N S Govinda Rao Memorial Lecture Feb 2009

8/13/2019 N S Govinda Rao Memorial Lecture Feb 2009

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Infrastructure Development in India:

Current Status & Future Direction

Professor N. S. Govinda Rao Memorial Lecture

February 2009

Dr. A. Ramakrishna,Former President & Deputy Managing Director, Larsen & Toubro Limited

Director, International Infrastructure Consultants Pvt. Limited (IIC)


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Issues to be discussed

1. Global Infrastructure outlook & India position

2. Macro overview of Indian Economy

3. Indian infrastructure & Construction Industry outlook

4. Infrastructure Sectoral Outlook & Policy Initiatives:

Transportation (Roads, Ports, Railways, Airports), Power, RealEstate & Townships

5. Key Indian Construction Industry Players

6. Key Success Factors driving Indian Construction Industry

7. Strategies for Successful Entry for Foreign Companies

8. International Infrastructure Consultants (IIC)


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Global Trend in Infrastructure & India Position


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Infrastructure Global Outlook

United States

China

India

GDP= US$ 50 Tril lion

GDP= US$ 3.6 Tri ll ion

GDP= US$ 1.05 Trill ion

Infra. Spend as a % of GDP = 0.5%Infra. Spend pa = $500B

Infra. Spend as a % of GDP = 14%Infra. Spend pa = $500B



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United States

China

India







Growth in China Infra spend20% pa for the last 30 years

Much of Chinas recent st imulusPackage of $600B will go towards

Highways, Railroads, Airports30,000 Miles of Expressways bui lt

In the last 10 years Another 25,000Miles planned by 2020

53,000 miles ofExpressways

Indias Expressways, current &Proposed are less than 1,000 KM


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United States

China

India







Growth in China Infra spend20% pa for the last 30 years

Much of Chinas recent st imulusPackage of $600B will go towards

Highways, Railroads, Airports30,000 Miles of Expressways bui lt

In the last 10 years Another 25,000Miles planned by 2020

53,000 miles ofExpressways

Indias Expressways, current &Proposed are than 1,000 KM

Est. Infra Spend over Next 3 YearsChinaMiddle EastBrazil

RussiaIndiaTurkey

$800 - $1,500 Bill ion$400 Billion$225 Billion

$325 Billion$250 - $300 Bill ion$65 Billion


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Certain Industries Thrive in Certain Countries! Why?National Competitiveness of Industries

IndustryAutomobilesWatch/ Fin. Svcs.Camera

Luxury CarsMovie MakingSoftware Svcs

CountryJapanSwitzlnd.Japan

GermanyUSIndia

Swiss preference for precision

Japanese preference for miniatur

German preference for SUV

Americans l iking mov ies &availability of talent

Abundant cheap qualif ied labor

Possible Reasons8 top auto majors are from Japan


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Certain Industries Thrive in Certain Countries! Why?National Competitiveness of Industries

IndustryAutomobilesWatch/ Fin. Svcs.Camera

Luxury CarsMovie MakingSoftware Svcs

CountryJapanSwitzlnd.Japan

GermanyUSIndia

Demand forInfrastructure wil lHave to be High

Availability

Of TrainedManpower

Presence ofMany

EfficientPlayers

PolicyFramework &Gov. Support

In order to strengthen IndiasInfrastructure/ConstructionIndustry, India wil l have to:

Swiss preference for precision

Japanese preference for miniatur

German preference for SUV

American liking for mov ies

Abundant cheap qualif ied labor

Possible Reasons8 top auto majors are from Japan

- Work on its Policy Framework/nurture the industr- This will allow more and more companies to ente

the industry & the existing companies to grow- Due to scale, these companies will become more

efficient, thereby providing services at lowest cos- Construction Methods & Technology wil l diffuse- Demand conditions which is already high (due to

economic growth) will improve further & industrywill thrive

In case of Indian Infrastructure/Construction, the following needs tohappen in order

For the industryTo becomecompetitive :


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Develop the Indian Infrastructure/ Construction Industry

Is the Indian Government well positioned to strengthen Indias

Infrastructure/ Construction Industry, more specifically to:

- Work on i ts Policy Framework/ nurture the industry?

- Facili tate flow of adequate resources in order to grow the industry?

- Facil itate more companies to enter the industry & ensure the existing

companies to grow in order for these companies to become moreefficient?

- Facil itate state of the art Construction Methods & Technology todiffuse?

and thereby create and industry that caters to the growing infrastructure/construction demand & thus achieve the countrys targeted high GDPgrowth rates?


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Macro Overview of Indian Economy

Indias Chronology of Liberalization Initiatives


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1995-2000Minimum Alternate Tax (MAT)

Divestment Commission EstablishedHealth Insurance PrivatizedForeign Institutional Investors allowed to invest inunlisted companiesVisible Developments seenMany sectors started to open up MoreCompetition The economy was now more MarketFocused

1991An economic crisis was declared

Structural Adjustment Program (SAP) Liberalization IMF Two loans amounting to $1.8 billion

Visible Developments seen

The Economy slowly started to Take-Off

1991-1995

New Industrial Policy & ReformsOpened up FDI in certain IndustriesDivestment of PSUsComptroller of Capital Issues AbolishedFERA to FEMA, Insider Trading LawPvt. Sector - Banking, Telecom & AirlineService Tax IntroducedSEBI IntroducedVisible Developments seen

More competition - Easier Credit Access Privatization of PSUs improved theirproductivity

India s Chronology of Liberalization Initiatives2000-2005Indian companies allowed to invest

abroad up to $100 million - Large scaleacquisitions by Indian companies abroad

Fiscal Responsibility & Budget Mgmt. ActVAT introducedFBT abolishedRationalization of Excise Duty StructureVisible Developments seenIncreased investments into India - ForeignReserves cross $100B for the first time

M O i f I di E


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Macro Overview of Indian Economy

Indian Economy, Twelfth largest in the

world, Fourth largest in Asia

GDP: US$ 1 Trillion; Man.28%, Svcs.55%

9.1% GDP Growth 2007-08; SecondFastest Growing Emerging Economy in the

world

A Robust growth of 9% pa expected over

the next five years: Second fastest

Growing Emerging Economy

Infrastructure Growth averaged at 7%

In spite of marginal slow down expected in

2008-09, forecast Infrastructure spending

is expected to be robust

3.0%

6.0%

9.0%

12.0%

15.0%

China

Singa

pore

South

Korea

Taiw

an

Hong

Kong

India

GDP Growth: India Vs. Other Asian

EconomiesSource: ADB

2,008 2009 Fcst

GDP Vs Infrastructure Growth TrendSource: Dun & Bradstreet, Planning Commission

3.8%

6.2%

5.8%6.2%

5.6%

8.6% 9.1%8.5% 7.5%

9.0%

9.4%

15.0%

3.0%

6.0%

9.0%

12.0%

15.0%

FY03 FY04 FY05 FY06 FY07 FY08

GDP Growth Infrastructure Growth

Indias Infrastructure Industry Outlook


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Indias Infrastructure Industry Outlook

India spends around 5% of GDP on

infrastructure

Need to accelerate Infrastructure spend to

8% of GDP by 2012

China spends 9% of GDP on Infrastructure

Infrastructure Gap is Large, to be bridgedin short to medium term

Infrastructure Gap costs India 1.5% to 2%

of GDP growth, every year

Private sector contribution to infrastructure

in India,1.5% of GDP; likely to go up to 3%of GDP by 2012

5

25

45

65

85

Bang

ladesh

Camb

odia

China

India

Indon

esia

SriL

anka

Vietn

am

% Access to Electricity NetworkSource: Dun & Bradstreet

Electricity

30

50

70

90

Banglad

esh

Cambodia

China

India

Indonesia

SriLank

a

Vietn

am

% Access to improved SanitationSource: Dun & Bradstreet

Sanitation

Growth Trends in Infrastructure Sector Output (2002 07)


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Growth Trends in Infrastructure Sector Output (2002-07)

Growth in Coal, Electricty & Rifinary Output

Growth (%)

Source: Dunn & Bradst reet

5

88

2

13

66

55

53

555 4

2

4

6

8

10

12

2002-03 2003-04 2004-05 2005-06 2006-07

Coal Electricity Refinery T/put

Growth in Steel & Cement Output

Grow th (%)Source: Dunn & Bradstreet

1011

8

10

710

12

76

9

5

7

9

11

2002-03 2003-04 2004-05 2005-06 2006-07

Steel Cement

Growth in Airport Cargo & Pax.Traffic

Growth (%)

Source: Dunn & Bradstreet

20

24

9

16

7

18

127

10

19

7

12

17

22

2002-03 2003-04 2004-05 2005-06 2006-07

Cargo-Airports Pax-Airports

Growth in Railway & Port Cargo Traffic

Growth (%)Source: Dunn & Bradstreet

810

5

8 8

11

9

1011

10

5

7

9

11

2002-03 2003-04 2004-05 2005-06 2006-07

Railway Traffic Cargo-Ports

Th I di C t ti I d t


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The Indian Construction Industry

Indian Construction Industry Spend (Rs. Billion)

Source: CSO

1,352

1,568

1,857

2,221

2,592

1300

1600

1900

2200

2500

02-03 03-04 04-05 05-06 06-07


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Indian Construction & Infrastructure:Expected Infrastructure Spend

Growth in Infrastructure Spend: Tenth Plan Vs Eleventh Plan


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Growth in Infrastructure Spend: Tenth Plan Vs. Eleventh Plan

215

494

100

200

300

400

500

2002-2007 2007-2012

US$ Bill ion

Source: Planning Commission

Indian Infrastructure Sectors: A broad Taxonomy


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Indian Infrastructure Sectors: A broad Taxonomy

International

Business

Equipment

Bank

Building ProductsManufacturing

Water, Waste Water &Urban Renewal

Oil & Gas

FacilitiesManagement

Irrigation

Real Estate/Farms

Transportation Power

Industrial Parks

Buildings Townships

Shopping Malls

Roads/ Bridges

Sea Ports

Rail Facili ties

Airpor ts

TransmissionTowers

Steel Fabrication/

Pre Engineered Bui ldings

Precast ConcreteProducts

Aluminum Claddings/False Ceilings

IndustrialBuildings

Telecom

Thermal Power

Hydro Power

SEZs

Sector wise Investments Anticipated


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Sector-wise Investments Anticipated

Infrastructure Spend expected to more than double during the following years

Sector-wise proportion more or less, same. More allocations to Ports & W/Sup.

Electricity, Roads, Telecom, Railways, Irrigation, Water Supply & Sanitation takethe bulk.

Tenth Plan (2002-07) SpendTotal Spend: US$ 215 Bill ion

Eleventh Plan (2007-12) SpendTotal Spend: US$ 494 Bill ion

Electricity

33%

Roads/Bridges

16%

Railways

14%

Irrigation

13%

Telecom

14%

Ports

0%

W.Sup/ Sanit ation

7%Airpor ts

1%

Storage

1%

Gas

1%

Electricity

30%

Roads/Bridges

15%

Telecom

13%Railw ays

13%

Irrigation

11%

Gas

1%Storage

1% Airports

2%

W.Sup/ Sanitation10%

Ports4%

Sector wise Investments Anticipated


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Sector-wise Investments Anticipated

Tenth Plan Eleventh PlanSectors Rs. Crore US$ billion Sectorsl(%) Rs. Crore US$ billion Sectorsl(%)

Electricity 291,850 71.18 33% 616,526 150.37 30%

Roads and Bridges 144,892 35.34 16% 311,816 76.05 15%Telecommunications 123,411 30.10 14% 267,001 65.12 13%

Railways 119,658 29.18 14% 258,001 62.93 13%

Irrigation 111,503 27.20 13% 223,131 54.42 11%Water supply and Sanitation 64,803 15.81 7% 199,127 48.57 10%

Ports 4,096 1.00 0% 73,941 18.03 4%

Airports 6,771 1.65 1% 34,748 8.48 2%Storage 4,819 1.18 1% 22,378 5.46 1%

Gas 8,713 2.13 1% 20,500 5.00 1%

Total 880,516 214.76 100% 2,027,169 494.43 100%Source : Planning Commission, Government of India

I t t l it b C t St t & P i t (R C )


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Investments split by Centre, State & Private (Rs.Crore)

Centre, 804,429,

39%

State, 620,780, 31%

Private, 601,959,

30%

Gross Capital Formation in Infrastructure


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Gross Capital Formation in Infrastructure

Rs.Crore 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

GDP 4,125,725 4,497,040 4,901,774 5,342,934 5,823,798 6,347,939

GDP Growth Rate (%) 9.00 9.00 9.00 9.00 9.00 9.00

GCF-Infra as a % of GDP 5.00 5.75 6.50 7.25 8.00 9.00


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2323

65

77

94

115

143

0

35

70

105

140

175

07-08 08-09 09-10 10-11 11-12

Infrastructure Spend

Year wise XI Plan Infrastructure Spend

Total Investment = US$ 494 Bill ion

Source: Planning Commission


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Government Support to Private Sector forInfrastructure Development

Infrastructure - Government facilitation still critical


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JULY 2005 POLICY DOCUMENT OF GOVERNMENT OF INDIA ON

PUBLIC PRIVATE PARTNERSHIP IN INFRASTRUCTURE

Government of India recognizes that there is a significant deficit in the availability ophysical infrastructure across different sectors and that this is hindering economic

development

To attract private capital as well as the techno-managerial efficiencies associated

with it, the Government is committed to promoting Public Private Partnerships(PPPs) in infrastructure development

Due to the long gestation periods and limited financial returns Government supporis necessary to make them financially viable

Government of India has decided to put into effect a scheme for providing financiasupport to bridge the viability gap of infrastructure projects undertaken throughPublic Private Partnerships

Public Private Partnerships (PPP)


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p ( )

Over the past few years, PPP has been the most preferred mode of projectexecution by the government

PPP projects involve A Public Sector Agency

A Private Sector Consortium, comprising contractor, maintenance

companies, private investors & consulting f irms Formats can vary; BOT, BOOT, OMST, Concession, Joint Venture

Sharing Risks, and rewards, for development of world class infrastructure

Budgetary constraints & growing Private Sector strength have been thedrivers for the popularity of the PPP model



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p ( )

PPP is still at a nascent stage in India; lack of experience at the Central aswell as the State level has been the concern

The awareness of concerns and issues related to PPPs success and failuresare not evenly spread across the different states; PPP cells have been setupacross the States

Governments prominent initiatives for bridging the financial gap in long termfinancing includes:

International Infrastructure Finance Company Limited (IIFCL)

Viabili ty Gap Funding schemes

ADBs Technical Assistance (TA) Fund also facilitates capacity building at a

State Level



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p ( )

89

11

45

55

30

3

0%

20%

40%

60%

80%

PPPAC VGF IIFC

Roads Ports Metro Airports Power

PPP Funding - % of Total Project Cost

Some of the Iconic PPP Projects executed


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j

Hyderabad International Airport; BOOT Format

Bangalore International Airport; BOOT Format

Kakinada Deep Water Port; OMST Format & Hassan Mangalore Rail Line

Elevated Expressway to E-City in Karnataka

Thiruvananthapuram City Road Improvement Project

Vizhinjam International Container Transhipment project in Kerala

Four-laning of Kalyani-Dum Dum Expressway in West Bengal


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Transportation

Transportation Sector Artery to the Countrys Economy


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Airports SectorAirport Sector, and aviation,

is one of the fastest growingsectors in the country.

It contributes 1% in terms ofvolume &

Around 30% in terms ofvalue, to the countrysmerchandise trade

Roads SectorAccounts for close to 5% of the countrysGDP, spanning across 3.3 million kilometers; only 2% of this are National Highways -

Leaving ample scope for future development

Sea Ports Sectorand shipping, pay a major role in the

countrys merchandise trade,Constituting 95% in terms of volume &

Around 70% in terms of value

Railways SectorThe Indian Railways Sector, is one of the

largest and the busiest railway network in thecountry,

Spanning across close to 64,000 Kms.Covering more than 15 Zones.

Policy and Regulatory Framework


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y g y

The Prime Minister has assured that:

The government will ensure that there is a regulatory framework

that is: Transparent

Independent of government Based on international best practice


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Roads & Bridges

Existing Road Network in India


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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 carry 40% of traffic

Road Sector Opportunities


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Rural RoadsConstructing 1,65,244 km of new

rural roads

National Highways

Six-laning 6,500 km of GoldenQuadrilateral and selected NationalHighways

Four-laning 6,736 km on North-South and East-West Corridors

Four-laning 12,109 km of National

Highways

pp

Renewing and upgrading existing1,92,464 km covering 78,304 ruralhabitations

Widening 20,000 km of NationalHighways to two lanes

Developing 1000 km ofExpressways

Constructing 8,737 km of roads,including 3,46 km of NationalHighways, in the North East

Projected Investments in Road

Sector (2007-2012; XI Plan; Rs. Bill ion)National Highways - 1,543State Roads - 1,160

Rural Roads - 367NE Roads - 48Total 3,118

Major Initiatives for Highways Development


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National Highways Authority of India (NHAI) created andmade functional

National Highways Development Project (NHDP) launched

Requisite legislative and legal provisions made forfacilitating PPP in road sector

Evolution of Policy Framework in the Roads Sector


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PPP launched Fiscal Incentives to lure Private Sector Aggressive Revenue Models Project Specific concession agreements NHAI constituted, nodal agency Willingness to pay issues Slow down of Economy Revenue projections affected Investor optimism waned

Annuity models launched

Economy revives, interest rates plunge Projects gets restructured, revived NHDP Launched Model Concession Agreement in place Capital support introduced Investor interests picks up Aggressive bids - Negative Grants

Policy shift; all projects on BOT-Toll . Ifno takers, bids to be reinvited on Annuity

Projects offered on toll collection

Viability issues

New developers evolve, high growth in

sector

Wide variations in project perception

Developer responsible for Clearances,State Support, Land

Increasing interest rates

New MCA - Concept of risk sharing

Revenue sharing DBFO concept in the anvi l

Indian economy opens up

Beginning of Reforms Road Infrastructure as thrust area Increased demand, budget constraints

Evolution of PPP Enabling Environment


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Early 1990s marked the beginning of introduction of PPP in India

Early Attempts to create enabling environment included:

Guaranteed returns 20% on Road Projects (Ahmedabad Mehasana, Vadodara-

Halol, Noida Toll bridge)

Sweeteners : Land - Bangalore-Mysore Expressway , Bridge - Coimbatore Bypass

Protection against FE fluctuation (SVBTC User fee linked to FE rate)

VGF - For marginally viable projects

Annuity Concept Assured revenue streams

Recent Attempts include

Sharing of Traffic Risk New MCA

Introduction of New Toll Policy

Selection of PPP Mode


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SlSl NoNo PPP ClassPPP Class CharacteristicCharacteristic

11 Stand AloneStand Alone Projects with high revenue potentialProjects with high revenue potential

22 Capital SupportCapital Support Marginally viable projectsMarginally viable projects

33 AnnuityAnnuity Projects with low traffic intensityProjects with low traffic intensity

44Regular construction contract withRegular construction contract withextended period of maintenanceextended period of maintenance

Projects of economic/social importanceProjects of economic/social importance

All projects could be fitted in one or the other form of PPP with varying degree of Public-

Private involvement

Selection of appropriate type for each project is key to the success of the project

All projects on BOT May have to be reviewed Some can be on budgetary

allocation

Project Packaging Due Dil igence


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Timing the Project Offers - 80 projects on BOT basis during 2008Over-specification in PPP Projects at the cost of project viability

Under-estimation of project cost by Project Proponent (Government)

Due Diligence efforts to be improved :

Land acquisition

Shifting of utilities Preparation of Estimates and approval of the same

MoEF Clearances and other statutory clearances for the project

Setting higher benchmarks for project documentation and DPRs - Must

Private sector includes the cost of perceived risks in the proposal

A project well prepared and packaged would attract the most optimal proposal .

Project Size


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Project sizes are progressively becoming larger

Coimbatore Bypass- Rs 90 Cr to Eastern Peripheral Expressway Rs 2676Cr

Metamorphosis of Contractors to Developers - Capacity of Indian Developers

Recent pre-qualification process in NHAI delayed the bidding process Restriction on number of bidders Max SIX based on Tech.score Restriction on submission of bids along with Economic slow down / Hike in cost of

funds - resulted in many projects having no bidders

With many projects of various sizes in the market, FI and Bank sector exposure norms are

getting squeezed

Termination payments are now to be made by NHAI with Projects size getting larger- GoI

guarantees for termination payments

Center State Synergies


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4242

State and Centre to work hand-in-hand

Centre providing the interstate connectivity and the State complementing it with Feede

networks

States create competing facilities along existing NH networks PPP project concessionaires left to fend for themselves Can Consider the right of first refusal for development of competing facility to the

existing Concessionaire, asin the case of Navi Mumbai Airport

Signing State Support Agreements - To be Condition Precedent

Land acquisition through the State Government machinery

States to align with Concession framework for PPP

All state trying to float road projects on BOT basis Gujarat / MP / AP / Karnataka

Concession Agreement


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Evolution of Concession Agreement

Project specific agreements in early BOT Projects

Standardization of CA first attempted in in 2002-03 with Jaipur-Kishangarh Project

Inputs from various stake holders were sought and incorporated

Standard MCA was used for up to 2007

Planning Commission brought about revisions in the MCA in 2007

Risk sharing more equitable in the new MCA

Some issues which are not adequately addressed in the new MCA are presented for

discussion

Sharing of Traffic Risk


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Sharing of Traffic Risk by Concessionaire and NHAI

Agreement on a certain level of traffic (target) based on Base Traffic, both decided

upfront

2.5% reduction in target traffic, period increase by 1.5%, capped at 20%

2.5% increase in target traffic, period reduced by 0.75%, capped at 10%

Bid Criteria


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Bid Criteria

Least upfront Positive Grant or

Highest % share of revenue (Premium) from an agreed date

Toll Collection

Six Laning projects Tolling can commence from the Appointed Date with

revenue sharing as Quoted for the Base year

Revenue share will get increased by 1% over the Quoted %ge over the

Concession Period

New MCA Provisions


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Capacity Augmentation

Provision to review after a period of 8 years from Appointed date - If

required capacity augmentation in 12th year

Safety Fund

Toll Collections in excess of 120% of design capacity to be deposited to

Safety Fund

Safety Fund to be managed by NHAI and funds to be used forincorporating additional safety features during the operation period.

New MCA Provisions


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Land Acquisition

NHAI to assure 50-80% of land required for the project corridor within

Appointed Date and the balance to be handed over on or before 90 days

thereafter

Penalties linked to late handing over of land

Concessionaire excused of performance in case of non-availability of land

Shifting of Utilities and Tree Cutting

Concessionaire excused of performance in case of delays in permissionsfor shifting of utilities and tree cutting

Some Projects, this is the responsibility of Concessionaire

New MCA Provisions


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Permits and Approvals

NHAI made responsible for Environmental Clearance for the project

GAD Approval from Railways for ROB/RUB Responsibility of NHAI

Termination on exceeding Design CapacityDesign capacities fixed for various road configuration

4 lane 56000 pcu, . 6 lane 90000 pcu

Concession to be terminated if the actual traffic exceeds design capacity

for 4 continuous years

Termination to be considered as an Indirect Political Event of Force

Majuere

CA Issues- TPC


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4949

Definition of Total Project Cost with respect to Termination Payments

Termination payments are limited to TPC

TPC almost always is the NHAI estimated cost which is either dated or unrealistic

Estimates of costs are based on Feasibility Studies and not DPR

Provision for revision to TPC is required in case of any abnormal increase in costs

Underestimation of TPC results in the projects being less bankable with less attractive

financing possibilities

CA Issues Viabili ty Gap Funding


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Marginally viable Projects made attractive with Viability Gap Funding (VGF) from GoI

Generally VGF is capped at 40% of TPC and for projects with better traffic potential

(such as GQ), VGF is capped at 10-20% of TPC

Equity Support grant during construction was restricted to 20% of TPC subject to a

cap of equity

O&M Support Balance disbursed during operations period

In January 2009, NHAI has relaxed the cap on Equity Support and would release

100% of grant amount during construction for new Projects

When TPC is underestimated, VGF not sufficient to make the project bankable

CA Issues Termination Payments


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Termination payments are presently guaranteed by NHAI

NHAIs financial strength to make termination payments especially for large project

sizes

Should NHAI guarantees for termination be backed by GOI guarantees, as in the case

of Airport Projects?

Toll Policy

Sl


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5252

SlNo Parameters Old Toll Policy (June 2007) New Toll Policy (December 2008)

1Applicabilityof Toll Rates Varying for Public & Pvt. funded Projects

Uniform toll Rate for Public & Pvt. fundedProject

2 Base Rate No. specific rate for 2 lane road Uniform rate for structures

Specified rates for 2 lane & 4 lane 2 lane @ 60% of 4 lane Rate

Higher toll in case ofBridges/Tunnels/Bypass > Rs 50 Cr in thestrech

3 Discounts Monthly passes & daily passesAll Passes based on trips

50 Trips ; Return Trip Passes

4 Toll Revision Annual @ 100% WPIAnnual, 3% flat on Base Rate + 40% ofWPI increase

5 Local Passes

Local Passenger 10 km & 20 km radius RatesRs150 / Rs 200 per month (not

revised for Concession Period) Commercial vehicles LCV/ 2A trucks eligiblefor local pass@ Rs 15/Rs 25 per Trips

Local Passenger cars (Pvt) only eligible @

Rs 150 per month (20km radius) Commercial vehicles not eligible for localpass

6

Toll

Compliance No Provision to check toll evasion

Toll Evasion can be checked within 10km

from TP

7 Overloading No Provision Penal provision for overloading included

CA Issues - New Toll Policy


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New Toll Policy allows for higher toll rates for projects with Tunnels, Bridges or Bypasses

each costing > Rs 50 Crores

User acceptability is to be tested

Neutralization of inflation Only 3% flat increase from Base rate + 40% of WPI increase allowed as annual tollincrease which may not completely cover the effects of inflation

Curbing overloading

New Toll policy allows overloaded vehicles are to be charged toll of next higher

category and excess weight to be off loaded

Empowerment of the Concessionaire by Law to enforce overloading restrictions still no

adequate.

Issues Competing Road


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5454

By definition Competing Road means

a road connecting the two end points of the Project Highway and serving as an alternate route

thereof or

An existing paved road widened to more than 2m of paved road for >75% of the length after the

date of Agreement or

A new road connecting the end points of the Project Highway which is less than 1.2 times the

length of project corridor

The present MCA does not provide a safeguard against the possibility of development of a road

which has a potential of drawing traffic from the Project corridor causing material reduction in the toll

revenue.

The same lacuna persist in the State Support Agreement and the Concessionaire is not protected or

compensated

Suggestions for Contractual Framework


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5555

Equitable allocation of risks

Bankable Contracts - Standardization of Contracts

Uniform toll policy applicable

State Government to standardize toll policy

Contractual obligations to be honoured by the Parties dispassionately

Design flexibility DBFOT : With performance based checksRole of (In)dependent Engineer - Real Independency must

Provision for abnormal escalation of costs Atleast for Govt controlled materials

Recognition of investment companies and allowing it to use parent credentials

Exit options for concessionaires

Regulator Issues


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5656

Road Sector is regulated by Contract

Need for an Empowered Road Regulatory Authority given the present policy on PPP

Present Scenario NHAI has conflicting roles A party of the Concession and also a

regulator

Role of Regulator

Tariff policy and enforcement of contracts/concessions

Dispute resolution

Monitor VGF disbursement for State Projects

Issues Sectional Treatment

P j t C id b i l i ti t h


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5757

Project Corridors becoming longer - comprise many sections, not necessary homogenous

NHAI could consider allowing sectional COD as and when pre-determined sections are

completed as per the specification

Allowing for earlier commencement of revenue streams

Incentive for early completion - reduce risk of localized issues delaying COD

New MCA specifies a premature Termination process when design service volumes are

exceeded

In case of heterogeneous stretches, termination should not be effected due to traffic

increase in a particular stretch

Sectional Capacity augmentation can be considered instead of termination of the entire

concession

Summary Roads Regulatory Regime


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5858

Governments have been continuously endeavoring to create an enabling environment

Selecting an appropriate PPP Model for implementation is the first step to project success

Enhanced Level of due diligence undertaken in preparation and packaging a project will lead to

better results (both for Government and the Private Sector)

Equitable risk allocation and standardization of concessions provide better clarity and ensure

bankability.

Larger project sizes call for GOI guarantees and tapping unexplored sources of funds

Empowered Highway Regulator an Urgent Need to ensure smooth functioning of PPPs

Centre and State to work in tandem to promote PPPs, else the efforts would be counter productive

for both

Government to provide Long Term funding to make the BOT concept successful

Govt to have a mix of BOT / Budgetary allocation projects

Phase II: Upgrading / 4-6 laning of 825 km of

NHDP Road Projects in Progress


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5959Page 6 of 25

NS-EW Corridor on BOT-Toll expected to becompleted by 2009 end

Phase III: Upgrading / 4-6 laning of 12,109 km on

BOT-Toll to be completed by 2013 end

Phase IV: 2-laning with Paved Shoulders of 20,000 km

on BOT- Toll/ Annuity to be completed by 2015 end

Phase V: 6-laning of 6,500 km of high density corridors on DBFObasis to be completed by 2012 end

Phase VI: 1,000 km Expressways on DBFO basis by 2015 end

Phase VII: 700 Kms of Ring Roads, Bypasses on BOT - Toll/Annuity by 2014 end

Road Projects awarded & in Progress

N ti l Hi h A th it h l d


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6060Page 6 of 25

National Highway Authority has already

announced projects valued at close toRs.1,10,000 crores - Mostly on BOT

Andhra Pradesh Roads Projects alreadyannounced Rs.9,000 crores Mostly on BOT

Madhya Pradesh Road Transport Corporation & Other States has alreadyannounced Rs.16,000 crores Mostly on BOT

BudgetHow are Road Project Generally Financed?


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6161

Budget

NormalDedicated Fund (Cess on Petrol/Diesel)

Lending from International InstitutionsWorld Bank

ADB

JBIC

Public Private PartnershipBOT (Toll)

BOT (Annuity)

Through setting up a Special Purpose Vehicle (SPV) withequity from NHAI

Market Borrowings

Road Sector has been declared as an Industry.

Incentives for Private Sector Participation


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6262

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

Encourage private investment in the infrastructure sector. Reducingpublic direct spending

Potential Advantages to the Government in PPP


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6363

public direct spending.

Public budget could be used in other priority areas and projects, suchas 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 andcommercial lenders, guaranteeing project viabil ity.

Tapping of advanced technologies and expertise with possiblecapacity building of contractors and consultancy firms. Developmentof local capital market.

Right sizing of public institutions.

BOT (Toll) Projects


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6464

Concessionaires Responsibi lities:DBFO (Design, Engineering, Financing, Procurement,

Construction, Operation & Maintenance)

Concessionaires rights

Demand, collect and appropriate the users fees (toll)

Concessionaires Risk:

Financing, Construction, Partial Traffic Risk, Operation &

Maintenance.

BOT (Annuity) Project


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6565

Concessionaires Responsibilities:Design, Engineering, Financing Procurement, construction and

Maintenance

Concessionaires Risk:

Financing, Construction and Maintenance (No Traffic r isk)

Award Criteria:

Minimum Annuity Payment over Fixed Period.

P ti l t f t ffi i k t th C i i

Highlights - Model Concession Agreement (MCA)In Roads Sector


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6666

Partial guarantee of traffic r isk to the Concessionaire. Concessionaires interest protected in competing roads. Performance standards of the highways clearly spelt out.

Provision for change in scope, if any, required during constructionand operation period included. Util ities to be relocated by the Concessionaire but it wil l be excused

from failure in case of delay by owning agencies. Focus on road Users 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 - Model Concession Agreement (MCA)In Roads Sector


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6767

Lowest subsidy/grant quoted by the bidders towards viability gapfunding or earliest premium quoted by the bidder is the basis foraward.

Force Majeure conditions and relief to the party under suchconditions 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 8years if not interested for 6 laning. In such case, concession shall beterminated after four laning with 12 years concession period. .)

Provide applicable permits to the Concessionaire

State Support Agreement for Roads/ Infrastructure


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6868

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 ofHighways Petrol Parties

Not to undertake any act which violates

State to pay claims on any breach

No competing facility within 8 years

Committee on Infrastructure (COI) headed by PM.

Institutional Strengthening in PPP/ Roads Sector


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6969

Restructuring of NHAI to be a multidisciplinary body.

Planning, standardization and quality assurance (PSC) cell

Project appraisal Group/cell headed by Financial Analyst, andsupported by Transport Economist, Transport Planner.

Human Resource (HR) cell

Monitoring cell

Sensitization to PPP

Role of State Government in National Highways (BOT)Project


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7070

State Support Agreement - Pre-requisite for success of PPP

Land Acquisition

Util ity Shifting Speedy action

Forest Clearance

NOC from State Pollut ion Control Board

Development of 2-lane Highways and levy of user fee


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7171

Airports

Present Scenario


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7272

AAI manages 128 airports which includes:

15 International airports

8 Custom airports

25 Civil Enclaves

80 Domestic airports

Indian Airports Management


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7373

Background

Indian airports were managed by Civil Aviation

Department, Government of India, ti ll the creation ofInternational Airports Authority of India (IAAI) in 1972 andNational Airports Authority (NAA) in 1986.

In 1995 Airports Authority of India (AAI) was establishedby merging both IAAI and NAA by an Act of Parliament The Airports Authority of India Act in 1994 for betterand efficient management of all airports in India by a

single Authority.

Less than 2% of the population travels by air

Airport Sector Overview


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7474

All airline companies in red due to low load factor, low operatingefficiencies and increasing fuel prices

Passenger traffic is projected to grow at a CAGR of 15% in next 5 yearsand reaching 100 mill ion by 2010

Cargo traffic is projected to grow at a CAGR of over 20% in next 5years and touching 3.3 mil lion tonnes by 2010

Investment of around US $ 9 Bil lion is needed in next 5 years for theconstruction of greenfield airports, modernization and up gradation ofMumbai & Delhi international airports and 35 non metro airports

Passenger Traffic Movement HistoryPassenger Traffic Movement HistoryPassenger Traffic Movement History

Passenger and Cargo Traffic Movement History


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7575

YEARYEARInternationalInternational DomesticDomestic TotalTotal

No.inNo.inmillionmillion

%age%agechangechange





20032003--0404 16.6416.64 12.212.2 32.1432.14 11.211.2 48.7848.78 11.611.6

20042004--0505 19.4219.42 16.716.7 39.8639.86 24.024.0 59.2859.28 21.521.5

20052005--0606

(estimated)(estimated)22.9022.90 17.917.9 50.8850.88 27.6427.64 73.7873.78 24.4524.45

YEARYEARInternationalInternational DomesticDomestic TotalTotal

QuantityQuantity%age%agechangechange



20032003--0404 693.2693.2 7.37.3 375.4375.4 12.712.7 1068.61068.6 9.19.1

20042004--0505 823.6823.6 18.818.8 456.7456.7 21.621.6 1280.31280.3 19.819.8

20052005--0606

((estimated)estimated) 902.7902.7

9.69.6

479.1479.1

4.94.9

1381.81381.8

7.937.93

Cargo Traffic Movement HistoryCargo Traffic Movement HistoryCargo Traffic Movement History

High Level StatisticsHigh Level Statistics--Flights & Passenger TrafficFlights & Passenger Traffic

Flt.Movmnts.Growth (27%)Flt.Movmnts.Growth (27%) Passenger Growth (around 29%)Passenger Growth (around 29%)


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409000

521000

0

100,000

200,000

300,000

400,000

500,000

600,000

Apr-Aug'06 Apr-Aug'07

36.88

47.41

0

510

15

20

25

30

35

4045

50

Apr-Aug' 06 Apr-Aug' 07

Domestic Growth around 40%,Domestic Growth around 40%,

International Growth around 20%International Growth around 20%

Domestic Growth around 33%,Domestic Growth around 33%,

International Growth around 17%International Growth around 17%

High Level StatisticsHigh Level Statistics -- FleetFleet

Current Fleet size (around 430)Current Fleet size (around 430) On Order (around 512)On Order (around 512)


77/223

90

76

197

1515 37

Jet Airways KingFisher/ AirDeccanAir India/ Indian Spice

Indigo Others

80

185120

22

85 20

Jet Airways KingFisher/ AirDeccaAir India/ Indian Spice

Indigo Others

High Level StatisticsHigh Level Statistics Domestic Airline Market shareDomestic Airline Market share


78/223

29%

29%20%

8%

8% 6%

Jet Airways KingFisher/ AirDeccan

Air India/ Indian Spice

Indigo Others

Private/ State MixPrivate/ State Mix Fleet & PassengersFleet & Passengers

Number of Aircraft ownedNumber of Aircraft owned Number of passengers carriedNumber of passengers carried


79/223

18%

32%

50%

Government Private-Lowcost Private-Regular

20%

36%

44%

Government Private-Lowcost Private-Regular

Increased traffic and cargo growth has led to congestion/ saturation at

Thus


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8080

different airports in India , e.g. Mumbai, Delhi, Bangalore, Hyderabad,Kolkata, Chennai etc.

Hence, country requiresNew AirportsExpansion of capacity at existing airports Induction of Technology for efficient handling of Passenger and cargo.

Better Management Practices

For all this additional funds to the tune of Rs. 40,000 crores + Rs. 454

crores for airports in North East are requiredThe revenue surplus generated by AAI in 2005-06 was Rs. 812crores.

The annual requirement of funds in the future is expected to bemuch

more than the AAI can generate.

Modernization of Chennai & Kolkata airports

Opportunities


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8181

Greenfield airports in Goa, Pune, Navi Mumbai, Nagpur and GreaterNoida

Up gradation of 25 identif ied airports

Development and modernization of 35 selected non metro airports -City side wil l be developed through PPP mode and air side wil l bedeveloped by AAI

Source: Ministry of civil aviation

Airport Development Fund RequirementsMore than Rs.40,000 Crores


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8282

Particulars Airport Indicative CostRs. In crores

Restructuring/

Modernization for world classairports

Delh & Mumbai

Chennai & Kolkatta

15,000

5,000

Green Field Airports Bangalore, Hyderabad, Goa, Pune, NaviMumbai, Nagpur (Hub) and Greater Noida

10,000

Upgradation 25 selected airports 7,000

Modernization/

Improvement

55 airports 3,000

Total investment by 2010 40,000

Dev. Of airports in North EastRegion (excluding Green FieldAirports

Terminal Building/CarPRK/Cargo etc. Air Side ATS Facility TotalRs. In crores

Total 225 167 62 454

Need for Private Participation in Airport Infrastructure realized long ago:

PPP in Indian Airports


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8383

One of the sectors to lead PPP formats in the country

PPP created in Airports sector to achieve the following objectives:

To build world-class airports with modern technology and efficientmanagement practices.

To make the airport user friendly and achieve higher level of customer

satisfaction. To lay special emphasis on the development of infrastructure forremote and inaccessible areas.

To provide airport capacity ahead of demand. To encourage greater efficiency in Airport Operations. To provide multi-modal linkages.

Legal & Regulatory framework facilitatingPPP in Airports Sector


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8484

Airports Authority of India Act, 1994 was amended in 2003, which, inter-alia,provides exclusion of Private Airports from the ambit of AAI Act

The Aircraft Rules, 1937, were also amended, which, inter-alia, provideconditions for grant of l icence, validity of l icence, tariff fixation including levyof Passenger Service Fee and User Development Fee, Ground handlingprovisions etc.

Setting up of an independent Airport Economic Regulatory Authority is underconsideration

Scope of RegulationSetting aeronautical price cap

Monitoring and assessing service quality performance standards set bthe Government

Review and assess aeronautical, operating and capital expenditure

Airport development Process hasconvincingly taken-off in the country


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8585

The process of development of airports through PPP in the countrybegan with CIAL

Two new Green f ield airports were thereafter approved and completedfor Bangalore and Hyderabad.

On 3rd May 2006 the Airports At Mumbai and Delhi were handed over toJoint Venture Companies.

Of 35 non metro airports being taken up for modernization PPP has

been approved for the city side development of 10 airports.

Proposals for a number of green field airports have been received fromvarious State Govts.

The process for development of CIAL as a private airport began in

Greenfield Airport Cochin International Airport (CIAL)


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8686

1993, airport was made operational on 10th June 1999

Investment Pattern Rs. Crores

Govt. of Kerala 52.04 (35%)

Central PSU (AI, BPCL) 10.25 ( 7%)

Commercial Banks 8.75 ( 6%) Investor Directors and

Relatives 55.37 (37%)

Facility Providers(AI,BPCL,SBT) 1.50 ( 1%)

Public and NRIs 21.00 (14%)

CIAL Board Constitut ionChairman: Chief Minister ofKerala

MD: Nominee of Gov. of Kerala

Three Directorsincluding Chief Sec. nominatedby Gov. of Kerala, Five Investor

Directors

Concessions given by GOI = Civil Enclave (Navy) at Cochin withdrawn

Build Own Operate and Transfer (BOOT); 30 years; Cost Rs. 1930 crores

Green field Airport Bangalore (BIAL)


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8787

Equity KSIIDC 26% and AAI cap at Rs. 50 crores, Siemens, Germany,Unique Zurich, Switzerland and - L&T India Limited 74%

Equity Rs.315 crores , State Support Rs.350 crores, Debt Rs.1265 crores

Concessions extended by the Govt. of Karnataka to BIAL SSA Rs. 350 crore Interest free support repayable after 10 years in 20 half yearly

installments

Land lease Agreement Lease of land of 4000 acres at concessional rent of Rs. 1 tillcommencement of operations. Thereafter @3% p.a. for a period of 6 years and 6% p.a.subsequently with an annual increase of 3%.

Property Tax exempted for a period of 5 years.

Stamp Duty payable on land lease exempted.

Local Fee payable to Bangalore Int. Airport Planning Authori ty (BIAPA) as bettermentfee and road cess exempted.

Entry Tax for goods for construct ion purposes exempted Infrastructure like water, power etc. to be provided at site.

BANGALORE INTERNATIONAL AIRPORTBANGALORE INTERNATIONAL AIRPORT(Master Plan & Terminal Bldg.)(Master Plan & Terminal Bldg.)


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8888

The design consists of a transparent, ecological building withnatural light filtering through sky lights in the roof

The Passenger terminal building is modular, so as to accommodatethe growing number of passengers

The terminal building is designed to cater to the peak hour capacityof 1850 passengers per hour.

Perspective ViewPerspective View


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8989Bangalore International Airport

Roof Element -

Precast yard

Top shutterBottom mould

Precast element


90/223

Pre fab. Rebar cage

Bangalore International Airport

Precast ErectionErection Gantry


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Bangalore International Airport

PTB-Interior view


92/223


PTB-Interior view


93/223


PTB-Interior view


94/223


PTB


95/223



96/223


ROOF CONSTRUCTION - CASTING


97/223

9797

Pre-cast Yard showing Shuttering,

Rebar fixing & casting Activities

Mould Shuttering in ProgressGantry forHandling

S ShapedMould

Top Shutterby Gantry

Pre-castElement

Strong back

ROOF CONSTRUCTION - CASTING


98/223

9898

Reinforcement Cage with Strongback

Mould Top Shuttering with Chute

Chute

Top Shutter

ROOF CONSTRUCTION DEMOULDING


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9999

De-Moulding/Lifting of element by

Double acting jack

HydraulicJacks

Lifting in Progress

Power Pack

ROOF CONSTRUCTION - SHIFTING

Pre-castElement


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100100

Jacking in Progress

Side Shifting of element by high speed

long stroke jack

HydraulicJacks

S Shaped

Mould

ShiftingTrolley

Build Own Operate and Transfer (BOOT); 30 years; Cost Rs. 1930 crores

Govt. of AP & AAI (cap Rs.50 crore) together hold 26% equity, GMR(MAHB) hold 74%Project cost Rs 1 761 cores

Green field Airport Hyderabad (HIAL)


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101101

Govt. of AP & AAI (cap Rs.50 crore) together hold 26% equity, GMR(MAHB) hold 74%Project cost Rs.1,761 cores .

Equity Rs.379 crores , State Support Rs.107 crores, Debt Rs.1,275 crores

Concessions extended by the Govt. of AP to HIAL

SSA Rs.315 crore Interest free loan refundable in 5 equal installments commencing

from 16th year. Land Lease Approx 5490 acres of land co-terminus with State Support Agreement.

State Grant Rs. 107 crores.

Stamp Duty / Registration Fee waived off on transfer of land as well as all project

agreements.

Sales Tax waived off on all construction material

Perspective viewsPerspective views


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102102Hyderabad International AirportHyderabad International Airport

HYDERABAD INTERNATIONAL AIRPORT


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103103

Design of the airport includes Airside, Landside works with structureslike

Cargo building ( 28m span ) with handling capacity of 1,00,000metric tons.

Crash fire rescue station (main and satellite),

Ground handling maintenance building,

Security office and

Gatehouse at strategic locations between airside and landside.

Passenger Terminal BuildingPassenger Terminal Building -- TrussTruss


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105/223




106/223




107/223




108/223


TECHNO INDICES Passenger Terminal Building

( Comparison between concrete and structural steeloptions )


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109109

ITEM UNIT BIAL

(Precast Roofing)

HIAL

(Structural Steel Roofing)

BUA Sqm 74430 104500

Concrete Cum/Sqm 0.64 0.54

Shuttering Sqm/Sqm 2.83 1.65

Reinforcement Kg/Sqm 90.7 81.6

Structural Steel Kg/Sqm - 35.1

World Class Development and Expansion

World Class Airport Management

Salient Features of JVCs; Objective is to create

Mumbai & Delhi Airport


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110110

World Class Airport Management

Equity participation

Delhi 74 % Pvt. Consortium (GMR Group, Fraport AG, MAPL, IDF), 26 % AAIMumbai 74% Pvt. Consortium ( GVK, ACSA,BSD), 26% AAI

Initial CapitalMumbai Rs. 200 crores; Delhi Rs. 200 crores

Estimated Capital Investment for first 7 yearsDelhi Rs. 3286 crs. (Funded as equity Rs. 551 crs, internal accrualRs. 70 crs. Debt Rs. 2665 crs.)Mumbai Rs.5676 crs. (Funded as equity Rs. 626 crs. Internal

accural Rs. 804 crs. Debt Rs. 4246 crs.)

Apart from Managing and running the airport the JVCs have to invest for the

mandatory and other capital works.

Tasks to be performed by the JVC


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111111

Performance Standards The JVCs are to achieve a rating of 3.5 on the AETRA scale of 5 on

completion of stage-I and improve to 3.75 by stage-II.

Payments to AAI

Upfront payment of Rs. 300 crores(RS.150 crores from each JVC).

Annual Revenue Share to AAI for a period of 30 years.

Delhi Airport 45.99% of Gross Revenue Mumbai Airport 38.7% of Gross Revenue

AAI employees cost to be reimbursed by the JVCs

The SGSA has been executed by the respective State Governments with the

JVCs in order to provide support to the projects.

Mumbai & Delhi Airport: Salient's of the StateGovernment Support Agreements


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112112

The agreement provides that the State Governments wil l make best efforts toprovide support to the JVCs in matters relating to removal of encroachmenor procurement of additional land for development of airport, removal oobstruction outside the airport boundary to ensure safe and efficient aitraffic movement, best endeavor to improve the surface access to the airporand to provide all the utili ties namely water, power etc.

The SGSA provides for assistance in procuring various clearancesHowever, the agreements do not confer any right to JVCs for enforcement o

any obligations of State Government or consequently for any damage or lossincurred by JVCs or by any party.

The SSA, inter-alia, provides for GoIs support by way of establishing ani d d t E i R l t A th it

Mumbai & Delhi Airport: Salient's of the StateGovernment Support Agreements


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113113

independent Economic Regulatory Authority,

Charging of Aeronautical Charges by the JVCs,

Provision of Statutory Services namely Immigration, Customs, HealthSecurity etc.

Right of First Refusal for MIAL in case a green field airport comes up atNavi Mumbai and for DIAL in case a green field airport comes up within 150kms of the exist ing airport.

GOI guarantee to the private partners in respect of obligation of AAI tomake payments to the JVCs upon termination or expiry of OMDA, Step-in-Rights of AAI/GOI.

Development of 35 Non-Metro Airports have been taken up in

a phased manner :

Development of Non-Metro Airports


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114114

These airports are: Ahmedabad, Amritsar, Agatti, Aurangabad, Agartala, Agra,Baroda, Bhopal, Bhubaneshwar, Chandigarh, Coimbatore,

Dehradun, Dimapur, Guwahati, Jaipur, Jammu, Khajuraho,Nagpur, Patna, Portblair, Pune, Rajkot, Ranchi,Raipur, Goa,

Imphal, Indore, Lucknow, Madurai, Mangalore, Trichy,

Trivandrum, Udaipur, Visakhapatnam and Varanasi,

Terminal Building and Airside development by AAI. City side development through PPP or Land Lease and Revenue Sharing

(Airport wise in a single package)

Development Approach for first ten non-metro airports

PAYKONG AIRPORT Sikkim for 50 Seater Aircraft (ATR 72)Estimated cost Rs. 340 Crores (excluding land cost which will be provided bySt t G t f f t)

Development of Greenfield Airports North East


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115115

State Govt. free of cost).

CHIETHU AIRPORT Nagaland for 50 Seater Aircraft (ATR 72)Estimated cost Rs. 150 Crores (excluding land cost which will be provided by

State Govt. free of cost). Rs. 1 Crore has been paid by NEC to AAI for Techno-Economic Feasibility Study.

ITANAGAR for 50 Seater Aircraft (ATR 72)Estimated cost Rs. 120 Crores (excluding land cost which will be provided byState Govt. free of cost). Banderdeva site seems to be technically feasible. Site

details awaited from State Govt. for further technical feasibility study.

MOPAMOPA -- GOAGOA

Development of Greenfield Airports ProposalReceived from State Governments


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MOPAMOPA GOAGOA

GangtokGangtok SikkimSikkim

Navi Mumbai, MaharashtraNavi Mumbai, Maharashtra ChakanChakan, Pune, Maharashtra, Pune, Maharashtra

KannurKannur, Kerala, Kerala

KohimaKohima NagalandNagaland Hassan & GulbargaHassan & Gulbarga KarnatakaKarnataka

HalwaraHalwara PunjabPunjab

ItanagarItanagar--Arunachal PradeshArunachal Pradesh

SL.NO. NAME OF THE AIRPORT /STATE WHERE DEMANDHAS BEEN MADE

STATES WHICHHAVE PROVIDEDLAND

AREA OF LAND PURPOSE

1 Raipur / Chhatisgarh Chhatisgarh 300 Acres Land free of cost for extension of RunwayLand yet to be handed over by State Govt.

2. Bhopal/M.P. Madhya Pradesh 366 Acres Land for extension of Runway. Land yet to be handed over by StateGovt.

3. Ahmedabad/Gujarat Gujarat 67.89 Acres Development o f Airport . Land yet to be handed over by State Govt .


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117117

4 Aurangabad/ Maharashtra Maharashtra 13.9 Acres Instal lat ion of CAT I approach light. Land yet to be handed over byState Govt.

6. Bhavnagar / Gujarat Gujarat 29 Acres Extension of Runway. Land yet to be handed over by State Govt.

7. Rajkot/Gujarat Negotiation withWestern Railway

14.7 Hectares For extension of runway. Development of Airport. Western Railwayyet to hand over land to AAI.

8. Surat/Gujarat Gujarat 36 Hectares (85 acres) Development of Airport. Land yet to be handed over by State Govt.

9 Udaipur/Rajasthan Rajasthan 42.53 Acres * Landadmeasuring approx. 2

acres is yet to be handedover by State Govt.

For extension of runway, widening of runway strip and constructioof isolation bay.

10. Trivandrum / Kerala - do - 2.5 Acres For Runway End Safety Area, land yet to be handed over

11. - do - - do - 120 Acres To be given free of cost by State Govt. for development purposes.27.57 Acres handed over.

12. Chennai / Tamil Nadu Tamil Nadu 1440 Acres To be given free of cost by State Govt. for development purposes(for construction of parallel runway).

13. Indore / madhya Pradesh Madhya Pradesh 150 Acres To be given free of cost by State Govt. for development purposes. (extension o f runway)

SL.NO. NAME OF THEAIRPORT / STATE

WHERE DEMAND

HAS BEEN MADE

STATESWHICH

HAVE

PROVIDED

AREA OF LAND PURPOSE


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118118

HAS BEEN MADE PROVIDED

LAND

14. Bhunter / H.P. Himachal

Pradesh

5.91 Acres

60 Acres

For construction of new terminal building etc.

Land will be acquired for extension of runway

after diversion of river Beas.

15. Hubli / Karnataka Karnataka 390 Acres To be given free of cost by State Govt. for

development purposes.

16. Belgaum/Karnataka Karnataka 370 Acres To be given free of cost by State Govt. for

development purposes.

17. Tirupati /Andhra

Pradesh

Andhra

Pradesh

405 Acres To be given free of cost by State Govt. for

development purposes. Request is being placed.

18. Jammu/ Jammu &

Kashmir

J&K


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Sea Ports

Capacity at Indian Sea Ports

Capacity at Indian PortsMillion Tones


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120120

600

1,100

2,000

400700

1000

1300

1600

1900

Million Tones

Present By 2011-2012 By 2016-17

(8% CAGR up to XI Plan & 12% CAGR for the XII Plan)

Port OpportunitiesXI Five Year Plan envisages a

capacity addition of around 500million tones and the XII Plan, anddi i l 900 illi T

Port Sector OpportunitiesProjected Investments in RoadSector (2007-2012; XI Plan; Rs. Crore)

SeaPorts 73941


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121121

additional 900 million Tones

Construction of 2 multipurposeberths in Haldia port at a cost ofapproximately US $ 20mn

Development of a LNG terminaland general cargo ports at Ennoreport at an estimated cost of US $

425mn

Construction of offshore containerterminal at Mumbai port costing

around US $ 273mn

Sea Ports 73,941

Total 73,941

Construction of 4th containerterminal at Jawaharlal Nehru port at a

cost of US $ 976mn

Development of other minor portsthrough the private sector

Ports cater to approximately 95% volume & 70% value of the total

foreign trade

Ports Sector Overview


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Cheapest mode of transport

Only sector where capacity is matching demand During 1999-2005,traffic has grown at a CAGR of 5.9%, while the capacity additions by

major ports have grown at 7.4%

Higher turnaround time - 3.5 days as compared to 10 hours in Hong

Kong

National Maritime Board (NMMB) has forecast a large scale capacity

addition of by 2012

Sea Port Projects under NMDP Phase-I & II

11

22

17

13 14

27

22

17

22

27

NMDP - No. of Projects

49

76

4237 38

47

62

77

NMDP - Estimated Cost (Rs. Billion)

PHASEIPHASEIPHASEI --- 180 Projects/ 320 Bn180 Projects/ 320 Bn180 Projects/ 320 Bn


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123123

5

1111 10 10

13 14

9 9

2

7

12

Kolkata

Haldia

Paradip

Visakha

Ennore

Chennai

Tuticorin

Cochin

New

Mormug

Mumbai

JNPT

Kandala

5 44

1116

9 6

22

2

17

32

Kolkata

Haldia

Paradip

Visakha

Ennore

Chennai

Tuticorin

Cochin

New

Mormug

Mumbai

JNPT

Kandala

20

4

17 16

4 4

7

1

6

35 5 4

2

7

12

17

22

27

Kolkata

Haldia

Paradip

Visakha

Ennore

Chennai

Tuticorin

Cochin

New

Mormug

Mumbai

JNPT

Kandala

NMDP - No. of Projects

49

8

2115 16

7

36

3

29

25

35

12

2

17

32

47

62

77

Kolkata

Haldia

Paradip

Visakha

Ennore

Chennai

Tuticorin

Cochin

New

Mormug

Mumbai

JNPT

Kandala

NMDP - Estimated Cost (Rs. Billion)

PHASEIIPHASEIIPHASEII --- 96 Projects/ 238 Bn96 Projects/ 238 Bn96 Projects/ 238 Bn

Major Ports

(under Government of India) 12 Major Ports

Ports Sector in India


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259 berths

account for about 75% of total traffic Cargo handled 423 MT (2005-06)

Non-Major Ports (under State Governments)

187 non major ports (61 cargo handling);

97 berths account for about 25% of total traffic

Total Cargo handled-568 MT (2005-06)

Induct Additional Resources

Why PPP in Ports?


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Bring in private sector efficiency

Client-Port Symbiosis for Port development and diversification

Strong Global networking

New business opportunities

Private sector participation and Joint Ventures permitted under MajorPort Trusts Act 1963

PPP Framework in Ports Sector


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Comprehensive guidelines 1996

Joint Venture Guidelines 1998

Model Bidding Documents 2000

Construction and Operation of :

Container TerminalsBulk, Break-Bulk, Multipurpose and specialized cargo berths

Areas for Private Sector Participation in Ports Sector


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Warehousing, Container Freight Stations, Storage Facilities and Tank

Farms, Dry Docking FacilitiesShip Repair Facilities

Leasing of equipment for port handling and floating crafts fromprivate sector

Auxiliary Port Services (like Pilotage, Tugging and Mooring)

Captive facili ties for port based industries

100% FDI

Open Competit ive bidding

Regulatory Principles followed in the Port Sector


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Open Competit ive bidding

Lease Period of BOT upto 30 years

No Government guarantees on ROI

Discourage private monopoly

Independent Tariff Regulatory Authority

Protection of labor interest

For Terminals and Berths

R t f Q lifi ti (RFQ)

Procedure for Ports Private Sector Participation


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Request for Qualification (RFQ)

Request for Proposal (RFP)

Draft Concession Agreement finalized in pre-bid meeting

Approval of PPPAC

Selection Criterion - Highest Revenue Share to Port

Already Operational: 14 projects with investment of Rs.3,516

crores:Container terminals

Present Status of Private Investment


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130130

Liquid cargo berths

General cargo berths

Container Freight Station(CFS)

Under Implementation: 4 projects with investment of Rs. 2,898

crores:

Container terminals

Single Point Mooring (SPM)

2006-07

15 Berths to be awarded during 2006-07Total Capacity Addition 94 MT

Berth Construction Plan


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131131

p y

Total Investment Rs.6497 crores

2007-08

13 Berths to be awarded during 2007-08Total Capacity Addition - 107.65 MT

Total Investment - Rs. 7664 crores

Construction of two off-shore container berths - Mumbai

LNG Re-Gassification Terminal - Cochin International Bunkering Terminal - Cochin

Berth Under Construction/ Completed


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Construction of 4 cargo berths - Kandla

Creation of Berthing & Allied facil ities off Tekra - Kandla Construction of cruise-cum-container berth - Mormugao Construction of Deep Draft berth for handling iron-ore and coal - Paradip

Construction of Bulk Coal Terminal - New Mangalore Development of existing 8th berth as Container Terminal - Tuticorin Marine Liquid Terminal - Ennore Coal Terminal - Ennore Iron-Ore-Terminal - Ennore Second Container Terminal - Chennai Construction of WQ-8 Berth - Vizag

Construction of EQ-10 Jetty at Inner Harbour - Vizag

Construction of 2nd berth for handling chemicals / specialized grade of

POL Mumbai Extension of container berth by 330 m - JNPT

International Container Transhipment Terminal Cochin

Berth Construction Plan 2007-08


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International Container Transhipment Terminal Cochin

International Cruise Terminal Cochin Development of one berth in East Docks Vizag Construction of berths at Vasco Bay - Mormugao Construction of berth for clean cargo - Paradip POL Berth in Oil Dock Arm - New Mangalore Construction of six berths - Tuticorin Construction of three Shallow Draught Berths Tuticorin

Construction of Coal Berth - Tuticorin LNG Terminal - Ennore Container Terminal - Ennore

Completed/ Under Process

7 Capital Dredging Projects to be awarded during 2006-07

Paradip, JNPT, Mumbai, Tuticorin, Ennore & Vizag

Total Investment Rs 2040 crores

Dredging Plan


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134134


2007-08 Expected

6 Capital Dredging Projects to be awarded during 2006-07

Kolkata, Mumbai, Chennai, Cochin, Vizag & Mormugao


Target draft - 14 meters (in phases)

Road

9 connectivity projects (completion in 1 to 3 years)286.12 kms

Port Connectivity Projects under Implementation


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135135

Total cost of Rs.1661 crores

Rail8 connectivity projects(completion within 2 years)961.56 kmsTotal cost of Rs.1780.68 crores

Dedicated High Axle Load Freight Corridor on Westernand Eastern routes at an estimated cost of Rs.22,000crore

Faster decision making Criterion for selection- Revenue share/MGT

Port Sector - Issues


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Mergers and Acquisitions

Tariff Regulation

Post selection alteration in scope of business

Captive facil ities

Dispute Resolution Mechanism


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Urban Infrastructure

Dharavi Redevelopment Project : RE Developers + Town planners

of Singapore & China 26 Bids received fromConsortiums/ 19 short listed Commencement 2008/09


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57,000 families currently in Dharavi proposed to be relocatedto 225 sq. ft. multistoried tenements, +maintenance for 15 yearsby the developer

30 million Sq. Ft. of space to be provided by the RE Developersin exchange for which they will be allowed to build 40 millionhome and office space for sale


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Urban Mass Transport System

Urban Mass Transport System Ministry of Urban Development (MoUD) - Urban Metropolitan

Transport Authority in all cities with 1m+ population

MRTS creation through30pcessonpetrolanddiesel


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140140

MRTS creation through 30p cess on petrol and diesel

consumption; Corpus of Rs.5,000 crore National TransportRevolving Fund New Bus Fleet, Metro Rail, Mono Rail,Modernization of existing Transportation Systems

26 cities in the country require MRTS - PPP 5 years forconstruction 30 years for operations

Bus Rapid Transport System (BRTS) principally approved infour cities Ahmadabad, Pune, Nagpur and Indore

Delhi Metro Extension of existing Delhi Metro to Noida & Gurgaon

80% will come from Haryana and UP governments + 20% willcome from the Delhi Metro Rail Corporation (DMRC)


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141141

DMRC running feeder busses

33% of the DMRC comes from property development (Renting

out shops, advertising, development of malls and housing, ITparks)

Mumbai Metro First city to have a single fare structure

First Line Andheri Versova Ghatkopar


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Second line Charkop Mankhurd; bids invited

Third Line Colaba Mahim Estimated at Rs.12,000 crore

(totally underground)

VGF being increased to 30% (from 20%) to make it moreattractive to the Private Players

Kolkata MetroKolkata Metro Howrah Salt Lake connectivity: Rs.5,000 crore project:

Cleared by the West Bengal Government (incl. Tunnel under Ganges) Jointly with Japan Bank of International Cooperation


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Hyderabad MetroHyderabad Metro Hyderabad Metro Rail Limited Separate SPV established Project on BOT; Single bidder with the lowest VGF Quote Will have Sixty Three stations 5 Yrs Construction + 30 years operations


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Power

Market OverviewElectricity sector: Overview

India is the 6th largest power consuming and 11th largest power

producing country

Demand for power is growing significantly driven by economic growth

Per capita power consumption is currently c.631 kWh and expected to

reach c.1,000 kWh by 2012 (China: 2,160 kWh, US 14,050 kWh)

Current installed capacity is c 141 000 MW (China: 650 000 MW 103 4107.7115.8

124.4

72 778.0 78.4 81.5

84.6 87.9 90.1

96.9

108.5

119.0

130.5143.2

165.0157.1

90

110

130

150

170

(in000's)

14% Gap

21% Gap


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145145

631

2,108

2,160

2,246

8,212

11,446

14,057

18,329

0 5,000 10,000 15,000 20,000

India

Mexico

China

Brazil

Japan

Australia

US

Canada

k Wh

Current installed capacity is c.141,000 MW (China: 650,000 MW,

Germany: 1,22,000 MW). Only c.100,000 MW equivalent is generated

Planned capacity addition over the next 5 years is c.100,000 MW.

The reserve margin remains negative with a shortfall of c.19% and this

is expected to continue as demand outstrips supply

The industry is in transition with the government encouraging private

participation and unbundling of the value chain

58 58.4 63.7 67.9

69.2 71.5 75.1 77.780.6

86.7

100.3103.467.972.7

78.0 78.4

30

50

70

90

1998 2000 2002 2004 2006 Today 2010 2012

MW

Peak supply Peak demand

2.7 3.5

5.6

7.98.9 9.2 9.3

11.9

0.0

2.0

4.0

6.08.0

10.0

12.0

14.0

India Mexico Japan US Brazil China Aus RusMW

(00,0

00's)/GDPUS$trillion

Per capita consumption of electricityPer capita consumption of electricity

Source: UNDP, CLSA

Installed capacity & GDP (PPP basis)Installed capacity & GDP (PPP basis)

On average about 60,000 to 90,000 MW is requi red fo r US$1 trillion o f GDP, whi leIndia cur rently has on ly 27,000 MW for every US$1 trill ion of GDP on a PPP basis

Total energy shortage & peaking shortage are 8.3% & 12.5% respectively

To maintain the GDP growth of 9%, the generation capacity should growby around 12 13% per annum

Overview


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by around 12-13% per

N S Govinda Rao Memorial Lecture Feb 2009

Documents

Transcript of N S Govinda Rao Memorial Lecture Feb 2009