Public Private Partnership (PPP) is infusion of private capital and management in provision of services that have traditionally been provided by the government. Adequate risk transfer from the government to the private sector is a key feature of PPPs along with the delivery of high-quality and cost-effective services to consumers and the government1.
C.2 Existing scenario
Reforms of 1990 brought/started economic liberalisation in India. The role of government underwent transformation from provider to facilitator as a result. Initially it was in the form of privatisation but after following international experiences PPP was introduced in India. The tendency of the private sector to undervalue social infrastructure, and the large sunk costs associated with providing much economic infrastructure, has been obstacle to privatization. Thus PPPs began to emerge significantly as a means of obtaining private sector capital and management expertise for infrastructure investment (both to carry on where privatization had left off and as an alternative where there had been obstacles to privatization).
It has emerged as one of the leading PPP markets in the world, due to several policy and institutional initiatives taken by the central as well as many state governments. Over the years an elaborate ecosystem for PPPs has developed, including institutions, developers, financiers, equity providers, policies and procedures2.
The growing role of PPP in India has led for the requirement of national policy. As a result Government of India in 2011 published a draft National PPP Policy which is under public consultation currently.
C.3 Public Private Partnership: Alternate Definitions
Government of India:
‘PPP means an arrangement between a government or statutory entity orgovernment owned entity on one side and a private sector entity on the other,for the provision of public assets and/ or related services for public benefit,through investments being made by and/or management undertaken by theprivate sector entity for a specified time period, where there is a substantialrisk sharing with the private sector and the private sector receivesperformance linked payments that conform (or are benchmarked) to specified,pre-determined and measurable performance standards.
The International Monetary Fund (IMF):
‘Public-private partnerships (PPPs) refer to arrangements where the private sector supplies infrastructure assets and services that traditionally have been provided by the government.’ (IMF 2004,)
1Sources: Public Private Partnership, IMF, 2004
2Source: National PPP Policy 2011 - Draft for Consultation
The World Bank:
‘PPP programs are projects that are for services traditionally provided by the public sector, combine investment and service provision, see significant risks being borne by the private sector, and also see a major role for the public sector in either purchasing services or bearing substantial risks under the project. (World Bank 2006)
The Asian Development Bank (ADB):
‘PPPs broadly refer to long-term, contractual partnerships between the public and private sector agencies, specifically targeted towards financing, designing, implementing, and operating infrastructure facilities and services that were traditionally provided by the public sector (ADB 2006)
The European Union:
‘A PPP is the transfer to the private sector of investment projects that traditionally have been executed or financed by the public sector’ (European Commission 2003).
C.4 Public Private Partnership (PPP) in India
PPP in India has evolved in the past decade and several projects of PPP have been completed in infrastructure sector apart from residential/commercial development and these can be considered for understanding the critical aspects of such project implementation in future.
Some of the case studies are as follow:
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Alandur Underground Sewerage Project
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Timarpur Okhla Integrated Municipal Solid Waste Management Project
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Hyderabad Metro
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Vadodara Halol Toll Road
These projects were considered owing to the key learning and observations derived from them, some to be emulated and others to be mitigated. Each of the case studies belongs to different sectors.
Alandur Underground Sewerage Project:
The Alandur Sewerage Project (ASP) was initiated in the year 1996. The ASP was the first project in the municipal water sector to be taken through the Public PrivatePartnership route in India.The proposed sewerage system was to be designed for the estimated population of about 300,000in 2027 and was planned to be completed within a five-year period from its inception date.
AlandurMunicipality (AM), located adjacent to Chennai, forms a part of the Chennai Metropolitan Area. With a population of around 165,000 (Census of India, 2011), the municipality is a residential suburb of Chennai with predominantly residential and commercial activities. Approximately one-fourth of its populationlives in slums. Prior to 1996, the town did not have an underground sewerage system and all
sewage was managedwith individual septic tanks.In 1996, AM announced an ambitious plan to construct an underground sewerage system and wastewater treatment facility with the participation of the private sector, contribution from the public,and payment to be provided by the city.
The AlandurMunicipality worked in partnership with theTamil Nadu Urban Infrastructure Financial Services Limited (TNUIFSL), the state asset managementcompany and with USAID’s Financial Institution Reform and Expansion (FIRE) Project.
The construction of the underground sewerage system in Alandur town was done on a BOQ (Bill ofQuantities) basis, and the sewerage treatment plant (STP) on a BOT (Build, Operate and Transfer)basis. Besides the construction responsibility, the contractor was also required to undertake theoperation and maintenance of the sewerage system for a period of five years from the date ofcompletion of the construction, on a fixed fee basis. The collection of tariff and provision of newconnections during the O&M phase was to be undertaken by the municipality directly. Key features of the project are given below:
Table C.1: Alandur Sewerage Project Details
| Alandur Underground Se | werage Project |
|---|---|
| PPP Project Structure & | O&M Contract (5 Years) |
| Concession Period | BOT Annuity (14 Years) |
| State and year PPP | Tamil Nadu |
| contract signed | 2005 |
| Project Cost | INR 41.28 Crore |
| Salient Features | • The construction of the underground sewerage system in Alandur town, involving the laying of pipes, construction of pumping station, etc., was done on a BOQ (Bill of Quantities) basis, and the Sewerage Treatment Plant (STP) on a BOT (Build, Operate and Transfer) basis. • Besides the construction responsibility, the contractor was also required to undertake the operation and maintenance of the sewerage system for a period of five years from the date of completion of the construction, on a fixed fee basis. • The collection of tariff and provision of new connections during the O&M phase was to be undertaken by the municipality directly |
| Key Learning | • Beneficiary participatory approach • Stakeholder involvement and interdepartmental coordination • Political will and strong decision making, especially at the grass-root level • Acceptance of fiscal discipline • Implementing an effective fee system • Assurances on payment to the Private Sector Participant • Access to finance for the municipality • Technical and financial assistance from other institutions • Transparency in bidding and contracting procedures |
Source: Public Private Partnership Projects in India, Compendium of Case Studies, Department of Economic Affairs, Ministry of Finance, Government of India
Public Private Partnership Projects in India, Compendium of Case Studies, Department of Economic Affairs, Ministry of Finance, Government of India
Timarpur Okhla Integrated Municipal Solid Waste Management Project
Delhi generates 7,000 metric tonnes (MT) of Municipal Solid Waste (MSW) daily, which is expectedto increase to 18,000 MT by 2021. The present landfill sites that are being utilized for disposingthe garbage are approaching their full capacity. Municipal Corporation of Delhi (MCD) has thus embarked on a project to reduce the amountof MSW being disposed in the landfill sites and utilizing the waste for productive purposes such asgeneration of power from waste. MCD has identified two locations, namely Timarpur and Okhla,for implementing this project. The project has been undertaken on Built, Own, Operate and Transfer (BOOT) basis.
The project is registered with the United Nations Framework Convention on Climate Change(UNFCCC) for the Clean Development Mechanism (CDM) to earn 2.6 million Certified EmissionReductions (CERs) over a ten-year period.
Table C.2: Timarpur-Okhla Integrated MSWM Project details
| Timarpur Okhla Integrated | Municipal Solid Waste Management Project |
|---|---|
| PPP Project Structure & | BOOT (25 Years) |
| Concession Period | |
| State and year PPP | Delhi |
| contract signed | 2008 |
| Project Cost | INR 200 Crore |
| Salient Features | • Infrastructure included plants for converting MSW to Refuse Derived Fuel (RDF), capable of processing 1300 TPD at Okhla and 650 TPD at Timarpur, a bio-methanation plant capable of handling of 100 TPD of green waste at Okhla, a water recovery plant capable of handling up to 6 MLD of treated sewage at the Okhla site for recycling into process water and cooling water and a Power plant with a generation capacity of 16 MW at Okhla • The salient features included - Solid and liquid waste can be treated in the same complex. The treatment process is well integrated in terms of inputs and output. The complex generates compost and methane from the Bio-methanation process, fuel from the RDF plant and power from the RDF fluff and methane. |
| Key Learning | • Project Preparedness • Government Support • Innovative Use of Technology • Consumer Education |
Source: Public Private Partnership Projects in India, Compendium of Case Studies, Department of Economic Affairs, Ministry of Finance, Government of India
Hyderabad Metro
Hyderabad is a growing city that covers 625 square kilometres of municipal corporation areaand 6,852 square kilometres of metropolitan area. The burgeoning population has put Hyderabad’s transportation system under immense pressure. To address this need, the Government of Andhra Pradesh (GoAP) has
planned a MassRapid Transit system (MRTS) covering three high traffic density corridors of Hyderabad. Theproject is planned to be developed on a PPP basis through the Build Operate Transfer (BOT)mode.
Hyderabad Metro Rail Ltd, a fully owned Public Sector Undertaking of GoAP is currentlyimplementing the Hyderabad Metro Rail Project. The project is to be developed under a concessionagreement on BOT basis. Underthe concession agreement, the operator has to design, finance, construct, operate, and maintain the3 corridors and transfer the assets at the end of the concession period.
Table C.3: Hyderabad Metro Details
| Hyderabad Metro Project | |
|---|---|
| PPP Project Structure & | BOT (35 Years) |
| Concession Period | |
| State and year PPP | Andhra Pradesh |
| contract signed | 2008 |
| Project Cost | INR 200 Crore |
| Salient Features | • Under the concession agreement, the operator has to design, finance, construct, operate, and maintain the 3 corridors and transfer the assets at the end of the concession period. • In addition, the operator would also have access to the commercial development of land available at the depots (212 acres) and 10% of the carpet area of the station sites identified in the concession agreement. This aggregates to a cumulative maximum of 12.5 million square feet in the case of depots and a cumulative maximum of 6 million square feet in the case of stations. • The SPV would also be allowed to undertake real estate development over the parking and circulation areas at stations. |
| Key Learning | • Real Estate Development along with metro project • Transfer of Traffic Risk • Creation of Right of Way • Issues of Promoter Backing |
Source: Public Private Partnership Projects in India, Compendium of Case Studies, Department of Economic Affairs, Ministry of Finance, Government of India
Vadodara Halol Toll Road
VHTR was an initiative commissioned as a part of the Vision 2010 – an infrastructure masterplan developed by the Government of Gujarat (GoG). Theproject involved widening and strengthening of 32 kilometres (km) of the existing two-lane StateHighway (SH 87) connecting Vadodara to the industrial town of Halol into a four-lane tolledexpressway.
The Vadodara Halol Toll Road (VHTR) was one of the first State Highway widening projectsdeveloped on a Public Private Partnership basis in India and it has subsequently paved the way fora large number of projects to be undertaken on a similar format in Gujarat and the rest of India.
The VHTR project is developed under the Built, Own, Operate and Transfer (BOOT) basis.
Table C.4: Vadodara Halol Toll Road Details
| Vadodara Halol Toll Road | Project |
|---|---|
| PPP Project Structure & | BOOT (30 Years) |
| Concession Period | |
| State and year PPP | Gujarat |
| contract signed | 1998 |
| Project Cost | INR 161 Crore |
| Salient Features | • Under the concession agreement, construction aspects included design and completion of the road, including the pavement, cross drainage system, bridges, toll facilities, medians, separators, road furniture, and horticultural aspects. • The O&M aspects included the toll collection, operating the toll plaza, traffic regulation and maintenance of the facility. It also includes special maintenance activities such as eliminating potholes in the pavements, replacing drainage structures, road markings and signage, cleaning lanes, shoulders, right-of-way strips, structures, maintaining operational installations and drainage facilities. |
| Key Learning | • The criticality of pre development market assessment • Competitive bidding can ensure a better deal • Need to create a balanced risk return profile • Conflicts of Interest should be identified early and avoided • Innovative Financing Mechanisms • Environmentally and socially responsive development framework |
Source: Public Private Partnership Projects in India, Compendium of Case Studies, Department of Economic Affairs, Ministry of Finance, Government of India