Road Ministry to take up GMR Infra project issue with Committee of Secretaries

June 19, 2013

By PTI |

GMR Infrastructure was ready to start the project with some preconditions, including making piece-meal payments.

(GMR Infrastructure was ready to start the project with some preconditions, including making piece-meal payments.)

 

 

 

 

NEW DELHI: In a bid to salvage the stalled Kishangarh-Udaipur-Ahmedabad highway project of GMR Infrastructure, the Ministry of Road Transport and Highways will soon approach the Committee of Secretaries for the matter.

“The matter will go to the Committee of Secretaries, we want that the net present value of the project does not change,” a Road Ministry official told reporters.The difference between the present value of cash inflows and the present value of cash outflows is the net present value of a project.
The Ministry and the company are already in discussions to rescue the project.According to sources, GMR Infrastructure BSE 0.76 % was ready to start the project with some preconditions, including making piece-meal payments.The company has also said it would pay about 50 per cent of the amount to restart the work on project at present and pay the remaining sum in the subsequent years, including interest.The official added that the proposal from the Ministry is to ask the company to make the requisite payments in time and to seek its guarantee to ensure that the project is not abandoned mid-way, leading to the financial burden falling on the the government.
Earlier this year, GMR Infrastructure walked out of the Kishangarh-Udaipur-Ahmedabad project 16 months after securing the order.The project is estimated to have required an investment of Rs 5,387 crore. The Bangalore-based group had won the project in western India through international competitive bidding at Rs 636 crore annual premium for 26 years.It is believed that the company terminated the contract on account of difficulties in taking up the project due to regulatory hurdles, including delays in environment clearance and land acquisition.However, NHAI had said that the company exited the project on account of financial hurdles in arranging finance for the project and not due to lack of regulatory clearances.The company had won the project in September, 2011, through the international competitive bidding route. It is to be implemented through the Public Private Partnership (PPP) model on Design, Build, Finance, Operate and Transfer basis.
Source-http://economictimes.indiatimes.com

PPP projects still out of hawk vision

May 14, 2013

By SPS Pannu in New Delhi

THE government has been dragging its feet over the Comptroller and Auditor General’s ( CAG) proposal to bring public- private partnerships ( PPPs) under the ambit of the DPC Act, which gives the top auditor unfettered access to audit the finances of such projects.

According to sources, the proposal was first moved by CAG Vinod Rai in 2009.But despite repeated reminders, the finance ministry has not taken action.

Rai, who hangs up his boots on May 22 after an eventful career, will not have the satisfaction of realising one of his key objectives. According to sources, the embarrassment that the United Progressive Alliance government had to face after the CAG’s audit teams blew the lid off mega scams in the telecom sector, the allocation of coal blocks and the Commonwealth Games may be responsible for the go- slow attitude on the issue.

Sources disclose that for the record, the government has maintained that the states are also being consulted on the issue and response is still awaited from some of them.

The government had itself referred the privatisation of the Delhi Airport under the PPP mode to the CAG, which discovered that private operator GMR had managed to get hold a huge tract of prime land in the Capital for commercial use with an insignificant investment. CAG’s report had also exposed that GMR had not being paying the Airports Authority of India the full share of revenue that it had committed itself in the contract.

Similarly, the audit of the eastern offshore KG Basin gas fields operated by Reliance Industries Ltd had revealed major irregularities in contracts given out by the private company. This had inflated the cost of development of the gas fields and adversely impacted the government’s share of the revenue.

A senior officer of the Indian Audit and Accounts Service said, “ This ground experience clearly shows that there is a need to audit PPP projects in order to ensure transparency in the running these ventures.” Interestingly, the Prime Minister while addressing the Accountants General Conference as far back as 2008 had himself stated, “ Public private partnership projects are becoming increasingly common in key infrastructure sectors of transport, power, urban infrastructure, tourism and Railways. Audit needs new skills to evaluate these complex arrangements.” A senior official said that in order to meet this objective, a new set of guidelines for audit of PPP projects which at once reflects the best practices world over and yet is rooted in our experience of auditing government operations over the years has already been drawn up by the CAG. “ However, the government needs to amend the DPC Act so that PPP projects are formally brought under its ambit,” he added.

Rai had in his note to the government stated that PPPs, while bringing in private capital and experience, also involve transfer of valuable public assets as well as foregoing future revenue in the form of concessions. To ensure that such arrangements always enjoy high credibility in the public eye, due diligence, transparency, objectivity and probity of the entire decision making process are all paramount if these arrangements are to succeed and continue for future projects.

The rationale of the exercise is that the role of public auditors becomes critical in assessing whether such arrangements are truly in public interest and are also fair and balanced in sharing of risks as well as rewards.

PROPOSAL ON THE BACKBURNER

CAG Vinod Rai had proposed to bring PPP projects under the ambit of the DPC Act in 2009

The Act gives the top auditor unfettered access to audit the finances of such schemes

The government needs to amend the DPC Act so that PPP projects are formally brought under its ambit

Rai had said PPPs bring in private capital and experience but also involve transfer of valuable public assets as well as foregoing future revenue as concessions

The rationale of the exercise is that the role of public auditors becomes critical in assessing whether such arrangements are truly in public interest

Source-http://epaper.mailtoday.in

BOT News: UP highways on public-private-partnership model

May 10, 2013

Pankaj Shah, TNN

LUCKNOW: The Uttar Pradesh state government is in talks with potential bidders to develop 11 state highways, in what could be a big push to its mandate to develop road connectivity across the state.

It has been proposed that the highways will be developed by Uttar Pradesh State Highways Authority (UPSHA) on the public-private-partnership (PPP) model.

The prominent projects included the Shahjahanpur-Hardoi-Lucknow State Highway, Basti-Mehendawal-Tamkuhi road, Akbarpur to Jaunpur, Mirzapur and Dudhi Road, Gorakhpur to Maharajganj Road and Muzaffarnagar to Saharanpur via Deoband Road.

The state government has also clarified doubts of prospective bidders for the Agra to Lucknow green-field expressway. The ambitious access-controlled Agra to Lucknow six-lane, eco-friendly green-field expressway is to be constructed on a minimum distance and minimal agricultural land formula through the PPP mode.

Earlier on 24 April, the government held a pre-application conference for the Agra to Lucknow project in New Delhi where 15 prominent developers including GVK, GMR, ESSEL Infra and IL&FS Transportation, among others participated. The project will be developed at an estimated project cost of Rs 9,600 crore on Build-Operate-Transfer (BOT) model, for a 30-year concession period.

The Agra-Lucknow expressway expects to offer a smooth link between Greater Noida and Lucknow via Agra covering a distance of about 270 kms.

http://timesofindia.indiatimes.com

 

Govt’s pre-fixation with PPP not good for infrastructure: Parliamentary Panel

May 10, 2013

PTI : New Delhi, Sun May 05 2013,

Urging the government to come out of “pathological prefixation” with public-private-partnership (PPP) model, a Parliamentary panel has asked it to build through budgetary support all highways where bidders have failed to respond.

“PPP as a model for the development of road project needs to be reviewed seriously in the light of our experience so far in this regard. That private capital is mainly for profit is borne out by the fact that the profitable projects are being bid out fast,” Standing Committee on Transport, Tourism and Culture has said in its latest report.

Committee Chairman and CPI-M MP Sitaram Yechury said: “Unfortunately the government has pathological pre-fixation with PPP which is hindering infrastructure development in the country as driven by the objective of profit, private sector is not coming forward to bid for unprofitable projects.”

Stressing upon the need for government’s thrust on infrastructure Yechury said: “No other country whether USA or China depended on private sector for building its infrastructure unlike India. Unfortunately the allocation has been reduced drastically for infrastructure as Planning Commission is encouraging private partnership.”

He said only such projects were bid out in the PPP mode where profit is envisaged, asking as to how there was no response for 13 bids invited by the NHAI last year. The report said that a vast country like India needed faster connectivity to its length and breadth and should “adopt an alternative model of project development which is development driven and not profit driven”.

It added: “Since profitable projects are sold out first, the government is facing problems in getting bidders for such non-profitable road projects as those in Left Wing Extremist and North-East Areas.”

Emphasising that India needs faster construction of roads, the Committee recommended that “all such projects without bidders should be developed with the budgetary support from the government and the Planning Commission needs to be more practical and careful about its role and function”. National Highways Authority of India (NHAI) had set a target to award projects for 7,464 km of roads during the last financial year, of which only projects worth 879 km could be awarded.

Source – http://www.indianexpress.com

 

Bansal woos private players for rail projects

April 29, 2013

Railway Minister Pawan Kumar Bansal today invited private companies to participate in ventures including the Dedicated Freight Corridor (DFC).

(Railway Minister Pawan Kumar Bansal today invited private companies to participate in ventures including the Dedicated Freight Corridor (DFC).)

NEW DELHI: Highlighting tremendous scope for private investments in rail projects, Railway Minister Pawan Kumar Bansal today invited private companies to participate in such ventures including the Dedicated Freight Corridor (DFC).

Advocating the need to de-clog the road network in the country, the Union Minister insisted transporting bulk goods through rail instead of roadways as it would be cost effective and environment friendly.

“The 570 km long corridor from Sonnagar to Dankuni in the Eastern DFC will be executed through PPP route,” Bansal said at a conference here.

The Eastern and Western corridors of DFC are being constructed covering a length of 3,328 km route for exclusive freight movement in the country.

Giving the timeline, Bansal said, “the DFC project has to be completed by 2018 which is an uphill task. There is a tangible progress as 87 per cent land has been acquired. It would cost about Rs 95,000 crore including land acquisition cost.”

Highlighting the importance of the DFC, he said, “we need DFC as it is for the growth of our economy. In order to meet the growth we need to encourage private participation.”

Currently, the share of railways in goods transportation is 36 per cent whereas in the USA  and China the share is 48 per cent 47 per cent respectively.

Comparing with the road carriers, Bansal said “one freight with 59 wagons and one electric engine of 5,000 Horsepower to 6,000 Horsepower would carry 4,600 tons while 400 trucks of each of having 150 Horsepower carrying 10 tons are required to carry the same load.”

Bansal said the movement of goods on rail is six to 10 times more efficient as compared to its impact on environment, long queues at toll plazas, the time factor and the additional cost involved on roads.

 
Source-http://economictimes.indiatimes.com

Govt for independent regulators to promote PPP projects

April 29, 2013

By PTI | 29 Apr, 2013,

NEW DELHI: The government today made a case for strong independent regulatory authorities to promote Public-Private Partnership (PPP) projects in sectors like coal, road and rail. “We do not have enough independent regulators… Their terms of reference are not properly defined to meet all the challenges that the sectors are facing. “The regulatory authorities have to be empowered and they have to be given enough authority to be able them to deal with the issues which are arising on the regulatory side,” Economic Affairs Secretary Arvind Mayaram said at a Ficci event here. Budget 2013-14 has proposed formation of a new regulator for road sector and in Rail budget there has been a announcement for tariff regulator. “The coal regulator which was earlier announced is also likely to come up this year. We are gng to see some more regulators coming in,” he said. Mayaram said there was a need for re look at the existing regulatory authority and ways to further empower them. “We need to look deeper to create more regulatory authorities independently. The independent entities to be able to look at problems — independent of the government and other party,” he said. Referring to the problems being faced by PPP projects, Mayaram said the government cannot bailout projects which fail due to commercial reasons. However, he added that the government should step in if the failures are on account of regulatory hurdles. “We need to make ours distinctions between these two. Wherever it is commercial failure, the private sector must take the hit, wherever there is a regulatory failure government must step in,” he said. The distinction between the two kinds of failures is necessary, Mayaram said, adding otherwise the PPP “will run into another kind of problem… the government (being) accused of crony capitalism. Effort should be to salvage the projects and not allow anybody to fail”

Source-http://economictimes.indiatimes.com

 

Vinayak Chatterjee: The high road to efficiency

January 16, 2012

For a historically capital-starved and infra-deficient nation, we have rightfully been obsessed with asset creation in the public-utility space. Little emphasis has been paid, however, on the maintenance of these assets or the delivery of pre-determined service levels from these assets. Take, for example, our roads and highways. Highway users continue to be a frustrated lot in spite of massive investments in this sector. Waiting-time at toll-plazas, safety aspects, ride quality and haphazard lane-management continue to bedevil even newly constructed roads.

Highway operators must eventually get prepared for regulatory raps as well as individual and “class action” litigation for failing to provide desired levels of service. They will have to wake up to the reality that toll cannot be charged merely for the privilege of being allowed to use a particular stretch of road. The “purchase consideration” inherent in charging a toll has to come bundled with the commitment of a smooth ride at a designated average speed, with full consideration of safety and highway amenities. Failure to ensure this should attract penalties and damages.

In this cauldron of frustrations and rising aspirations, it is interesting to note that the responsibility for operations, maintenance and tolling (OMT) is gradually shifting from the developer or the contractor group to independent and professional OMT service providers. Simultaneously, the focus is also shifting from merely reducing capital expenditure to optimising life-cycle cost, as well as, providing an accountable delivery of services.

My friend and colleague, Vivek Rastogi, who has a deep knowledge and insight on these issues, likes to draw out lessons from Brazil’s experience.

Brazil, with emerging-economy demographics much like India, has faced similar challenges in highway operations. Brazil embarked on its public-private partnership (PPP) highway development programme a decade ago. Its journey in developing national highways on a build-operate-transfer (BOT) basis has been equally successful. The operations and management (O&M) for these highways started the same way as where India is today — a toll revenue leakage as high as 25 per cent, below par patrolling and unsatisfactory maintenance and traffic management.

What is remarkable is that in the last 10 years Brazil has improved the O&M performance to reach close to world standards. There are four main reasons for this success:

  • An independent governance and regulatory body: the Brazilian Agency for Land Transportation (ANTT) was set up in 2001 to monitor the performance of concessionaires. ANTT sets aggressive service-delivery standards. These include mandatory electronic tolling, patrolling every 90 minutes, fixing pot-holes in 24 hours and replacing damaged safety signals in three days. It has a monthly monitoring mechanism for each concession. Any major gaps in performance are severely penalised.
  • Electronic tolling accounts for 60 per cent of the collections. This has significantly improved the productivity for heavy transport vehicles and also resulted in more accurate toll collection.
  • There is a strong and time-bound legal support for issues affecting the concessionaire. Users paying toll are answerable to the legal system and these cases are closed within 30 days. Major accidents and erring drivers are also referred to the same legal set-up. This level of processing is possible since the legal set-up directly reports to ANTT.
  • The police is extremely responsive and officers are actually stationed in the control rooms of the concessionaire. This support from the police has helped the concessionaires in reducing revenue leakage to near-zero levels.In essence, Brazil has created a virtuous circle in which concessionaires have near-100 per cent toll collection and thereby have adequate funds and motivation for O&M. They have strong legal and police support to ensure this is an ongoing process. In case they do not deploy adequate funds or do not perform activities in a timely fashion, the regulator ANTT has the stick ready. The same is the case in other developed countries with large PPP highway development programmes — such as Portugal, Spain and Malaysia.In contrast, India has a vicious circle – one that reduces the value and impact of the new asset – and this, unfortunately, starts from the design and construction phase.

    Sarkari authorities often “under-design” to reduce project costs and sometimes to save “viability-gap” funding. The under-provisioning of service-lanes, under-passes and pedestrian facilities are simply obstinacy to recognise genuine consumer needs. The state also often abdicates its role in removing encroachments and ensuring hassle-free right of way. Many Indian concessionaires have their roots in the construction business. They enter BOT highway projects for the construction revenue and not for operating a long-term asset. As a result, profit maximisation during construction is often in conflict with the desired asset lifecycle longevity. The concessionaire has little legal or police or state support to make all users pay. This is one of the reasons 20-30 per cent leakage in toll collection is not uncommon.

    These three aspects – poor design parameters, short-sighted development and collection difficulties – together create a financial pressure on the concessionaire. This is the start of the slippery slope — a story with which we all are very familiar across most Indian roads. The resultant poor O&M of roads leads to more headaches and accidents.

    Similar to ANTT of Brazil, the National Highway Authority of India (NHAI) is currently performing the role of setting O&M requirements in the concession agreements and monitoring implementation. The NHAI role in follow-up and corrective action often lags intent, leading to the known “chalta-hai” attitude.

    Is there hope for the Indian highways? Yes. There are well known, implementable solutions. However, most of these are systemic solutions requiring states and NHAI to play a bigger coordinated role:

  • NHAI needs to be strengthened for O&M supervision and related penal action. The authority should go to the extent of displaying the service levels on the road and invite comments from users of the highway. In case of continued low service levels, either the toll rate could be reduced or NHAI should appoint a third party to manage the O&M of the highway.
  • State governments need to find an effective mechanism for providing better police support.
  • A separate legal tribunal for highway-related cases should be considered.
  • NHAI and the Ministry of Road Transport and Highways need to ensure the implementation of electronic tolling systems that will not only improve throughput, but also lead to more accurate toll collection.
  • The bureaucracy will have to get used to a widely different nature of contracting. From the centuries old, lowest capital cost tender system, the bureaucracy will have to define service-level agreements and choose parties that will deliver agreed levels of service at “minimum” cost to the citizen.With 

    all these in place, the romance of a long-road journey can surely be brought back. All we need is 21st century attitudes, technologies and systems in place.

Source: business-standard.com

 

IDFC Project Equity, Ashok Piramal Group, SNC-Lavalin In $250M Tie-up

December 12, 2011

Ashok Piramal Group (APG), India Infrastructure Fund (a fund managed by IDFC Project Equity) and Canada’s SNC-Lavalin have entered into a tripartite arrangement to develop, own, construct and operate public-private partnership (PPP) road projects in India through a joint venture, the companies said in a statement today.

“The total deal value is in the range of $250 million-$300 million,” M.K. Sinha, president & CEO, IDFC Project Equity, told VCCircle.

In terms of shareholding pattern, APG-controlled Piramal Roads Infra Private Limited (PRIL) will hold 51 per cent equity stake, IIF will hold 39 per cent while SNC-Lavalin will own the balance 10 per cent.

PRIL, formed by APG as part of the group’s initiative to pursue opportunities in the infrastructure sector, is currently developing a road project in Madhya Pradesh.

Commenting on the JV, Ashok Piramal Group’s vice-chairman Rajeev Piramal said, “The group has been focused on growth and has been looking to diversify from its existing business. Our goal is to be among the leading infrastructure players in India by 2015.”

IIF, a fund floated by IDFC Project Equity, is a private sector infrastructure equity financer with an existing portfolio of seven road assets, along with its other investments in the energy, ports and urban infrastructure sectors. SNC-Lavalin is among the world’s largest engineering and construction groups and has been active in the infrastructure sector in India for more than 50 years.

According to MK Sinha, president & CEO of IDFC Project Equity, each of the three partners brings together complementary skills and capabilities. “The objectives and expectations of all three partners from this JV are such that they align our interests perfectly well. Also, this initiative is in line with our fund’s long-stated strategy of having a firm, long-term partnership arrangement to build a diversified portfolio of operating and under construction road assets.”

“The idea is to build a portfolio of road projects in excess of $1 billion over the next 3-4 years,” added Sinha. The asset management firm has already committed about $130 million into roads as part of its portfolio.

“It’s an annuity stream once the first dividend cheque comes in. We could package it and sell our fund as a listed fund. Our investment horizon is typically much longer (7-8 years), unlike private equity (3-5 years),” he said, while specifying the terms of providing liquidity to its investors.

In 2008, IDFC Project Equity, an IDFC subsidiary, raised the $930 million India Infrastructure Fund to invest in ‘core’ infrastructure assets.

There have been a slew of big private investment deals in the Indian roads and highways space as investors look to tap the infra opportunities. India may require $1.7 trillion during 2010-20, to meet the country’s overall infrastructure demand and keep pace with the economic growth and urbanisation, a report by Goldman Sachs has stated. Of this, power and roads alone may require upwards of $700 billion.

In another equity partnership for investment in roads, Morgan Stanley Infrastructure Partners and Isolux Corsán Concesiones announced an investment of $200 million each for developing highways in India under long-term concession agreements, awarded through the build-operate-transfer (BOT) programme of NHAI.

Most recently, HCC Concessions Ltd (which has six NHAI concessions) diluted 14.5 per cent stake to US-based investment firm Xander Group for Rs 240 crore.

Private equity major 3i Group has also invested $111.51 million in KMC Infratech Ltd, a subsidiary of KMC Constructions involved in BOT projects in the roads and highways sector. Other major investments in this space have been in Nandi Infrastructure Corridor Enterprises Ltd (JPMorgan) and Tata Realty & Infrastructure (Actis).

Source: vccircle.com

Govt mulls opening all PPP options

October 10, 2011

KATHMANDU, Oct 10: The government is preparing to open all Public Private Partnership (PPP) modalities by scrapping the existing Build Operate and Transfer (BOT) modality in a bid to remove legal complications and ensure involvement of Nepali investors in the Kathmandu-Tarai Fast Track Road.

“We are weighing pros and cons of all possible modalities for executing the 76-km expressway because we can´t ensure involvement of Nepali investor under BOT as per the existing Private Financing in Build and Operation of Infrastructure Act 2006,” said a high-level source at the Ministry of Physical Planning and Works (MoPPW).

The Act has specified different options — BOT, Build Operate Own and Transfer (BOOT), Build-Own-Operate (BOO) Lease Operate Transfer (LOT), Lease Build Operate and Transfer (LBOT) and Develop Operate Transfer (DOT) — to implement the project under PPP.

“Participation of more investors, including Nepalis, will be possible once we open new investment modalities, as the Act has different options for the implementation of such mega projects under PPP,” the source added.

The MoPPW had last year called international tender inviting investors having experience of implementing six-lane highway costing at least $900 million to implement the fast track road project under the BOT system. It, however, had canceled the process of selecting bidders on March 15 as per the instruction of the parliamentary Public Accounts Committee (PAC). PAC had directed the ministry to ensure at least 10 percent domestic investment, irrespective of the experience of local investors, in the project.

PAC´s direction had contradicted with the existing Private Financing in Build and Operation of Infrastructure Act 2006 and its regulations that require investors to meet certain work experience requirements to implement projects under the BOT system. It had also directed the ministry to provide at least four months for filing tender to ensure participation of higher number of aspirant firms in the bidding process.

To implement the PAC instruction, the ministry was earlier preparing to amend the Act. It had also sought necessary instruction from the high-level Project Coordination Committee of the National Planning Commission (NPC) on the implementation of the PAC´s direction.

However, the committee did not respond to the ministry´s request.

As per the Asian Development Bank´s revised estimation of 2008, the mega project costs $800 million.

Source: myrepublica.com

Bumps in road funding to be eased

December 3, 2009

NEW DELHI: The government is exploring ways to improve flow of funds to developers executing road projects by making funding of such projects
attractive for financial institutions, including insurance companies.

The panel on highway development, headed by the Planning Commission member BK Chaturvedi, is now working on the second part of its report on expediting work on the ambitious National Highways Development Project (NHDP).

“We have sorted out funding issues of the NHAI through cess and government guarantees, at least for one year. Now we have to look at the issue of financing of people who are building the roads,” Mr Chaturvedi said in an exclusive chat with ET.

The government has already accepted Chaturvedi panel’s recommendations on relaxing the norms for public-private projects (PPPs) in the road sector, continued funding of National Highways Authority of India through road cess collection and government guarantee for its borrowings.

The government has set a target of constructing 7,000 km of road annually, which translates into building 20 km of roads a day. It is planning to hand out contracts for nearly 12,000 km of highways to private developers in the next one year.

“We are examining what kind of safeguards are required to make insurance companies lend to road projects,” he said, adding that they would want the government to share risk and also give guarantees that the debts would be repaid.
The panel is still in the process of collecting information from the industry and other parties concerned and hopes to finish its report by January-end.

The government has decided to guarantee NHAI’s borrowing for the current year. The financing of NHAI in the years to come is yet to be decided. “ The empowered group of ministers set up on road financing will look at how the funding requirements of NHAI will be handled in the following years,” Mr Chaturvedi said.

Although NHAI does involve the private sector to fund projects through the build operate and transfer (BOT) mode of finance, it has its own financing needs as well.

NHAI has to invest in all projects carried on EPC or cash contract basis, which is the standard financing format in the North East and J&K where private players are not too keen to take risks because they are commercial unviable in these areas.

NHAI has to make some investments even in projects that are handed out to private road developers through the build operate transfer (BOT) basis to the extent of making them commercially viable, through what is called viability gap funding.

It has to pay an annual annuity to developers under the BOT annuity option and provide capital grant to increase viability of projects under the BOT toll option where private developers are allowed to collect toll for recovering costs and earning profits.
Source: economictimes.indiatimes.com

« Previous Page