PRESENTATION ON PUBLIC PRIVATE PARTNERSHIP PPP IN NATIONAL HIGHWAYS By SECRETARY, DEPARTMENT OF ROAD TRANSPOR

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PRESENTATION ON PUBLIC PRIVATE PARTNERSHIP (PPP) IN NATIONAL HIGHWAYS By SECRETARY, DEPARTMENT OF ROAD TRANSPORT & HIGHWAYS GOVT. OF INDIA Conference of Chief Secretaries on PPP in Infrastructure 20 th May, 2006. EXISTING ROAD NETWORK IN INDIA.
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PRESENTATION ON PUBLIC PRIVATE PARTNERSHIP (PPP) IN NATIONAL HIGHWAYS By SECRETARY, DEPARTMENT OF ROAD TRANSPORT & HIGHWAYS GOVT. OF INDIA Conference of Chief Secretaries on PPP in Infrastructure 20th May, 2006 EXISTING ROAD NETWORK IN INDIA HIGHWAYS Road Category Length Percentage (km) (%) Expressways 200 - National Highways (NHs) 65,600 2% State Highways (SHs) 1,37,700 4% Major& other District Roads 7,25,425 21% (MDRs/ODRs) Rural & other Roads 24,62,100 73%
  • TOTAL 33,91,025 100%
  • Roads carry 85% of passengers & 61% of freight traffic
  • Less than 2 % length of NHs but carry 40% of traffic
  • Major Initiatives for Highways Development HIGHWAYS
  • CRF revamped to create dedicated fund
  • National Highways Authority of India (NHAI) created and made functional
  • National Highways Development Project (NHDP) launched
  • Requisite legislative and legal provisions made for facilitating PPP in road sector
  • NHDP Phases I,II,III HIGHWAYS Future Phases for NHDP HIGHWAYS Mostly through Public Private Partnership ROAD PROJECT FINANCING HIGHWAYS
  • Budget
  • Normal
  • Dedicated Fund (Cess on Petrol/Diesel)
  • Lending from International Institutions
  • World Bank
  • ADB
  • JBIC
  • Public Private Partnership
  • BOT (Toll)
  • BOT (Annuity)
  • SPV with equity from NHAI
  • Market Borrowings
  • INCENTIVES FOR PRIVATE SECTOR PARTICIPATION HIGHWAYS
  • Road Sector has been declared as an Industry.
  • 100% tax exemption in any consecutive 10 years out of 20 years.
  • Foreign Direct Investment (FDI) up to 100%.
  • Provision of Capital Subsidy up to 40% of the project cost to make projects viable.
  • Provision of encumbrance free site for work, i.e. Government bears expenses for land and pre-construction activities.
  • Easier external commercial borrowing norms
  • Exemption of Capital gains tax for the bonds issued by NHAI.
  • Duty free import of high capacity and modern construction equipments.
  • NHAI Equity upto 30%.
  • Potential Advantages to the Government in PPP HIGHWAYS
  • Encourage private investment in the infrastructure sector.
  • Reducing public direct spending.
  • Public budget could be used in other priority areas and projects, such as education and social programmes.
  • Risks are allocated to the party, which is best suited to handle it.
  • Introduce innovation and increased efficiency from the private sector.
  • Involvement of experienced and creditworthy sponsors and commercial lenders, guaranteeing project viability.
  • Tapping of advanced technologies and expertise with possible capacity building of contractors and consultancy firms.
  • Development of local capital market.
  • Right sizing of public institutions.
  • Better road services to users and early delivery.
  • BOT (Toll) Projects HIGHWAYS
  • Concessionaire’s Responsibilities:
  • DBFO (Design, Engineering, Financing, Procurement, Construction, Operation & Maintenance)
  • Concessionaires rights
  • Demand, collect and appropriate the users fees (toll)
  • Concessionaire’s Risk:
  • Financing, Construction, Partial Traffic Risk, Operation & Maintenance.
  • BOT (Annuity) Project HIGHWAYS
  • Concessionaire’s Responsibilities : Design, Engineering, Financing Procurement, construction and Maintenance
  • Concessionaire’s Risk : Financing, Construction and Maintenance (No Traffic risk)
  • Award Criteria: Minimum Annuity Payment over Fixed Period.
  • Summary HIGHWAYSof BOT Toll based Projects Though allowed upto 40% the overall grant was 7.6% Summary of BOT (Annuity) based Projects HIGHWAYS HIGHLIGHTS OF NEW MCA HIGHWAYS
  • Partial guarantee of traffic risk to the Concessionaire.
  • Concessionaire’s interest protected in competing roads.
  • Performance standards of the highways clearly spelt out.
  • Provision for change in scope, if any, required during construction and operation period included.
  • Utilities to be relocated by the Concessionaire but it will be excused from failure in case of delay by owning agencies.
  • Focus on road User’s safety
  • Users fee charges, revision thereof and concession to local traffic clearly spelt out.
  • NHAI has to provide land free from all encumbrances. NHAI to bear cost of all pre-construction activities.
  • Risks are allocated to the party, which is best suited to handle it. Contd…
  • HIGHLIGHTS OF NEW MCA HIGHWAYS(contd.)
  • Lowest subsidy/grant quoted by the bidders towards viability gap funding or earliest premium quoted by the bidder is the basis for award.
  • Force Majeure conditions and relief to the party under such conditions clearly spelt out.
  • Strong dispute resolution mechanisms.
  • BOT bids are invited for 6 lane with 20 years concession period. However, exist option exists for Concessionaire and the NHAI after 8 years if not interested for 6 laning. In such case, concession shall be terminated after four laning with 12 years concession period.
  • State Support Agreement HIGHWAYS
  • Provide applicable permits to the Concessionaire
  • Assist access to infrastructure facilities and utilities
  • Erect no barriers to interrupt free flow of traffic
  • Assist in regulation of traffic
  • Police assistance in the form of Highways Petrol Parties
  • Not to undertake any act which violates
  • State to pay claims on any breach
  • No competing facility within 8 years
  • Institutional Strengthening HIGHWAYS
  • COI headed by PM.
  • COS to resolve inter-ministerial issues and problems.
  • Restructuring of NHAI to be a multidisciplinary body.
  • Planning, standardization and quality assurance (PSC) cell
  • Project appraisal Group/cell headed by Financial Analyst, and supported by Transport Economist, Transport Planner.
  • Human Resource (HR) cell
  • Monitoring cell
  • Sensitization to PPP
  • Role of State Govt. in National Highways BOT Project HIGHWAYS State Support Agreement - Pre-requisite for success of PPP Land Acquisition Utility Shifting – Speedy action Forest Clearance NOC from State Pollution Control Board Development of 2-lane Highways and levy of user fee Infrastructure Improvement HIGHWAYS Jaipur- Kishangarh – Service Road HIGHWAYS Thank You HIGHWAYS
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