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

PPP as a tool to use bridging fiscal gap in countries

4th

th South

uth Asi sia Re Region

• n Public

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ent Conference ference “Electronic Government Procurement (e-GP) GP) in South th Asi sia Achi hievments evments, Op Oppo portun tunities ities and d Cha hallanges anges”

20th – 23rd Feburary , 2017

Mr Rajneesh Kapoor Superintending Engineer Ministry of Road Transport & Highways Govt of India

 Ministry of Road Transport & Highways (MORTH) is an apex organization under the Central Government is primarily responsible for development and maintenance

• f National Highways.

 India has about 5.472 million Kilometer of road network

• ut of which NHs are only 1,03,933 Km.

 National Highway comprises only 2% of total road network in India but carries about 40% of the road traffic.  Road Transport is considered to be one of the most cost effective and preferred mode of transport in India, both for freight(60%) and passengers(87%).

INTRODUCTION

Road Network in India

The road network in India is second largest in World after USA. Details of road in India is as under:

Road Network of India Length (Km) National Highway (NH) 1,03933 State Highway (SH) 1,61,487 Other Roads (MDR, ODR & VR) 52,07,044 Total Length 54,72,464

Implementation modes for NH Projects in India

• National Highways Authority of India (NHAI)
• State Works Dept (PWD)/ State Road Development

Corporations

• Border Roads Organization (BRO)
• National Highways Infra Dev Corp Ltd. (NHIDCL)

Implementation agencies for NH projects

• Build Operate Transfer (BOT) Toll (PPP)
• BOT Annuity (PPP)
• Hybrid Annuity (PPP)
• EPC (Public funded)

Implementation modes for NH projects

• NHDP (National Highways Development Project)-48298 km
• SARDP–NE(Special program for North East)
• 7611 km
• LWE (Left Wing & Extremist affected areas)
• 1770 km
• National Highway Interconnectivity Improvement

Programme (NHIIP) under World Bank Loan Assistance

• 1120 km

Total 58799 Km

• Development of remaining NHs of length 45134 Km are

taken up under NH(O) scheme through Budgetary support

• f Govt of India

Programme for road development in India

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

Phases of NHDP

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

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Status of NHDP

NHDP Phase Mode Length (Km) Awarded/ under implementation

(Km)

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

 To meet with the massive requirement of funds, innovative means of financing have been adopted by Govt of India.  Special financing strategies are needed, as raising adequate resources from budgetary resources alone is very difficult.  The details of fund raised from various sources is as under:

• Cess on diesel and petrol: A cess of Rs 6 per liter is levied for

road development.

• NHAI (Toll Remittance)-Toll to be collected from completed

stretches

• Market borrowings on the strength of future inflow in

cess/Toll: Funds are raised from Bonds issued by NHAI

• Avail long term external loans from the World Bank, ADB

& JICA.

• Budgetary resources of Govt of India
• public private partnership (PPP)

FINANCING OF VARIOUS PROGRAMMES

Public Private Partnership in India

• Build Operate Transfer (BOT) Toll (PPP)
• BOT Annuity (PPP)
• Hybrid Annuity (PPP)
• EPC (Public funded)

Implementation modes for NH projects

• BOT(Toll) is the Default Mode
• Earlier, the projects not viable on BOT(Toll) were taken up
• n BOT Annuity (PPP).
• Now Govt has adopted a new Model HAM in 2015.
• Projects not viable on BOT(Toll) are taken up on Hybrid

Annuity Model(HAM)

• When no response is received on BOT(toll) and HAM then

projects are taken up on EPC Mode.

Preference of Mode

Public Private Partnership in India- BOT (Toll)

• Concessionaire construct the road and recovers the cost

through collection of toll revenue during concession period maximum upto 30 year.

• Viability Gap Funding (VGF) maximum up to 40% of Total

Project cost (TPC) paid to concessionaire by Authority during construction period in 5 installments linked to project milestones.

• Remaining project cost is recovered by concessionaire

through collection of toll revenue during operation period

• Concessionaire

maintains the road during

• peration

period.

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BOT(Toll) Project

VGF support upto 40% of TPC by Govt. Balance Project Cost to be arranged by Concessionaire for Financial Close COD

• 1. Toll revenue to be retained by

concessionaire

• 2. Interest payments (on reducing

balance @ Bank Rate + 2.5%)

Construction Period Operations Period

Toll collection by Concessionair e O&M by Concessionaire

BOT(Toll)Model

Bid Parameter – VGF quoted Concession Period

Public Private Partnership in India- BOT(Annuity)

• Concessionaire construct the road and recovers the cost

through Annuities paid semi annually after completion of construction and during operation period (maximum upto 17.5 year).

• Construction risk with concessionaire.
• Authority collects toll.
• O&M responsibility is with concessionaire.
• Authority has to pay annuities during operation period

hence payment liability deferred during construction and paid in installment during operation period.

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BOT(Annuity) Project

No Construction Support by Govt. 100% of Project Cost arranged by Concessionaire for Financial Close COD

• 1. Annuity payments (biannually)

for 15 years

• 2. Interest payments (on reducing

balance @ Bank Rate + 2 %)

Construction Period Operations Period

Toll collection by Govt. O&M by Concessionaire

BOT(Annuity) Model

Bid Parameter–Semi Annuity quoted Concession Period

The Model

▪ This is a new Model Adopted by Govt In 2015. ▪ 40% of Project Cost paid to Concessionaire by Authority during

construction period in five equal instalments linked to project milestones.

▪ Balance 60% of Project Cost to be brought in by Concessionaire ▪ Investment recovered by Concessionaire through Annuity payments

• ver 15 years along with interest @ Bank Rate + 3 %.

▪ O&M

responsibility is with Concessionaire, who receives O&M payments bi-annually along with Annuity payments.

▪ Authority collects toll and Concessionaire remains insulated from Toll

Revenue Collection Risk.

▪ Project payments are inflation indexed.

Hybrid Annuity Model

• This is a new innovative Model in which Annuities paid to

concessionaire are not equal but increases with time.

• This helps to reduce the pressure on budgetary

resources initially since annuity amount increased with time to match the budgetary resources (2.1% to 4.75% of balance cost).

• Separate provisions exist for O&M payments to the

concessionaire from the Authority.

• Toll collection shall be the responsibility of the Authority.
• As of now 30 projects are awarded on HAM mode out of

which 9 has achieved financial close, which will be started shortly .

Hybrid Annuity Model – salient features

Annuity payment schedule – Pre determined

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

100%

Hybrid Annuity Project

40% of Project Cost (Construction Support) by Govt. 60% of Project Cost arranged by Concessionaire for Financial Close COD

• 1. Annuity payments (biannually)

for 15 years

• 2. O&M payments
• 3. Interest payments (on reducing

balance @ Bank Rate + 3%)

Construction Period Operations Period

Toll collection by Govt. O&M by Concessionaire

Hybrid Annuity Model

Bid Parameter – NPV of the quoted Bid Project Cost + NPV of the O&M Cost for the entire Operations period

 All the 3 modes of PPP is very useful in bridging the fiscal gap in budget of country.  In BOT(Toll) Mode, government has to pay only 40% of project cost and project will be constructed and maintained by concessionaire for maximum period of 30 year.  In HAM mode, government has to pay only 40% of project cost during construction period and remaining as semi annual annuities during 15 year operation period and project will be constructed and maintained by concessionaire for period of 17.5 year.  In BOT(Annuity) mode, government has to pay semi annual annuities during 15 year operation period and project will be constructed and maintained

by concessionaire for period of 17.5 year.

PPP as a tool to use bridging fiscal gaps in countries

Road Development on PPP in India

 Putting investment through PPP is enabling reduced dependence on public expenditure for infrastructure projects.  In India, 30% (approx) funds for NHs are being raised through PPP and 30% through (approx) Internal borrowing like NHAI Bonds.  Highway sector in India has effectively used the PPP route and presently, 39000 Km length of National Highways are being developed on PPP basis in India.  259 projects with a length of 22225 Km is already awarded on PPP basis.  The details are as under:

Total projects awarded 259 No. Total Length awarded 22225 Km Length Completed 7566 Km Length under Implementation 14659 Km Total Project cost of awarded project US$ 28.84 Billion

Allocation/Expenditure for NHs

Financing Scheme Funds Raised (2014-15) Funds Raised (2015-16) Expenditure upto Jan 17 (2016-17) Cess on diesel and petrol Rs 15923 cr Rs 34257cr Rs 25001 cr NHAI (Toll Remittance) Rs 5448 cr Rs 6500 cr Rs 7500 cr Avail long tern external loans from the World Bank, ADB & JICA. Rs 138 cr Rs 547 cr Rs 171cr Budgetary resources of Govt of India under NH(O) Rs 5292 cr Rs 4216cr Rs 4010 cr Market borrowings on the strength of future inflow in cess/Toll Rs 3343cr (7%) Rs 23281cr (23%) Rs 27831cr (36%) public private partnership (PPP) Rs 19232 cr (38%) Rs 29770 cr (30%) Rs 11277 cr (15%) Total investment for NH in India Rs 49376 cr Rs 98571 cr Rs 75790 cr

Advantages of PPP

 Timely Completion  Value for Money  Whole life asset performance

• Private entity takes responsibility & assumes

risk for the performance of the asset and delivery of service over a long term

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Delhi Gurgaon- PPP Project BOT (Toll)

Jammu-Udhampur PPP Project- BOT(Annuity)

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