Public Private Partnerships in Tamil Nadu: Experiences and Outlook

1
Public Private Partnerships in Tamil Nadu
Experiences and Outlook
2
Roadmap

• Existing Institutional Environment for PPPs
• Recent PPP Experiences
• Upcoming PPP Projects
• Issues for Discussion

3
Institutional Environment - Enablers

• While there is no specific law or policy
  framework for PPP in TN, private sector
  participation is being sought in select sectors
  like SEZs, AEZs, agricultural marketing, tourism,
  housing and urban services
• Drivers GOI policies (e.g. terminal markets,
  viability gap funding) and public sector capacity
  issues
• Institutional elements TNUIFSL and NTADCL kind
  of organizations
• Political climate not averse to PPPs in certain
  areas
• Mixed success stories Alandur sewerage
  project, Tirupur water supply project, Coimbatore
  bypass, East Coast Road, SWM privatization in
  Chennai

4
Institutional Environment - Bottlenecks

• Absence of a specific PPP enabling law or policy
• Political indifference to PSP
• Bureaucratic distrust of private sector
  unwilling to share risk, leading to unbalanced
  terms
• Legacy of witch-hunting
• Lack of capacity to engage private sector (e.g.
  in preparing bid documents, drafting contracts
  and enforcement) e.g. tourism project
• No shelf of projects lack of clarity on how to
  deal with unsolicited proposals (say through
  Swiss-challenge) or what PPP model to apply
• Crowding out effect of robust state finances and
  huge capital investments
• Propensity for grant based funding in contrast to
  more efficient financing models e.g. roads
  infrastructure project
• Multiplicity of agencies impinging on a project
  absence of single-window approach
• Bitter experiences of past PPP contracts e.g.
  Karur toll bridge, Coimbatore bypass

5
Recently Completed Project 1 Alandur
Underground Sewerage

• Sector Sanitation Underground sewerage
  treatment
• Size 12 MLD
• Location Alandur (outskirts of Chennai)
• Cost/Value Rs.34 cr, including STP for Rs.8 cr.
• Duration 5 years concession period 13 years
• Key Players Concessionaire (IVRCL), ULB
  (Alandur), MAWS deptt, TUFIDCO and TNUDF
• PPP model adopted BOT for STP
• Outcome Working, with some outstanding dispute

6
ALANDUR UNDERGROUND SEWERAGE SCHEME
7
Recently Completed Project 1 Alandur
Underground Sewerage

• Project Cost Rs.34 cr
• Initial tariff Rs.150 per house per month
• TNUDF organized peoples participation through
  deposits _at_ Rs.5000 per house and generated
  Rs.14 cr
• STP bid out on BOT arrangement
• With this, tariff reduced to Rs.75 per house per
  month
• Crucial role of Project Champion in the form of
  the Chairman, Alandur Municipality
• Support from Government
• The Alandur model is being adopted with some
  modifications (DBOT) and learnings (providing h/s
  connections as part of project) in other towns
• Contract structuring important (e.g. decision to
  entrust collection system EPC to same BOT
  operator for STP)

8
Recently Completed Project 2 Karur Toll Bridge

• Sector Road (Bridge)
• Size lt 1 km
• Location Karur
• Cost/Value Rs.16 cr
• Duration About 2 years Concession period 13
  years
• Key Players Concessionaire (ECCI), ULB (Karur
  Municipality), MAWS deptt, TNUDF
• PPP model adopted DBOT
• Outcome Failed

9
Recently Completed Project 2 Karur Toll Bridge

• TNUDF facilitated the first toll bridge
  contracted by a ULB in India cost Rs.16 crore
  under DBOT arrangement
• TN State Toll Act amended to facilitate ULB to
  enter into DBOT contract stable regulatory
  framework
• Predictable cash flows ensured project
  structuring
• However, damage to bridge approach road during
  rains gave pretext to Government to terminate
  contract without compensation

10
Upcoming Project 1 Energy-saving using ESCOs

• Sector Energy
• Existing Situation High energy costs in street
  lighting and water pumping
• Proposed Solution Implementation of
  energy-saving measures
• Government Agencies Involved Commissioner of
  Municipal Administration, Urban Local Bodies,
  TNUDF
• Size 29 towns
• Cost/Value Indeterminate
• PPP model envisaged DBOOT through Energy Saving
  Companies (ESCOs) Shared savings model

11
Upcoming Project 1 Energy-saving using ESCOs

• Structuring the project IGA and bid evaluation
  criteria a challenge, given limited past
  experience (first of its kind)
• Benefit of a partner NGO (Alliance to Save
  Energy)
• Now a BEE manual for bid process put in place
• ULBs buy-in took time several rounds of
  discussions including 4 pre-bid meetings
• Contentious issues raised by ESCOs, especially on
  bid evaluation parameters and baseline
• IGA may reveal non-implementability
• Complaints on performance may derail the project,
  despite clear performance indicators and 3rd
  party oversight

12
Upcoming Project 2 Old Prison Land Project

• Sector Real Estate
• Existing Situation Old Prison land vacated and
  proposed to be handed over to Chennai Metro Rail
  Ltd for commercial exploitation to augment
  capital
• Proposed Solution Lease out to private sector
  for creating commercial complex, MLCP and public
  park
• Government Agencies Involved Special Initiatives
  deptt, Prison deptt, CMRL, TNUIFSL
• Size 12 acres approx.
• Cost/Value Around Rs.600 crore
• PPP model envisaged DBOOT

13
Old Prison Land - Chennai
14
Upcoming Project 2 Old Prison Land Project

• Government commitment and political support
• Competing demands from other agencies (e.g.
  Health department for expansion of Govt Hospital)
• Locational factors like access to land, proximity
  to slums and river/canal (CRZ, pollution)
• Market demand and bid price
• Design of project being subject to Govt clearance
• CMDA regulations under Master Plan/DDP
• Upcoming transportation projects like Chennai
  Metro, Port Connectivity corridor, Central-Egmore
  railway link
• Competence of the concessionaire to complete
  project as per schedule and market / maintain it
  for the duration

15
Issues for Discussion

• What kind of a PPP model should be adopted in
  this case?
• How should this project be structured?
• How can we go about gathering stakeholder and
  political commitment?
• What are the perceived bottlenecks to this
  project?
• What other international / national experiences
  can we draw upon?
• How to ensure transparency in the bidding
  procedure?
• How to select a competent bid process manager
  and how to fund its cost?
• What are the safeguards that need to be built
  in into the project to secure the legitimate
  interests of the agency and the private sector
  operator / concessionaire?

16
Thank You