for urban centres such as Bhopal, Indore, Jabalpur and Ujjain. The Asian

Development Bank (ADB) has also funded 16 projects worth US$ 33.8 million for Bhopal in the areas

of water supply, sewerage and sanitation, storm-water drainage and solid-waste management.

In the past 3-4 years, focus on social sectors like education, health has been growing. MP has 50

District Hospitals, 333 Community Health Centres, 1155 Primary Health Centres, 56 Urban Civil

Hospitals. There are 10872 high schools & higher secondary schools, 97800 primary schools, 39882

middle schools and 878 Ashram Shalas (elementary level to serve children and families who reside in

remote areas especially tribal population).

2.1.2 Sector policies

Almost all sector policies in MP encourage private sector participation in their respective sectors.

Some even specify PPP as preferred mode of development. For example State Road Policy has

initiated formation of Road Maintenance Fund which would participate in PPP projects in roads and

highway sector. Many policies have specified various incentives in terms of tax holidays, land


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concessions, low entry/ exit barriers to encourage more and more private participation in their

respective sectors.

Highlights of relevant policies with respect to private sector participation are given below:

State Roads Policy

The objective of State Road Policy was to meet transportation requirements efficiently across all road

networks in the state through upgradation of state roads, urban roads and rural roads. However, due

to paucity of funds for upgradation/ maintenance of roads, State Road Policy has identified PPP for

development of road and highway sector in the state.

A Road Maintenance Fund has been created by pooling the toll revenue and assistance obtained from

CRF, Mandi Cess and Road Tax. This fund would be offered as 'equity participation' to BOT operators

under PPP contracts who would pool in their own resources and bid for a road project. This would

encourage PPP which would not only increase the available pool of funds but would enhance

maintenance/ reconstruction activities by application of modern techniques.

The policy states that viable projects will be offered to private sector under BOT scheme, especially forconstruction of (i) new bridges (ii) re-construction of distressed and narrow bridges (iii) bye-passes (iv)

widening of high density corridors and (v) strengthening and maintenance of economically viable

sections of highways. The policy also provides incentives (attractive entry/ exit clause, land

concessions and tax holidays) to the private sector to ensure commercial viability of road projects.

The State Road Policy has been supported by amendments and enactment of enabling legislative

structure:

Amendment of Indian Tolls (M.P.) Act, 1932 To facilitate private sector participation in road

projects, GoMP has amended the Indian Tolls (M.P.) Act 1932 which permits the levy of toll on

new construction as well as improvement of road and bridge projects.

Madhya Pradesh Highway Bill 2001 In order to facilitate implementation of the policy

effectively and within the prescribed time frame, a legal framework for the regulation and

development of road sector has been prepared. It has been prepared on the guidelines of a

Model Highway Act issued by Govt. of India. The bill is yet to be enacted.

Tourism Policy, 2010

Tourism Policy for Madhya Pradesh was approved by the State Cabinet in 2010 to promote balanced

and sustainable tourism, Tourism Policy particularly focuses on attracting private investment and

advocates land use for the purpose of tourism centers. One of the guiding principles of the policy is to

create institutional mechanism to promote private investment and to promote PPP in tourism.

In order to enhance tourism, guidelines and procedures to attract private investment have been madetransparent. Land bank policy is strengthened to promote tourism. For tourism projects, land for 90

years lease or development agreement for 30 years is permitted along with exemption of stamp duty.

A databank has been prepared for destination marketing. Concessions on taxes in tourism sector have

been given in many cases.


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State Water Policy (2003)

MP has formulated a State Water Policy in 2003 which has been prepared in accordance to the

guidelines and general directions in the National Water Policy, keeping in view the specific necessity

for the state of Madhya Pradesh.

The policy has specified water allocation priorities (in that order) for the state Drinking water supply,

Irrigation and afforestation, power generation/industrial and tourism. The policy identifies use of

information systems, quality control mechanisms for drinking water, management and control of water

zones, irrigation and land management etc.

The policy does not talk directly about PPP. However, the policy does encourage non-government

participation in the water sector in project planning, construction and maintenance.

Housing Policy, 2007

Housing policy of 1995 was amended in 2007 due to change in demand for urban housing due to rapid

urbanization. Considering growing need for urban housing, provision for participation of private and

corporate sectors has been made in the policy to meet the requirement of social housing in the state.Provision of providing government land at concessional rates for development of habitations to

construction agencies has also been made.

The policy encourages PPP to meet the shortages of houses. Provision has been made to grant

permission for township development in agricultural areas scrapping the existing practice of

compulsory for diversion of lands.

Health Policy

Around 75% of the total funding in health sector is a private sector funding. There is an urban rural

divide since 70% of the qualified practitioners are in urban areas. Given the numbers and spread of

private health care providers in rural areas (often the less than qualified providers) and substantialpresence of qualified and less than qualified providers in urban areas, it is obvious to explore

possibilities of the role the private sector can play for improved public health in the state.

Government puts forward specific measures for encouraging public private collaboration in the fields of

immunization, reduction of maternal mortality and control of infectious diseases. Further, measures are

suggested to use the human and financial resources of non-government organizations (NGOs) and

private sector for management of some government owned facilities.

Industrial Promotion Policy 2010 and Action Plan

In order to attract industrial investments, establish industrial houses, GoMP has taken many policy

initiatives. The industrial policy was revised recently with effect from November 2010. For ensuring

speedy approvals of investment proposals, rules and procedures have been streamlined under

Madhya Pradesh Investment Facilitation Act 2008 (single window clearance).

One of the key objectives of the Industrial Promotion Policy is to attract private sector participation in

industrial infrastructure and encourage FDIs and investments by NRIs. The policy also intends to

rationalize rates of commercial taxes to make the industry attractive.


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2.2 PPP in MP

PPP in Madhya Pradesh started with a road sector project in 1992 by MP Bridge Corporation. A road

sector project was conceptualized and developed in early 1990 (Pithampur-Indore highway project).

Primarily reason for this PPP initiative in 1990s were two fold firstly urgent need for the Pithampur-

Indore highway was felt and secondly there was dearth of funds with the government to implement the

project. Post 2000, many PPP projects were conceptualized across many other sectors also like urban

infrastructure, water supply and sanitation, social sector etc.

For example, Dewas Industrial Water Supply project was one of Indias early water supply projects

developed on a BOT basis. This green field project was awarded on a domestic tender for a contract

period of 30 years. Madhya Pradesh State Industrial Development Corporation Ltd (MPSIDC) awarded

this project to MSK Projects (I) Ltd. The cost of this project was around USD 20 million, 70% of which

was provided by IDFC and 30% came from developers equity.

2.2.1 Status of PPP Projects in MP

It is understood that around 88 infrastructure projects have been taken up or initiated on PPP in the

state with a definite increasing trend in recent times. The value of these projects is estimated to be

more than Rs.13,800 crores. This section highlights key trends in terms of number and value of PPP

projects and status of these projects across various identified infrastructure sectors.

It is seen that most of the PPP projects are from in the road and highway sector. This sector accounts

for around half of the total value of PPP projects in the state. Road and highway sector has had the

advantage of standardized process/ documents/ guidelines for PPP (even at central level) and

authorities have also found it easier to establish suitability of PPP for road projects.

MPRDC (MP Road Development Corporation) is responsible for sponsoring most of the PPP projectsin the road sector. Over the years, they have acquired PPP project preparation capacities. However,

there is absence of these capacities in other departments / agencies. It may also be noted that

average size of road projects are comparatively larger than other infrastructure projects (like projects

in urban or social infrastructure).

It is seen that more than Rs.1800 crores worth of PPP projects have been completed in road sector

compared to less than Rs.5 crores worth of PPP projects in all remaining sectors. More than Rs.4600

crores worth of PPP projects are under construction and in the pipeline in road sectors, whereas more

than Rs.7300 crores worth of PPP projects are under construction and in the pipeline in other sectors.

The exhibit below describes sector wise breakup of PPP projects (completed & pipeline projects) in the

state.


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Figure 1: Sector wise status of PPP projects in Madhya Pradesh (number & value)

It is seen than out of 88 projects, over 50% belongs to road sector and over 17% belong to urban

sectors. However, in terms of value, around 47% and 3% belong to these sectors. Health and sports

sectors have also seen relatively larger projects. Only 5 projects in health and sports sector comprise

of 25% of total value of PPP projects in the state. The two large projects include the 195 hectare

Medical Hub at Tigaria Badshah and Sports City in Bhopal having project cost of Rs.2000 crores and

Rs.900 crores respectively.

It is seen that only 16 projects (out of these 88 projects) have been completed having value of less

than 15%. Out of these14 projects belong to road sector. All the remaining projects are in the pipelineand construction phase. The exhibit below describes status of PPP projects in the state.

Figure 2: Status of PPP projects in Madhya Pradesh


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Projects in pipeline include all projects before bids are invited from bidders. It includes projects under

various stages like project conceptualization, DPR preparation, awaiting DLEC / SLEC / cabinet

approvals, transaction advisor selection, bid document preparation etc.

2.2.2 Status of PPP projects in Road Sector

As mentioned before, 14 out of 16 completed projects belong to road sector. It is seen that there are

14 projects in the construction phase also. The fact that 28 road sector projects have been bid out on

PPP highlights the fact that road sector has matured in the PPP learning curve. They have

standardized procedures, standardized bidding documents and institutional capacity to manage PPP

transactions.

It is seen from the experience that most projects get stuck in bidding / pipeline stage is due to its non-

viability. However in case of road sector, since most of the projects are financially viable, 28 projects

have been successfully bid out.

The diagram below describes the status of the road sector projects in terms of numbers and value.

Figure 3: Status of PPP projects in road sector in Madhya Pradesh

2.2.3 Status of PPP projects in Urban Sector

It can be seen that there are many urban PPP projects in the pipeline stage. Most of these projects are

unattractive for the private sector. Some of them have even gone for re-bid due to no response frombidders. The two completed urban projects are Bus stops for city service and public toilets in Bhopal.

The two under construction projects are multi-level parking and FOBs in Indore.

Unlike other sectors, urban sector projects can be conceptualized at departmental level as well as

local body level. In most cases local bodies do not have the capability to undertake and manage a

PPP transaction. Hence most local bodies follow conventional method of procurement for projects

sponsored by them.


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The diagram below describes the status of the urban sector projects in terms of numbers and value.

Figure 4: Status of PPP projects in urban sector in Madhya Pradesh

2.2.4 Status of PPP projects in Water Sector

The two under construction projects in water sector are augmentation of water supply network in

Shivpuri and Kandwa. The two projects under bidding stage are ADB projects for 24X7 and NRW

reduction for Indore and Bhopal. Since these projects are pilot projects, the value of these projects is

very small. Hence they represent only 3% water sector PPP project in the state.

The diagram below describes the status of the water sector projects in terms of numbers and value.

Figure 5: Status of PPP projects in water sector in Madhya Pradesh

Going forward, it is seen that PPP has been identified as a preferred mode of procurement of water

infrastructure projects. The section below highlights PPP targets identified for various departments in

GoMP.


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2.2.5 PPP targets has been identified for next 3 years

Procurement of infrastructure projects through PPP has been identified as the priority. GoMP intends

to double the investment in the State through PPP in next three years. GoMP intends to attract

Rs.25000 crores of investment in three years in projects developed through PPP. Department-wise

PPP targets have been proposed.

Department wise targets for Rs.18500 crores are given in the table below.

Table 1: Department wise targets for PPP given by Govt. of Madhya Pradesh

Sl.

No.Department

Target for 2010-12

(in Rs. crores)

1. Medical Education 200

2. Public Works Department (Road Sector) 6000

3. School Education (DPI) 900

4. Horticulture and Food Processing 500

5. School Education (Rajya Shiksha Kendra) 500

6. Urban Admin & Development Department 1000

7. Commerce, Industries & Employment 4000

8. Energy 2000

9. Biotech 200

10. Food & Civil Supplies (Warehousing) 500

11. Transport 1200

12. Health 100

13. Higher Education 100

14. Technical Education 100

15. Tourism 200

16. Housing 1000

17. Water Resources (To be indicated by the department) NA

Total 18500

Source: Govt. of Madhya Pradesh

In order to achieve these targets, GoMP has attempted many policy and regulatory initiatives and set

up an institutional mechanism. A discussion on the exiting institutional mechanism is presented in a

later section of this report.

2.2.6 PPP Process Map

The PPP process followed in Madhya Pradesh has been mapped and shown below:


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Figure 6: PPP process map for Madhya Pradesh

GoILEVEL

Empowere

dComm./

Ins

ti.

GoILEVEL

PPPCell,DEA,

GoI

LineMinistry/Implementing&Sponsoring

Agency

M

PPDF

MPIIFB

Approval

Committees

(DLEC/SLEC)

CabinetApproval

(Cabinet/Line

Ministry)

PPPCell,DIF,

GoMP

Preparatory / In-principle Approval Stage Final Approval / Tendering StageProject Conceptualization / Study

Formulation ofproject documents

like project

agreements, rightsand obligation of

each party

In-principleApproval

RfQ tenderedby the

department

Selection ofConcessionaire

In principle approvalgiven by Empowered

Comm./Insti.Depending upon

project size

Appointment oftransactionadvisor /project

development

Preparationof projectproposal

| D |

| G |

| C |

Vetting of RfQand Project

Proposal withsuggested

modifications

Project

Conceptualization

PreparationMemorandum ofConsideration

(MFC)

Screening of MFCsubmitted bySponsoring

Agency

Approval of MFCapplication and

disbursement offunds if approved

Disbursementof IIPDF funds

Approval ofapplication for MPPDF

funds after scrutiny

and analysis

Disbursementof MPPDF

funds

DPRpreparation andassessment of

feasibility

Approval fromDLEC / SLECdepending onproject value

Issue of RfPand CA toshortlisted

bidders

FinalApproval

Vetting of Projectdocuments

including RfP,CA with

suggestedmodifications

Approval fromDLEC / SLECdepending onproject value

Shortlisting of

bidders

| E |

Approval forState VGF

Verify andforward

State VGFProposal

Is VGFrequired

YES

NO

| B |

| A |

Signing ofConcessionAgreement

| H |

| F |


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Legend:

Roles performed by every institution at every stage are clearly mentioned in the diagram. The process

map shows the approval process of central VGF, state VGF, IIPDF, MPPDF and PPP approval

process in the current scenario. For approval of IIPDF and central VGF, central government level

institutions like Empowered Committee / Institution and PPP Cell, DEA are also involved.

The PPP projects of MP which are in pipeline (as on March 2011) have been mapped in the process

diagram above from A to H. The details of these projects are given in the table below.

Table 2: Mapping of PPP projects in pipeline on the PPP process map

Referenceno. Project Location

A.1 Multi-level Parking at New Mkt Bhopal

B.1 Minerals-based SEZ on 250 acres Hargarh, JabalpurB.2 Agro-based SEZ on 248 acres Umariya-Dungariya, JabalpurB.3 PPP Projects exploration at select MCs in MP 11 citiesB.4 MLP In front of Nigam Shopping Complex Daulat Ganj GwaliorB.5 MLP at Old Bus Stand Kampoo GwaliorB.6 Bus Terminals (3) Bhopal

C.1 Van Vihar Ph-II on 350 ha BhopalC.2 Sports Complex on 42.140 hect spread over 3 locations Indore

C.3 Logistics Hub at Talavali Chanda on 151.845 hect IndoreC.4 ISBT on 10 hect IndoreC.5 Convention Centre on Airport Road IndoreC.6 Medical Hub at vill Tigaria Badshah on 194.727 hect IndoreC.7 Hospital Project at Old Nigam Work Shop, Dholi Bua ka Pull Gwalior

D.1 Water Supply Improvement Pithampur PithampurD.2 Betul-Sarni-Parasiya 124.10 kmsD.3 Damoh-Bahtiyargrah-Hirapur 69.60 kmsD.4 Jhabua-Jobat-Zeerpanya-Kukshi 95.50 kmsD.5 Rau-Mhow-Mandleshwar 74.40 kmsD.6 Sarangpur-Akodia-Shujalpur 39.86 kmsD.7 Khandwa-Dehtalai-Burhanpur 127.25 kms

E.1 BioTech Park on 181 acres (Common research facilities/Residential/Commercial) Indore

E.2 Logistics Park Powerkheda (115 acres) HoshangabadE.3 Commercial Cplx construction and O&M of Bus terminal Rewa

F.1 Food Park at Karmadi 80 acres RatlamF.2 Food Park at Anjana Saraiyat 60 acres HardaF.3 Food Park at Adampur Chhawni 50 acres Bhopal

F.4Parking Cum Commercial at Gandhi Mkt, Maharaj Bada for 300cars, 252 shops relocation. (5,228 Sq. Mt.)

Gwalior

Central VGF

Process

PPP Process

IIPDF Process

State VGF

Process

MPPDF Process

A

B

|C|

D

E

|F|


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Referenceno.

Project Location

F.5 ADB Pilot - 24x7 and NRW Water reduction Gwalior

G.1 Kalpana Nagar Swimming Pool O&M BhopalG.2 Fitness Centre O & M of Prakash Swimming Pool Bhopal

G.3 Mandsaur-Pratapgarh 11.526 kmsG.4 Hata-Fatehpur-Rajpura-Solapuir-Bajna-Dargawon 64.42 kmsG.5 Sendhwa-Khetia 57.3 kmsG.6 Semaria-Manikpur 16.36 kmsG.7 Deharda-Ishagrah 32.93 kmsG.8 Tikamgarh-Maheroni 15.7 kmsG.9 Badwani-Palsod-Sendhwa 56.89 kms

G.10 Dhar-Nagda 22.50 kmsG.11 Mhow-Ghata Billod 26.88 kmsG.12 Sardarpur Badnawar 42.98 kmsG.13 Water-based Tourism activities on Indira Sagar Dam - II Vill Hanvantiya, KhandwaG.14 Water-based Tourism activities on Indira Sagar Dam - I Vill Hanvantiya, KhandwaG.15 Eco-Tourism Park (7 hectares) RewaG.16 ADB Pilot - 24x7 and NRW Water reduction Indore

G.17 ADB Pilot - 24x7 and NRW Water reduction Bhopal

H.1 Dindayal Chalit Aspatal Yojana

G

|H|


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3. INSTITUTIONAL ARRANGEMENTSFOR GOVT. OF INDIA FOR PPP

3.1 PPP Framework at Central level

The enabling environment for Infrastructure development is significantly different from the situation a

few years ago when issues such as lack of political will, varied interest groups at the centre and the

state levels, red-tapism, and lengthy tedious approval processes were considered major bottlenecks.

Apart from the above there were limited incentives for the private sector due to constraints in

Government regulations with only select areas open to private participation, the reluctance of users to

pay for the infrastructure facilities and project returns not meeting investor expectations.

The 11th Plan approach paper and various working groups identified an ambitious program for

infrastructure development in the Road, Rail, Air, Water Transport, Power, Telecommunication, WaterSupply, Irrigation and Storage. Out of the total investments in infrastructure, 30% is envisaged to come

through private investments. It has been recognized that for creating world class infrastructure, it is

necessary to explore PPP in all sectors of infrastructure. To facilitate this process, the government is

pushing for reforms that encourage private sector participation and has recently made various legal

and regulatory changes to enable PPPs in infrastructure.

GoI has actively promoted PPPs across sectors through various initiatives. A three-tier approval

system has been instituted. Initiatives for facilitating PPP including model documents, financing

mechanisms and provision of technical assistance have been established. The institutional framework

for PPP projects can be categorized into the following:

PPP Advisory: These include the Committee on Infrastructure (CoI), Planning Commission

including PPP Appraisal Unit (PPPAU)

PPP Approval Mechanism: These include PPP Appraisal Committee (PPPAC) for approving

PPP projects and Empowered Committee / Institution for approving VGF.

PPP Financing Mechanism: These include 1) Viability Gap Funding (VGF), 2) India

Infrastructure Finance Company Limited (IIFCL), 3) India Infrastructure Project Development

Fund, and 4) other institutions like IDFC, IL&FS, and other financial institutions including

commercial banks

Government Ministries / Sponsoring Agencies: These include Ministry of Finance (MoF),

Department of Economic Affairs (DEA) including PPP cell in DEA and, PPP coordinators in line

ministries.

The table below summarizes the Institutional Framework for PPP at central level:


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Table 3: Institutional Framework for PPP at central level

Name Role

PPP Advisory

Committee onInfrastructure

(CoI)

It was instituted under the Chairmanship of thePrime Ministerin2004 with anobjective to initiate policies that enable creation and management of infrastructure,

facilitate mechanisms for PPPs, and monitor the progress of key infrastructure

projects.

The committee has since issued guidelines for implementation of PPP projects

including bidder selection guidelines, specifications and standards for projects,

model concession agreements, and financing plans.

Planning

Commission

It is the apex planning body of government. It plays a pivotal role directly and

through PPP Approval Committee (PPPAC) and PPP Appraisal Unit (PPPAU) as a

member, a unit created to appraise PPP projects and suggest suitable

modifications.

PPP Approval Mechanism

PPP Appraisal

Committee

(PPPAC)

It is an important institution for approval of PPP projects which was established in

2005. PPPAC first gives in-principle approval to a project put forth by a central

government ministry / autonomous undertaking and sends it to DEA, Planning

Commission and concerned line ministries for approval. Subsequent to their

approval, PPPAC gives final approval to the project.

Empowered

Committee /

Institution

An Empowered Committee and an Empowered Institution have been established

for approving Viability Gap Funding up to USD 50 million and USD 25 million

respectively, for projects which satisfy the eligibility criteria of the VGF scheme.1

PPP financing mechanisms

Viability Gap

Funding (VGF)

This scheme of government support is envisaged to bridge the viability gap of

infrastructure PPP projects up to a maximum of 20% of project in cases where the

project is awarded on competitive bidding and the private party has 51% or more

equity stake.2 This scheme is funded by MoF through budgetary allocations and

the assistance is provided in the form of capital grant to fund a part of the project

cost. Eligible sectors for VGF include Roads and bridges, railways, seaports,

airports, power and urban transport.

India It was established in 2006 with a mandate to provide long term debt for

1Empowered Institution (an institution, company or inter-ministerial group designated by the Government for

VGF scheme) will release the Grant to the Lead Financial Institution (the financial institution (FI) that is fundingthe PPP project) and will obtain reimbursement from the Finance Ministry. The Empowered Institution, the LeadFinancial Institution and the Private Sector Company shall enter into a Tripartite Agreement for the purposes ofthis scheme.2

The sponsoring ministry, state government or statutory entity can provide support over and above VGF subjectto a maximum of 20% of project cost


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Name Role

Infrastructure

Finance

Company

Limited (IIFCL)

infrastructure projects either by way of refinance or by direct lending, up to 20% of

capital cost, to project companies with a preference for infrastructure PPP projects.

Role of IIFCL is complimentary to that of existing infrastructure financing

institutions. In addition IIFCL enjoys Government guarantee for the funds it raisesfrom domestic and international markets (limits to be set at the beginning of each

year) whereas other institutions do not have such guarantee. IIFCL is expected to

fill in the gap in long-term debt financing for infrastructure projects and complement

the efforts of commercial banks and other financial institutions. It also provides

refinance to banks and FI for loans with tenor of five years or more. The

commercial banks in India participate in the infrastructure project funding and

typically provide three-fourth of the total funds.

IIFCL has also been identified as the channeling agency for using part of foreign

exchange reserves to finance import of capital goods for infrastructure projects.

India

Infrastructure

Project

Development

Fund

IIPDF was announced in the Budget Speech for 2007-08 and was subsequently

created with a corpus of USD 25 million to quicken the pace of preparation of a

shelf of bankable projects which can be offered for competitive bidding.

Upto 75% of the feasibility level project development cost may be financed from

this fund as interest free loan and is envisaged to be recovered from the successful

bidder. If the project does not take off, then the same is converted to a grant. Any

state government & local body can avail of this facility for developing PPP projects.

Government ministries/ Sponsoring Agencies

Ministry of

Finance(MoF)

The Ministry of Finance is the nodal ministry responsible for examining concession

agreements from the financial angle, deciding on guarantees to be extended, andgenerally assess risk allocation from the investment and banking perspectives.

There is no generic policy in India which governs the provision of guarantee by the

MoF for PPP projects. The projects undertaken by government and its bodies have

implicit sovereign guarantee. There have been instances of explicit sovereign

guarantee in case of projects funded by multilateral institutions

Department of

Economic

Affairs (DEA)-

Ministry of

Finance

DEA is the nodal agency of the Union Government to formulate and monitor

country's economic policies and programmes having a bearing on internal and

external aspects of economic management. DEA services the Public Private

Partnership Approval Committee (PPPAC).

The PPP cell in DEA coordinates the PPP related activities at central level,including VGF (detailed later) and appraisal of PPP projects at the centre

Line Ministries

(Roads, Ports,

Civil Aviation,

etc.)

These play an important role in identification of PPP projects within their respective

areas. They are also part of the PPPAC as project sponsor to suggest necessary

modifications before approval of project. Nodal officers have been nominated in

key line ministries such as Urban Development, Civil Aviation, Road Transport,

Railways etc. for coordination of PPP projects.


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The institutional framework at the central level can be described by the diagram below.

Figure 7: Institutional Framework for PPP at central level

Details of the PPP projects (quantum and value) are attached as Annexure 2.

3.2 Policy Framework for PPP at Central level

As on date, India does not have an overall Infrastructure PPP Policy. However, talks are going on in

Planning Commission and DEA to formulate an overarching policy guideline at the Central level soon.

However, at various times, the GoI has made various policy statements outlining the need to provide a

strategic thrust towards PPP especially in infrastructure.

3.3 Issues with PPP Projects and Processes at Central level

GoI has made extensive effort in institutionalizing PPP with special focus on defining PPP, preparing

policy, guidelines and model documents, establishing an approval mechanism, setting procurement

Sponsoring Agency

Policy and Legislation

PPP Cell, DEA

under MoF

Line Ministries /

Departments at

state level

Planning

Commission

Committee on

Infrastructure

Financing

Mechanism

No PPP policy oroverall infrastructurepolicy

Various sectorspecific policies

Various initiatives toencourage PPP likestandardization ofbid documents,project preparatoryassistance, andviability gap funding

PPPAC

VGF IIFCL IIPDF

PPP

Coordinators in

every Line

Ministries at

Central level

Viability gap

assistance

Financial

assistance

through long

term debt

Project

preparatory

assistance

State Nodal

Agency

Advisory

Empowered

Committee/

Approval

Committees


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methods and processes. But there are some gaps and issues identified in the PPP mechanism at the

central level which should be addressed.

There is an absence of a comprehensive PPP Policy at the Central level. Planning Commission

is considering developing such policy which will be applicable to all infrastructure sectors.

There is no overarching legislation for PPP at the central level. Social sector needs more encouragement in undertaking PPP including through additional and

innovative financial incentives in addition to VGF.

There are constant changes in the processes and guidelines which sometimes hinder the

growth for PPP e.g. evaluation criteria changes, timeline changes for bidding, changes in tax

applicability, interpretations etc.

In addition, the time taken to obtain clearances by private parties after getting selected also

varies hugely depending on quality of ground work done by bidding authorities in advance. This

also acts as a deterrent. Absence of capacity in bidding agencies also sometimes comes in the

way of getting serious private parties.


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4. PPP IN OTHER INDIAN STATES

4.1 Introduction

There are a number of states in the country which have adopted PPP models successfully to provide

efficient infrastructure services to people while others are still in the process of coming to terms with

PPP. Realizing the importance of speedy development of infrastructure through PPP, some states like

Andhra Pradesh and Gujarat institutionalized PPP even before a formal mechanism was established

at the central level.

Studying the PPP framework adopted by various states has given important insights into various

policies, institutional, financial and regulatory options that have been used to operationalize PPP.

There are different frameworks adopted by different states and it is possible to use specific examples

for Madhya Pradesh given the local context. The states chosen for the purpose of analysis here

included Gujarat and Andhra Pradesh - both of which operationalized PPPs through an over-archinginstitutional and legal framework for PPPs including the creation of a specialised institution. Tamil

Nadu and Maharashtra have also achieved some success in undertaking PPP projects by creating

specialised sector specific agencies with private sector participation and also by leveraging public

funds to undertake PPP projects. Another state added to the comparison list was Orissa as it has

implemented a PPP policy and has a formal three-tier hierarchical mechanism for approving PPP

projects. The key lessons that emerge from the comparative analysis are presented at the end.

4.2 Gujarat

4.2.1 PPP in Gujarat

Gujarat has been one of the leading states in implementing PPP projects and has been one of the few

states that have enacted special legislations for infrastructure development through PPP that cuts

across sectors and have created institutions for undertaking these initiatives.

The Gujarat Infrastructure Development Board (GIDB) is the nodal agency to promote private sector

participation in all infrastructure sectors in Gujarat. Presently the major infrastructure sectors where

PPP projects have been successful are Roads and Ports. The Gujarat Infrastructure Development Act,

1999 (BOT Law) provides the legal framework for private sector participation in financing, construction,

operation and maintenance of the project.

GIDB was established under the Gujarat Infrastructure Development Act, 1999 (GID Act) to promote

private sector participation in Infrastructure Projects. GIDB focuses on overall planning, coordination

between various sector specific departments, concession agreements, selection of developers etc.

rather than developing infrastructure facilities on their own. GIDB is an over-arching body for

infrastructure development in Gujarat (hard as well as soft infrastructure sectors). GIDB itself does not

develop infrastructure but acts as a catalyst for their development.

GIDB is mandated with the following functions:


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To promote private sector participation in financing, construction, operation and maintenance of

the Infrastructure projects.

To develop the projects through pre-feasibility/ feasibility studies of the project.

To advise the state government and its agencies on the matter of Policy.

To lay down priority of the projects. To consider proposal and proposed concession agreement to be entered into between the

state government/agency and the private sector developer.

To monitor the projects undertaken in the state.

Figure 8: Institutional Framework for PPP in Gujarat

Details of GIDB and other agencies, policies and legislative framework pertaining to PPP in Gujarat

are attached in Annexure 3.

PPP Initiatives

Formulated a State VGF

Scheme and guidelines

for its operation

Model documents

Vision documents ( BIG

2020)

Sector Policies

GIDB

Nodal agency for PPP headed by Chief Minister

Overall planning & framework studies

Advise on Policy matters

Prioritization of projects

Provide state VGF (20% oTPC)

Nodal agency for preparing VGF proposals for

Centre

Line Departments /Sponsoring agency

Project preparation

Bidding

Approval

Selection of developer

Project execution

Monitoring

Empowered Committee (Executive Committee)

Approval of feasibility study less than Rs. 1.5 crore

Appraise all proposals requiring VGF and puts it

up to the state Government for approval

GID Board (Steering Committee)

Approval of feasibility studies costing more than

Rs. 1.5 crore

Approval of all PPP projects

PPP Cell / Project preparation

develops shelf of projects

conducting feasibility studies

drafting of model documents

bid process management

appraisal of projects for approval and VGF

Conceptual diagram of PPP Institutional framework in Gujarat


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4.2.2 Key Learning from Gujarat

Gujarat is a progressive state and has undertaken many PPP projects in various sectors. The state

has institutionalized the PPP mechanism so well that process of doing PPP projects is clearly

understood and followed by line departments. Some of the important lessons to be drawn from Gujarat

are given below.

A nodal agency for PPP projects, headed by the Chief Minister/ Chief Secretary should be

created at the state level.

Such agency should be a one point of contact for all departments for project preparation and

approval of PPP projects which also helps in expediting the project development and

implementation.

Nodal agency should also be mandated to build capacities of other line departments.

Political consent at various stages of project development helps in faster movement of the PPP

project in the project cycle.

Swiss challenge must be encouraged as a procurement method for PPP as it allows for

innovation.

4.3 Tamil Nadu

4.3.1 PPP in Tamil Nadu

Tamil Nadu has made some success in promoting public-private-partnership (PPP) in some

infrastructure sectors, including power, roads, ports and urban. The State Government has

encouraged private sector participation in the process of infrastructure development. Tamil Nadu was

the first state in the country to setup a genuine public - private partnership venture for infrastructure

development in the year 1998.

The Tamil Nadu government has agencies in different sectors promoting PPP but not an overall

coordinating agency as in case of Gujarat or Andhra Pradesh. Some of the Joint venture companies

established at the state level for specific PPP projects are shown below.


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Figure 9: Institutional Framework for PPP in Tamil Nadu

Details of the projects and PPP agencies in Tamil Nadu are attached as Annexure 3.

4.3.2 Key Learning from Tamil Nadu

Tamil Nadu has achieved success in PPP using JV model for project preparation and execution. It

does not have a nodal agency or an umbrella legislation to support PPP but there are some merits inadopting such model. Key learning from PPP mechanism in Tamil Nadu is listed below.

Involvement of private player from project conceptualization stage itself helps in

accomplishment of PPP projects as suitability of PPP is established at the onset.

PPP projects can also be funded through schemes like capital subsidy as given in Tamil Nadu

apart from viability given funding. This can give additional incentive to the private players to

undertake a PPP project.

TNRDC was formed to encourage PPP in road sector. TNRDC is a 50:50joint venture between TIDCO and IL&FS. It was set up with the objective to

catalyze private sector participation and investment in Road sector and ismandated to initiate commercialization of operations and maintenance ofRoad assets.

Tamil Nadu Road

DevelopmentCompany (TNRDC)

In order to attract private capital into urban infrastructure developmentTNUDF was established in 1996. TNUDF is the first public privatepartnership between Government of Tamil Nadu and three FinancialInstitutions (viz., ICICI, HDFC, and IL&FS) for providing long term financefor civic infrastructure on a non-guarantee mode. The TNUDF aims to raiseresources and long-term finance for infrastructure in Urban local bodies ona sustainable basis, support and strengthen Urban reforms, and institutionalstrengthening and capacity building. It also promotes PPP arrangement tochannel private capital in municipal infrastructure. The Fund is managed byTamil Nadu Urban Infrastructure Financial Services Limited.

Tamil Nadu UrbanDevelopment Fund

(TNUDF)

TNUIFSL is a Public Limited Company and is a partnership in the Urbansector, between Government of Tamil Nadu and three all India-Financial-Institutions namely, ICICI Bank Limited, Housing Development FinanceCorporation Limited (HDFC) and Infrastructure Leasing and FinancialServices Limited (IL&FS). TNUIFSL undertakes fund management (includingthe TNUDF) on the basis of management contracts

Tamil Nadu UrbanInfrastructure

Financial ServicesLimited (TNUIFSL)

TNUDP is a state government project with assistance from the World Bank.A part of the project is to enhance the institutional capacity andstrengthening the financial and managerial capacities in ULBs. Under thisproject, the TNUDF, the first private institutional arrangement in the country,has been established to assist municipalities in raising funds from markets tofinance specific infrastructure projects. It also helps local authorities tostructure and develop infrastructure projects.

Tamil Nadu UrbanDevelopment

Project (TNUDP)


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4.4 Maharashtra

4.4.1 PPP in Maharashtra

Maharashtra does not have any specific institutional or regulatory framework for PPP across sectors.

Presently, individual organisations / agencies are responsible for carrying out the PPP projects

according to their own policies and guidelines and the thrust of PPPs in the state have been in ports

and roads sectors. Currently, PPP cell acts as the nodal agency and there is now a nodal officer in the

state who is responsible for overseeing all PPP projects in the state. A PPP Policy has been

formulated at the state level and is under the process of approval from the Cabinet.

The Maharashtra government has several infrastructure departments such as the Public Works

Department, Urban Development Department, and Water Supply and Sanitation Department which

have organizations (authorities and corporations) working under them to coordinate the PPP projects

in their respective sectors.The key agency responsible for PPP in ports is the Maharashtra Maritime Board (which is the nodal

agency for development of minor Ports in Maharashtra). The PPP projects in the road sector are under

the purview of the Public Works Department (PWD) and the Maharashtra State Road Development

Corporation Limited (MSRDC). Planning authorities such as MMRDA, CIDCO, Nagpur Improvement

Trust and Pimpri Chinchwad Development Authority under the Urban Development Department have

implemented PPP projects such as the Mumbai Metro and other Urban Infrastructure Projects.

In order to undertake road sector development through private sector participation, the Government of

Maharashtra had come out with a Policy on implementation of Road & Bridge Projects through

private sector participationin 1996. The key provisions of the policy include the following:

Certain concessions been granted to the private sector developer to make the project

financially attractive.

The entrepreneur is envisaged to meet the project cost and recover the same through tolls. In

some cases, based on the financial feasibility of the project, the government may decide to

contribute towards the project upto 40% of the project cost.

The Power to decide whether the project can be taken up through private sector participation

are as follows:

o For works/projects with estimated cost less than Rs. 50 crores, the Public Works

Department may take decision and the tender should be approved by the Public Works

Department on consultation with the Finance Department and after approval of the Minister

for Public Works Department.

o For works with estimated cost more than Rs. 50 crores, the proposal should be placed

before the Cabinet for approval. The tender for such works should also be placed before

the Cabinet for approval.

Maharashtra has also developed a Toll Policy, which provides for the tolls to be levied depending upon

the project cost for different categories of vehicles. Although the government does not give any traffic


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guarantee, in cases where tolls cannot be charged for 15 days or more, there is a provision that the

government would compensate the concessionaire.

Salient features of Proposed PPP Policy

An Infrastructure Authority is proposed to be created for facilitating PPP projects in the state.

Decentralized approach

o It is proposed that no approvals will be required from Infrastructure Authority.

o Such authority will only be facilitated from PPP cell on technical matters.

As per existing rules, all the projects costing more than Rs 25 Cr necessarily be sent to Cabinet

Sub-committee on Infrastructure chaired by CM

VGF Approval

o Departments may approach GoI for VGF directly in case no State Support is required

o Departments have to approach GoI through State Government, in case State share of

20% is required or

o Departments have to take approval from State Government if entire 40% of total VGF

is required from State Government.

VGF to be housed in Planning Department

o Principal Secretary (Planning) is Member Secretary of Infrastructure Sub Committee

PDF to be created and housed in PPP Cell

Risks Disclosures in all the PPP Projects

VfM analyses for PPP projects need to be done

PPP Regulator to be established with sunset clause

Panel of States own Transactional Advisors in addition to GoI TAs must be established.

4.4.2 Key Learning from Maharashtra

Maharashtra does not have an overarching legislation or organization for doing PPP projects but still

the state has executed many PPP projects successfully. Some of the factors facilitating PPP in

Maharashtra are given below.

PPP facilitators like model documents and toolkits (PPP and Sector toolkits) enhance the

amenability of PPP.

A dedicated fund for supporting PPP projects at Urban Local Bodies, like MUIF, assists in

developing PPP projects at grass root level.


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4.5 Andhra Pradesh

4.5.1 PPP in Andhra Pradesh

Andhra Pradesh is one of the leading states in India with a successful track record of implementing

infrastructure projects under PPP framework. The state is amongst the first ones to have acomprehensive legislation relating to development of Infrastructure (AP Infrastructure Development

Enabling Act). In addition, AP has also constituted an Infrastructure Authority (IA) to co-ordinate and

develop various infrastructure initiatives under Public Private Partnerships. The following diagram

shows a broad level institutional framework for PPP in Andhra Pradesh.

Figure 10: Institutional Framework for PPP in Andhra Pradesh

In May 2005 the Government of Andhra Pradesh (GoAP) established anew department called the Infrastructure and Investment Department forachieving the infrastructure goals in select sectors `through a holisticapproach'. It was envisaged to create an environment for the upcoming

projects through single window facility. The Government of AndhraPradesh enacted the Andhra Pradesh Infrastructure DevelopmentEnabling Act (IDEA-2001) and two organizations have been set up - theInfrastructure Authority and Infrastructure Corporation of Andhra Pradesh.

Infrastructure andInvestmentDepartment

IDEA provided for the establishment of the Infrastructure authority (IA)under the Infrastructure and Investment department of the GoAP. TheAuthority has the Chief Secretary as the Chairman, and other membersinclude the Managing Director of APIIC, Director of National Academy ofConstruction and Secretaries of Departments of Finance & Planning,Transport, Roads & Bridges, IT, Municipal Administration & Urban

Development of GoAP.

InfrastructureAuthority (IA)

The GoAP created the Infrastructure Corporation of Andhra Pradesh(INCAP) on 31st May, 2005 as a part of the Department of Infrastructureand Investment working directly under the supervision of the HonbleChief Minister. INCAP was envisaged to facilitate infrastructuredevelopment by assisting the setting up and development of PPPprojects in the state. INCAP is also envisaged to enable the creation ofSpecial Purpose Vehicles that will provide impetus to infrastructureinvestment in the State.

The Infrastructure Corporation aims to facilitate project preparation,

project financing mechanism, the government role as sponsor /developer , access to long term funds and enhanced administrativesupport for Investors, including mobilizing and leveraging finances fromgovernment, public, private bilateral and multilateral entities includingViability Gap Funding from the Government of India where needed.

InfrastructureCorporation of

Andhra Pradesh(INCAP)


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Facilitators

Andhra Pradesh Infrastructure Policy

The Andhra Pradesh Infrastructure Policy provides guidelines for attracting and facilitating private

investments in infrastructure. It provides for a transparent selection mechanism, administrative support

for reduction in procedural delays and a risk sharing mechanism.

The Policy applies to all infrastructure projects implemented with Private Public Partnership (PPP) and

requiring Government support. The Infrastructure Development Enabling Act (IDEA) was enacted as a

result of this policy.

Infrastructure Development Enabling Act.(IDEA) 2001

It is applicable to all Infrastructure Projects implemented through PPP in the specified sectors of the

Act. The Act provides for the establishment of the Infrastructure authority (IA) with the Chief Secretary

as the Chairman, and members including Managing Director of APIIC, Director of National Academy of

Construction and Secretaries of Departments of Finance & Planning, Transport, Roads & Bridges, IT,Municipal Administration & Urban Development of GoAP.

The act formalizes the project delivery process by defining the procedures for the following:

Project identification

Project prioritization

Method of Selection of the developer

Selection criteria

Development of Model Concession Contract

The Act provides for the establishment of a Rs.10 million Infrastructure Projects Fund. It also entrusts

the IA to administer this fund.

Details about PPP agencies or organizations, projects, regulatory and policy framework in Andhra

Pradesh are given in Annexure 3.

4.5.2 Key Learning from Andhra Pradesh

Having gone through the PPP project cycle many times for projects in different sector, AP has some

experiences and recommendations for successful PPP. Given below are some key learning after

studying PPP projects and processes in AP and based on interactions with official from PPP Cell, AP.

For successful implementation of PPP, approval processes and committees for approving

projects with different project cost should be established.

Arbitration mechanism must be clearly spelt out in the PPP document (Guidelines / Policy/ Act).

Standardization of processes including appointment of Consultants and Transaction advisors

also contributes towards success of PPP.

Legal support for implementing any process or mechanism in PPP is required as it then

becomes binding on the departments and agencies to follow.

A dedicated Project Development fund aids preparation of projects in PPP format which

otherwise may not get developed through Department budget.


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4.6 Orissa

4.6.1 PPP in Orissa

Orissa has institutionalized PPP and established a state level PPP Policy in 2007. The Policy

document clearly spells out the mechanism for undertaking PPP projects. It has also put in place an

effective and efficient institutional mechanism for speedy clearance of the projects. Though the

success stories of PPP projects in the state are few but Orissa has well established institutional and

framework for PPP which is worth emulating. The three-tier hierarchical approval mechanism adopted

by Orissa is a national practice and is an effective mechanism.

The approval mechanism of PPP projects is as shown in diagram below.

Figure 11: Institutional Framework for PPP in Orissa

Role of ECI

The ECI shall be the nodal agency to co-ordinate all efforts of the State Government regarding

development of infrastructure sectors, involving private participation and funding from various sources.

The Powers and Functions of the ECI would include:

To prioritize, approve shelf of projects, sanction, authorize expenditure for PPP projects

Adopt, adapt and develop Model Concession Agreements for various sectors

Recommend projects for Viability Gap Funding

High Level Empowered Committee (HLCA)

Approve project costing greater than Rs. 500 crore

or involving any grant or other financial support

from GoO

Empowered Committee on Infrastructure (ECI)

Approve project costing lesser than Rs. 500 crore

or not involving any grant or other financial supportfrom GoO

Line

Departments

ECI deliberates a

recommends PPP

projects to HLCA

PPP cell housed in P&C department

assists ECI in approving PPP projects

Technical Secretariat

housed in IDCO

assists PPP cell.


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Manage the Infrastructure Development Fund proposed to be created to facilitate infrastructure

development, to recommend projects along with amount required from the Fund to meet the

objectives of this Policy

Deliberate and recommend to HLCA the final bids for approval of the projects above Rs. 500

crores.

Deliberate and recommend to HLCA any special grants and concessions

Coordinate the efforts of other departments for the furtherance of the objectives of this Policy.

Shall have power to inspect visit, review and monitor any PPP Projects regarding its

implementation, execution, operation and management.

To recommend enacting a special legislation for formation of appropriate regulatory

mechanism robust grievance redressal mechanism as may be required for the project.

To sanction PPP Projects and approval of concession agreements for projects upto Rs. 500

Crores.

Functions of the PPP Cell and Technical Secretariat (TS)

The Functions of the PPP Cell and its Technical Secretariat would include:

To identify, conceptualize and create a shelf of projects in consultation with the owner

department and recommend approval of such projects for PPP from time to time to the ECI.

To assist different government departments in preparing pre-feasibility reports by itself or

through consultants.

To assist the respective departments for preparing Detailed Project Reports

Shall have the powers to appoint / select consultants to take the projects upto selection of

developer stage in consultation with the concerned department.

To help respective departments to conduct the bidding process for appointment of developers.

To interact with the Planning Commission, GOI and other funding agencies like World Bank for

obtaining approval under VGF and any other fund created for such purpose.

To recommend the requirement of multilateral/bilateral funding for furthering the objectives of

the Policy.

To act as the nodal agency for capacity building for PPP in the state. To further this function itshall conduct/recommend exposure visits and training programs on PPP.

Recommend appropriate regulatory mechanism / robust grievance redressal mechanism as

per requirement of the project.

Recommend requirements from the PPP Fund for development of projects, gap funding and for

any other requirement for furthering the object of the Policy. It also assists in formulation and


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recommendation of any legislation if required for creation, administration and monitoring of the

Fund.

The PPP cell shall develop internal evaluation guideline in consultation with the respective

departments to evaluate and assess the projects whether the projects are to be funded by the

State Government, through multilateral/bilateral funding and/or implemented with Private sectorparticipation.

4.6.2 Key Learning from Orissa

Institutional mechanism for PPP in Orissa is stronger and well established than many other Indian

states. Therefore, there are many lessons which are worth emulating from Orissa.

PPP Policy document enunciating institutional, legal and approval mechanism for PPP

facilitates departments to undertake PPP projects.

A structured hierarchical approval process adds to faster movement of PPP project in the

project cycle. PPP cell can be the technical secretariat to such approval committees.

4.7 Conclusion

4.7.1 Conclusion based on State wise PPP study

After studying the PPP scenario in the selected states, a comparative table highlighting the policy,

legislative and institutional framework has been prepared. The table is as shown below


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Table 4: Comparison of Institutional Framework for PPP in 5 states

StateLegislation/Policy

Agency/ Institution Facilitators Role of agency

GujaratGIDBAct,1999(BOT law)

GIDB nodal agency forPPP/ PPP Cell

Sector policies,

VGF fund (proposed),

MCAs

Overall planning, policy support,coordination between departments,monitoring the progress of PPP, projectpreparation, capacity building and approval(Executive Committee as the Secretariat to

Board)

MaharashtraNooverarchinglegislation

PPP Cell/ MSRDC/MUINFRA

PPP Toolkits (water and urbantransport)

Maharashtra UrbanInfrastructure Fund (MUIF)

PPP cell provides state support for PPPthrough line departments;

MUIF meant to facilitate access toinstitutional finance and capital markets andMUINFRA assists urban local authorities indeveloping projects.

AndhraPradesh

InfrastructureDevelopmentEnablingAct(IDEA),2001

Infrastructure authority /PPP Cell/ INCAP

Sector Policies,

Infrastructure Fund / ProjectDevelopment Fund

Coordination with line departments,monitoring of progress, status of clearances,management of infrastructure fund, projectpreparation, seeking GoI assistance

OrissaPPP Policy,

2007

PPP Cell

HLCA & ECoI for approval

Various forms of governmentsupport;

VGF fund proposed

PPP Cell promotes PPP in infrastructureand helps in project development andprioritization. It also guides and approvesthe project and assists in procuring VGFfunding for the projects

Tamil Nadu

Nooverarchinglegislation /Nodal agency

JVs with private sector forend to end PPP-projectpreparation toimplementation in road,water and urbaninfrastructure / PPP Cell

Sector policies /

To attract private investments,government sometimes givescapital subsidy of 25% up to Rs.2.5 million.

JVs are run as joint management bygovernment and private sector. Themanagin

Mp Draft Ppp Policy

Documents