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Ppp in Infrastructure Sector

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India Infrastructure Project Development Fund
The Union Finance Minister in the Budget Speech for 2007-08 announced in the parliament the setting up of a Revolving Fund with a corpus Rs. 100 Crore to quicken the process of project preparation. Accordingly the corpus fund titled India Infrastructure Project Development Fund (IIPDF) has been created in Department of Economic Affairs, Ministry of Finance, Government of India with an initial corpus of Rs. 100 Crore for supporting the development of credible and bankable Public Private Partnership (PPP) projects that can be offered to the private sector. The IIPDF has been created with initial budgetary outlay by the Ministry of Finance, Government of India.
The procurement costs of PPPs, and particularly the costs of Transaction Advisors, are significant and often pose a burden on the budget of the Sponsoring Authority. Department of Economic Affairs (DEA) has identified the IIPDF as a mechanism through which Sponsoring Authority will be able to source funding to cover a portion of the PPP transaction costs, thereby reducing the impact of costs related to procurement on their budgets. From the Government of India’s perspective, the IIPDF must increase the quality and quantity of bankable projectsthat are processed through the Central or States project pipeline.

The IIPDF will be available to the Sponsoring Authorities for PPP projects for the purpose of meeting the project development costs which may include the expenses incurred by the Sponsoring Authority in respect of feasibility studies, environment impact studies, financial structuring, legal reviews and development of project documentation, including concession agreement, commercial assessment studies (including traffic studies, demand assessment, capacity to pay assessment), grading of projects etc. required for achieving Technical Close of such projects, on individual or turnkey basis, but would not include expenses incurred by the Sponsoring Authority on its own staff.
The IIPDF will be available to finance an appropriate portion of the cost of consultants and Transaction Advisors on a PPP project where such consultants and Transaction Advisors are appointed by the Sponsoring Authority either from amongst the transaction advisers empanelled by Department of Economic Affairs or through a transparent system of procurement under a contract for services.

India has the second largest roads network (4.9 million km) in the world. India’s road network consists of National Highways (NHs), State Highways (SHs), Major District Roads (MDRs), and Rural Roads (RRs), which includes other district roads and village roads. All roads other than NHs in the states fall within the jurisdiction of respective State Governments. The NHs constitutes 2 per cent of India’s road network but handle nearly 40 per cent of the total traffic. Roads remain the most important means of transport, accounting for around 85 per cent of the passenger traffic and 60 per cent of the freight traffic.
Sixty percent of 3P projects are for road building and they represent forty-five percent of 3P monetary value. They are a part of the National Highways Development Project (NHDP). Examples of 3P road building projects are the Golden Quadrilateral and the North-South and East-West Corridor. About 14,000 km (8,700 mi) of India's national highways are being converted to four-lane highways.(Source: NHAI, MoRTH, IBEF)
India has a coastline of 7,517 km served by 13 major ports and about 200 notified non-major ports along the coast line and sea-islands. Major ports fall under the jurisdiction of Ministry of Shipping and are governed by the provisions of the Major Port Trusts Act 1963, except for Kamarajar Port Limited which is constituted under the Companies Act, 1956.

Port building projects account for ten percent of projects and thirty percent of the value of 3P. As of 2011, India had twelve major seaports and 185 minor seaports along its coast line of 7,517 km (4,671 mi). Seaports constructed via the 3P model increased the handling of cargo in India by ten percent between 2008 and 2011.
Examples of port building projects include the Jawaharlal Nehru Port Trust (JNPT) in Mumbai and Chennai port in association with P&O. The Indian government expects the National Maritime Development Programme (NMDP) to be a 3P stakeholder.
The Indian Civil Aviation industry is among the top 10 in the world with a size of around USD16 billion offering significant long term opportunities for investors. Ministry of Civil Aviation (MoCA) is responsible for the formulation of national policies and programs for development and regulation of the Civil Aviation sector in the country.
MoCA exercises administrative control over attached and autonomous organizations like the Directorate General of Civil Aviation, Bureau of Civil Aviation Security and Indira Gandhi Rashtriya Udan Academy and affiliated Public Sector Undertakings like National Aviation Company of India Limited, Airports Authority of India and Pawan Hans Helicopters Limited.
Airports Authority of India (AAI) is responsible for developing, financing, operating, and maintaining all government airports in India. The Aircraft Act (1934) governs remaining airports. As of March 2015, there are 449 airports and airstrips in India, out of which 125 airports are owned and managed by AAI.
Investment in airports is encouraged under the PPP Policy of Government of India. Till March 2015, five airports have already been developed on PPP basis. Investment made by the private sector during the 12th FYP is projected to grow at a CAGR of about 30 per cent during FY2013-17. Currently, 60 per cent of airport traffic is handled under the PPP model, while the remaining 40 per cent is managed by the AAI.
(Source: IBEF, AAI)

BENEFITS OF PUBLIC PRIVATE PARTNERSHIP * Exploring PPPs as a way of introducing private sector technology and innovation in providing better public services through improved operational efficiency. * Incentivizing the private sector to deliver projects on time and within budget. * Imposing budgetary certainty by setting present and the future costs of infrastructure projects over time. * Utilizing PPPs as a way of developing local private sector capabilities through joint ventures with large international firms, as well as sub-contracting opportunities for local firms in areas such as civil works, electrical works, facilities management, security services, cleaning services, maintenance services. * Extracting long-term value-for-money through appropriate risk transfer to the private sector over the life of the project from design/construction to operations/ maintenance

RISKS OF PUBLIC PRIVATE PARTNERSHIPS * There is a cost attached to debt – While private sector can make it easier to get finance, finance will only be available where the operating cash flows of the project company are expected to provide a return on investment (i.e., the cost has to be borne either by the customers or the government through subsidies, etc.) * Some projects may be easier to finance than others (if there is proven technology involved and/ or the extent of the private sectors obligations and liability is clearly identifiable), some projects will generate revenue in local currency only (e.g. water projects) while others (e.g. ports and airports) will provide currency in dollar or other international currency and so constraints of local finance markets may have less impact * Private sector will do what it is paid to do and no more than that – therefore incentives and performance requirements need to be clearly set out in the contract. Focus should be on performance requirements that are out-put based and relatively easy to monitor * Government responsibility continues – citizens will continue to hold government accountable for quality of utility services. Government will also need to retain sufficient expertise, whether the implementing agency and/ or via a regulatory body, to be able to understand the PPP arrangements, to carry out its own obligations under the PPP agreement and to monitor performance of the private sector and enforce its obligations

Public private partnerships have seen a large increase over the years in part because local and state governments rely heavily on the growing number of non-profits to provide many public services that they cannot. Entering into a public private partnership can be rewarding as well as destructive if not done with caution and education. Partnerships need balance from both parties as well as continuous maintenance. If entered into lightly, one can find its organization falling in various areas proving to be one of many partnership failures. * Flexibility: Between the two partners as well as the contract and staff involved throughout the process. If one party feels they are losing some of the control they may work on adopting more rules and regulations throughout the process instead of working together to be flexible and mediate an issue. * Timeline: Non-profits are working on a long-term timeline. Many of their goals can only be achieved with long-term commitment; this is where their focus will lie. For-profit organizations are more short-term oriented because of short-term goals focusing primarily on profitability. Finally, government agencies' timeline depends a lot on election timelines and therefore can change regularly. * Focus of the project: Partners may not have the same focus when entering into a partnership even though they think they might. * Funding priorities: when parties can’t agree on where funding should go this can sometimes lead to losses in time, resources, and the overall funding for the project.

Funding priorities for government bodies looks typically at where the public’s funds were spent in relation to the contract made. This then typically is looked at as in how many hours of participations, forms filled out, meals served. Etc. * Communication or understanding: One of the largest issues that can be discussed, communication can be a huge downfall and can contribute to many of the other risks within partnerships. It can be said that when entering into a cross-sector partnership it is difficult to understand and collaborate due to the diversity and differing languages spoken amongst the sectors. Items like performance measures, goal measurements, government regulations, and the nature of funding can all be interpreted differently thus causing blurred lines of communication. * Conflicts: IT can arise from any of the above topics but even outside issues or forces may bring a partnership to a halt. Even though these partnerships are entered into with the best of intentions even the most trivial issues can snowball into greater conflict halting a partnership dead in its tracks. Having no understanding and communication between parties can cause conflicts with use of language, stereotyping, negative assumptions, and prejudice about the other organization. These conflicts can be related to territorialism or protectionism, and a lack of commitment to working within the partnership.

India has witnessed an absolute metamorphosis over the last decade. Sprawling cities, flourishing businesses, higher standard of living are all indicators of unprecedented growth, globalization, urbanization, expansion and diversification. Infrastructure modernization and development is said to be the key driver of all the growth and economic activity. The public sectors alone can’t meet the required funds and technology for the projects. So the Government decided to accomplish this business by collaborating with the sector which could provide this requirement which was none other than the private parties. Thus PPP emerged as a joint collaboration of the public and private sectors. The Indian infrastructure sector is at an inflection point and there are immense opportunities for the private sector. The PPP has come in to existence from over a decade but it has shown remarkable results in past 5-6 years. Almost every sector is covered where PPP needs to be implemented. Many foreign companies also show their interests but their participation is not much as the domestic private companies. The sectors covered in this research are health, education, power and transport
Indian infrastructure growth has reached massive heights. Most PPPs have been restricted to the roads sector. And the sector still has lot of scope and the measures are taken also by the PPPs to achieve it. Ambitious project plans have been developed for various transport sectors to bridge the infrastructure gap. The sectors are booming but there are hindrances and constraints persist threatening to slow down growth in the smooth development of world-class infrastructure. This is because the private sectors which are involved in the PPPs have the prime motive of profit making rather than doing any social work.

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