PPP as a tool to use bridging fiscal gap in countries th South 4 th - PowerPoint PPT Presentation

PPP as a tool to use bridging fiscal gap in countries th South 4 th uth Asi sia Re Region on Public ic Procurem ocurement ent Conference ference “Electronic Government Procurement (e -GP) GP) in South th Asi sia Achi hievments evments, Op Oppo portun tunities ities and d Cha hallanges anges ” 20 th – 23 rd Feburary , 2017 Mr Rajneesh Kapoor Superintending Engineer Ministry of Road Transport & Highways Govt of India

INTRODUCTION  Ministry of Road Transport & Highways (MORTH) is an apex organization under the Central Government is primarily responsible for development and maintenance of National Highways.  India has about 5.472 million Kilometer of road network out of which NHs are only 1,03,933 Km.  National Highway comprises only 2% of total road network in India but carries about 40% of the road traffic.  Road Transport is considered to be one of the most cost effective and preferred mode of transport in India, both for freight(60%) and passengers(87%).

Road Network in India  The road network in India is second largest in World after USA.  Details of road in India is as under: Road Network of India Length (Km) National Highway (NH) 1,03933 State Highway (SH) 1,61,487 Other Roads (MDR, ODR & 52,07,044 VR) Total Length 54,72,464

Implementation modes for NH Projects in India Implementation agencies for NH projects • National Highways Authority of India (NHAI) • State Works Dept (PWD)/ State Road Development Corporations • Border Roads Organization (BRO) • National Highways Infra Dev Corp Ltd. (NHIDCL) Implementation modes for NH projects • Build Operate Transfer (BOT) Toll (PPP) • BOT Annuity (PPP) • Hybrid Annuity (PPP) • EPC ( Public funded)

Programme for road development in India  NHDP (National Highways Development Project)-48298 km  SARDP – NE(Special program for North East) -7611 km  LWE (Left Wing & Extremist affected areas) -1770 km  National Highway Interconnectivity Improvement Programme (NHIIP) under World Bank - 1120 km Loan Assistance Total 58799 Km  Development of remaining NHs of length 45134 Km are taken up under NH(O) scheme through Budgetary support of Govt of India

Phases of NHDP  NHDP Phase-I: approved in Dec 2000 at the cost of Rs 30300 cr.  NHDP Phase-II: approved in 2003 at the cost of Rs 34339 cr.  NHDP Phase-III: approved in Dec 2006 at the cost Rs 80626 cr  NHDP Phase-IV: approved in Dec 2006 at the cost of Rs 41210 cr.  NHDP Phase-V: approved in October 2006 at the cost of Rs 41210 cr.  NHDP Phase-VI: approved in Nov 2006 at the cost Rs 16,680 cr  NHDP Phase-VII: approved in Dec 2007 at the cost Rs 16,680 cr

Map of NHDP-I (GQ) & II (NS&EW) 7

Status of NHDP NHDP Mode Length Awarded/ To be Approved Phase (Km) under implementation awarded cost (Rs (Km) (Km) in Cr) Phase I EPC 7522 7521 1 30,300 Phase II EPC/ 6647 6399 248 34339 BOT Phase III EPC/ 12109 10430 1679 80626 BOT Phase IV EPC/ 20000 15829 4171 27800 BOT Phase V BOT 6500 3457 3043 41210 Phase VI BOT 1000 166 834 16680 Phase VII BOT 700 120 580 16680 Total 54478 43922 10556 247,635

FINANCING OF VARIOUS PROGRAMMES  To meet with the massive requirement of funds, innovative means of financing have been adopted by Govt of India.  Special financing strategies are needed, as raising adequate resources from budgetary resources alone is very difficult.  The details of fund raised from various sources is as under:  Cess on diesel and petrol: A cess of Rs 6 per liter is levied for road development.  NHAI (Toll Remittance)-Toll to be collected from completed stretches  Market borrowings on the strength of future inflow in cess/Toll: Funds are raised from Bonds issued by NHAI  Avail long term external loans from the World Bank, ADB & JICA.  Budgetary resources of Govt of India  public private partnership (PPP)

Public Private Partnership in India Implementation modes for NH projects • Build Operate Transfer (BOT) Toll (PPP) • BOT Annuity (PPP) • Hybrid Annuity (PPP) • EPC (Public funded) Preference of Mode • BOT(Toll) is the Default Mode • Earlier, the projects not viable on BOT(Toll) were taken up on BOT Annuity (PPP). • Now Govt has adopted a new Model HAM in 2015. • Projects not viable on BOT(Toll) are taken up on Hybrid Annuity Model(HAM) • When no response is received on BOT(toll) and HAM then projects are taken up on EPC Mode.

Public Private Partnership in India- BOT (Toll)  Concessionaire construct the road and recovers the cost through collection of toll revenue during concession period maximum upto 30 year.  Viability Gap Funding (VGF) maximum up to 40% of Total Project cost (TPC) paid to concessionaire by Authority during construction period in 5 installments linked to project milestones.  Remaining project cost is recovered by concessionaire through collection of toll revenue during operation period  Concessionaire maintains the road during operation period. 11

BOT(Toll)Model 1. Toll revenue to be retained by VGF support upto concessionaire 40% of TPC by Govt. 2. Interest payments (on reducing balance @ Bank Rate + 2.5%) COD BOT(Toll) Project Toll collection by O&M by Concessionair Concessionaire e Balance Project Cost to be arranged by Concessionaire for Financial Close Operations Period Bid Parameter – VGF quoted Construction Period Concession Period

Public Private Partnership in India- BOT(Annuity)  Concessionaire construct the road and recovers the cost through Annuities paid semi annually after completion of construction and during operation period (maximum upto 17.5 year).  Construction risk with concessionaire.  Authority collects toll.  O&M responsibility is with concessionaire.  Authority has to pay annuities during operation period hence payment liability deferred during construction and paid in installment during operation period. 13

BOT(Annuity) Model 1. Annuity payments (biannually) No Construction for 15 years Support by Govt. 2. Interest payments (on reducing balance @ Bank Rate + 2 %) COD BOT(Annuity) Project Toll collection O&M by by Govt. Concessionaire 100% of Project Cost arranged by Concessionaire for Financial Close Operations Period Bid Parameter – Semi Annuity quoted Construction Period Concession Period

Hybrid Annuity Model The Model ▪ This is a new Model Adopted by Govt In 2015. ▪ 40% of Project Cost paid to Concessionaire by Authority during construction period in five equal instalments linked to project milestones. ▪ Balance 60% of Project Cost to be brought in by Concessionaire ▪ Investment recovered by Concessionaire through Annuity payments over 15 years along with interest @ Bank Rate + 3 %. ▪ O&M responsibility is with Concessionaire, who receives O&M payments bi-annually along with Annuity payments. ▪ Authority collects toll and Concessionaire remains insulated from Toll Revenue Collection Risk. ▪ Project payments are inflation indexed.

Hybrid Annuity Model – salient features  This is a new innovative Model in which Annuities paid to concessionaire are not equal but increases with time .  This helps to reduce the pressure on budgetary resources initially since annuity amount increased with time to match the budgetary resources (2.1% to 4.75% of balance cost).  Separate provisions exist for O&M payments to the concessionaire from the Authority.  Toll collection shall be the responsibility of the Authority.  As of now 30 projects are awarded on HAM mode out of which 9 has achieved financial close, which will be started shortly .

Annuity payment schedule – Pre determined Annuity following Percentage of Balance Annuity following Percentage of Balance the COD Completion Cost the COD Completion Cost 1 st Annuity 16 th Annuity 2.10% 3.30% 2 nd Annuity 17 th Annuity 2.17% 3.40% 3 rd Annuity 18 th Annuity 2.24% 3.50% 4 th Annuity 19 th Annuity 2.31% 3.61% 5 th Annuity 20 th Annuity 2.38% 3.72% 6 th Annuity 21 st Annuity 2.45% 3.83% 7 th Annuity 22 nd Annuity 2.52% 3.94% 8 th Annuity 23 rd Annuity 2.60% 4.06% 9 th Annuity 24 th Annuity 2.68% 4.18% 10 th Annuity 25 th Annuity 2.76% 4.25% 11 th Annuity 26 th Annuity 2.84% 4.25% 12 th Annuity 27 th Annuity 2.93% 4.44% 13 th Annuity 28 th Annuity 3.02% 4.71% 14 th Annuity 29 th Annuity 3.11% 4.75% 15 th Annuity 30 th Annuity 3.20% 4.75% 100%

Hybrid Annuity Model 1. Annuity payments (biannually) 40% of Project Cost for 15 years (Construction 2. O&M payments Support) by Govt. 3. Interest payments (on reducing balance @ Bank Rate + 3%) COD Hybrid Annuity Project Toll collection O&M by by Govt. Concessionaire 60% of Project Cost arranged by Concessionaire for Financial Close Operations Period Bid Parameter – NPV of the quoted Bid Project Cost + NPV of the O&M Construction Period Cost for the entire Operations period