DEVELOPMENT & MANAGEMENT OF INDUSTRIAL AREAS IN DELHI UNDER PUBLIC PRIVATE PARTNERSHIP MODEL

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DEVELOPMENT MANAGEMENT OF INDUSTRIAL AREAS IN
DELHI UNDER PUBLIC PRIVATE PARTNERSHIP MODEL
DEPARTMENT OF INDUSTRIES G o v e r n m e n t o
f N a t i o n a l C a p i t a l T e r r i t
o r y o f D e l h i
FEBRUARY, 2010
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PRESENTATION STRUCTURE
Background
Project Contours
Implementation Models - Options
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PRESENTATION STRUCTURE
Background
Project Contours
Implementation Models - Options
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BACKGROUND

• Dept of Industries (DoI), GNCTD DSIIDC are the
  key agencies for development of Industrial
  Infrastructure
• Delhi has 29 Industrial estates maintained by DoI
  / DSIIDC / MCD / other agencies
• Given the ageing and usage of infrastructure
  facilities in these industrial estates, need for
  infra up-gradation and its maintenance
• 4 Estates have been selected as Pilot Projects
  Okhla, Patparganj, Bawana Narela
• Objective
• Up-gradation / augmentation, managing, operating
  and maintaining of infrastructure facilities in
  an integrated manner
• Efficient and Sustainable Operation Maintenance
  of Infrastructure Facilities
• Ensuring high level of performance standards
• DoI has appointed Project Advisors (IDFC) who
  have completed feasibility study - projects
  structured as PPP projects

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PRESENTATION STRUCTURE
Background
Project Contours
Implementation Models - Options
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LOCATION OF INDUSTRIAL ESTATES
NARELA INDUSTRIAL AREA

• Narela and Bawana are similar developments
• Recent Industrial Estates- Narela (1980) Bawana
  (2000) - North West of Delhi
• Manufacturing Industries
• Managed by DSIIDC

BAWANA INDUSTRIAL AREA
PATPARGANJ INDUSTRIAL AREA

• Okhla and Patparganj are similar developments
• Older Industrial Estates- Okhla (1958)
  Patparganj (2000) - South East of Delhi
• Limited manufacturing and services (BPOs, IT etc)
  
• Managed by DSIIDC

OKHLA INDUSTRIAL AREA
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INDUSTRIAL ESTATE PROJECT COMPONENTS
Infrastructure It refers to the infrastructure
component of the estate such as Roads, drainage,
water supply, waste water, solid waste, parking,
horticulture
Facilities It refers to the real estate component
that can be commercially exploited, and can be
used to cross subsidize the expenditure on
infrastructure
Provided in subsequent slides are the details of
each component for Industrial estate
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PRESENTATION STRUCTURE
Background
Project Contours - Narela
Implementation Models - Options
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NARELA INDUSTRIAL AREA Status

• Road
• Total Length 27488 mts Area 4.76 Lacs sqmt
• All internal roads to be constructed Bituminous
  using existing sub-grade

• Sewage / Effluent Collection Treatment
• Total Length of conveyance system 27488 mts
• CETP 22.50 MLD (Operational)

• Street Lighting
• Total Street Lighting poles 916
• Combination of 150 W, 250 W, 400 W

• Storm Water Drainage
• Total Length of drainage network 55000 mts
• Mix of brick masonry RCC drains

• Parking
• No developed parking lots
• Available Plots
• Car 55 lots, Area 21968 Sqmt, 1080 ECS
• Truck 4 lots, Area 17860 Sqmt, 300 Bays

• Water Supply
• System Designed for 11 MLD
• Length of Distribution network 32030 mts
• Available total storage capacity 3.82 ML
• Source 12 nos. tube wells

• Horticulture
• Large Parks 9 Nos. (31.00 Acres)
• Small Parks 9 Nos. (6.20 Acres)
• Green Belt 25.00 Acres

• Municipal Solid Waste
• Total municipal waste generated / day 20 MT

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NARELA INDUSTRIAL AREA Project Scope (1/2)
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NARELA INDUSTRIAL AREA Project Scope (2/2)
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PRESENTATION STRUCTURE
Background
Project Contours
Implementation Models - Options
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OPTIONS TO DEVELOP THE INDUSTRIAL ESTATE

• DSIIDC will develop, operate and maintain the
  estate as it has been doing traditionally
• Only infrastructure would be developed ( Rs.139
  crores) and not facilities (cost over Rs.300
  crores)
• Full cost of service to be recovered through
  industry - no possibility for cross-subsidization
  through revenues earned from real estate

• DSIIDC will involve the private sector for
  project development Private sector brings in
  majority of the capital to develop the
  infrastructure and facilities.
• Revenues from facilities to cross subsidize
  service to industry.
• Since project is prime responsibility of DSIIDC,
  government participates in the form of JV
  leverages private capital (74) and efficiencies
  - yet maintains control over operations

• DSIIDC will involve the private sector for
  project development Private sector brings in
  100 capital to develop the infrastructure and
  facilities.
• Revenues from facilities to cross subsidize
  service to industry.
• DSIIDC grants concession to private partner
  leverages private capital and efficiencies
  concession governs performance

PPP Options
These options have been evaluated in the
subsequent slides
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OPTION 1 DEVELOP THROUGH DSIIDC

• DSIIDC will develop estate on its own as it has
  been doing traditionally
• No cross-subsidization from facilities because
  Government will require Rs.300 Crore of
  additional cash infusion over next 2-3 years,
  infrastructure will require Rs.100 Crore of cash
  infusion over next 2 years
• Less efficiency There is a maintenance charge
  proposed to be levied from 3rd year onwards.
  Governments collection efficiency would be far
  less then the private player, leading to more
  payouts from the Industry or higher revenue
  deficit by DSIIDC
• Precedence DSIIDC has been developing and
  maintaining the estates so far however, the
  sustained augmentation and maintenance of estates
  cannot be consistently ensured.
• Provided below are financials of the project
• For 12 IRR, provided below is the required
  maintenance charges for similar service by
  DSIIDC
• Total Cost of Infra Rs. 139 Crores
• Industry will not pay heavy maintenance charges,
  which will be essential to make the project
  viable if the Government opts for developing
  estates through DSIIDC.
• e.g. in Okhla the plot sizes vary from 200 sq.
  mt. to 4000 sq. mt. and the Maintenance charges
  may vary from Rs.3000 p.m. to Rs.96000 p.m.

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OPTION 2 3 PPP OPTIONS

• There are 2 PPP options and can be evaluated on
  the following parameters
• Returns for Government
• Risk for Government
• Bankability and Financial Viability
• NO TRANSFER OF ASSETS FROM DSIIDC IN BOTH
  OPTIONS.

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PROJECT INVESTMENTS FOR OPTION 2 3

• Concession Period
• 30 years
• Charges
• User charges are levied for water (as per DJB
  charges), waste water and solid waste management
• A maintenance charge of Rs. 10/sq m with a cap of
  Rs. 10,000 is levied on the industry owners.
• Key Financial Parameters
• Pre-Tax Project IRR of 21 by private sector
• Benefit for DSIIDC/GNCTD as given below

TOTAL CAPEX Rs. 441 Crores
TOTAL ANNUAL RECEIPTS Rs 4 Crores
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ALTERNATE PROJECT INVESTMENTS FOR OPTION 2 3

• Concession Period
• 30 years
• Charges
• User charges are levied for water (as per DJB
  charges), waste water and solid waste management
• A maintenance charge of Rs. 10/sq m with a cap of
  Rs. 10,000 is levied on the industry owners.
• Key Financial Parameters
• Pre-Tax Project IRR of 21 by private sector
• Benefit for DSIIDC/GNCTD as given below

TOTAL CAPEX Rs. 514 Crores
TOTAL ANNUAL RECEIPTS Rs 4 Crores
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ALTERNATE PROJECT INVESTMENTS FOR OPTION 2 3

• Concession Period
• 30 years
• Charges
• User charges are levied for water (as per DJB
  charges), waste water and solid waste management
• A maintenance charge of Rs. 10/sq m with a cap of
  Rs. 10,000 is levied on the industry owners.
• Key Financial Parameters
• Pre-Tax Project IRR of 21 by private sector
• Benefit for DSIIDC/GNCTD as given below

TOTAL CAPEX Rs. 514 Crores
TOTAL ANNUAL RECEIPTS Rs 4 Crores
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IMPLEMENTATION MODEL Option - 2
SPV with 26 shareholding by DSIIDC - gets 30
year concession
Maintenance Board with members from DI / DSIIDC
/ Ind Assoc. / DPCC SPV - Reviews Compliance
of Agreement with the IC
Dept of Industries / DSIIDC (Concessioning
Authority)
Empowerment of SPV to levy charges by way of
Notification
Appoints Concessionaire

• Roles Obligations of SPV Arrangement of Finance
• Preparation of DPR for project implementation
• Develops / upgrades / augments Infra as per DPR
• OM of Infra services as per performance
  standards defined in Con Agreement
• Develops facilities in compliance to statute/CA
• Payments and Compliance of all terms of CA
  other Authorities / agencies
• Payment of Ground Rent for facility plots (as
  appl.)

• Rights of SPV
• Collection of tariff for Water, Waste Water
  MSWM
• Collection of Maintenance Charges for roads,
  drainage, street lighting, horticulture etc
• Income from leasing of facilities area
• Advertisement Rights (as per MCD Policy)
• Collection of Parking Fees

Concessionaire forms SPV, DSIIDC holds 26 Equity
DSIIDC will provide cash equity as per financial
closure thereafter maintain 26 in
consideration of land / concession
BID VARIABLE Net ( or -) Financial
Consideration Amount to or from Concessioning
Authority (CA) as Concession fee / Annuities
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IMPLEMENTATION MODEL Option - 3
30 years concession granted to private party
Maintenance Board with members from DoI / DSIIDC
/ Ind Assoc. / DPCC SPV - Reviews Compliance
of Agreement with the IC
Dept of Industries / DSIIDC Concessioning
Authority
Empowerment of SPV to levy charges by way of
Notification
Appoints Concessionaire

• Roles Obligations of SPV
• Arrangement of Finance
• Preparation of DPR for project implementation
• Develops / upgrades / augments Infra as per DPR
• OM of Infra services as per performance
  standards defined in Con Agreement
• Develops facilities in compliance to statute/CA
• Payments and Compliance of all terms of CA
  other Authorities / agencies
• Payment of Ground Rent for facility plots (as
  appl.)

• Rights of SPV
• Collection of tariff for Water, Waste Water
  MSWM
• Collection of Maintenance Charges for roads,
  drainage, street lighting, horticulture etc
• Income from leasing of facilities area
• Advertisement Rights (as per MCD Policy)
• Collection of Parking Fees

Concessionaire (can induct other partners)
SPV could have PE / FDI possible
BID VARIABLE Net ( or -) Financial Consideration
Amount to or from Concessioning Authority (CA) as
Concession fee / Annuities
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PPP OPTIONS COMPARISION
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OTHER KEY VARIABLES

• Revenue Streams from Infrastructure and
  facilities
• Water Charges (Volumetric, similar to DJB tariff
  structure)
• Sewerage Charges (Volumetric, benchmark with
  tariff structure of model IA)
• Municipal Solid Waste Management (Flat Rate and
  as per plot size usage)
• Maintenance Charges (Rs 10 / sqmt / month on plot
  size with maximum charge rate of Rs 10,000 p.m.)
• Parking Charges (similar to MCD rates)
• Advertisement Revenue, as per market rate
• Revenue from leasing of facilities
• Revenue from developed kiosks in green / open
  areas)
• Revenue from developed nurseries in green belts,
  public toilets etc.
• In Case of SPV with DSIIDC, shareholder Agreement
  to set out terms relating to end of term ex.
  winding up , buyout at nominal value etc.
• CA to define scope of work, performance standards
  for OM of infra assets
• All facilities will be leased by IDO on sub-lease
  format, no sale will be allowed

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INVESTORS FEEDBACK

• Lot of interest was shown in the project by the
  market, with a many potential investors attending
  the pre-bid and expressing their willingness to
  participate in the project
• 14 Players attended the pre-bid meet
• Key concerns of the investors
• Mechanism of empowering the SPV to collect the
  charges. Developer should be given such
  authority, in the case of default by the
  industries, to recover the amounts. DSIIDC on its
  part, as a partner in JVC, should invoke revenue
  recovery act and support in recoveries in such
  cases
• Key suggestions from the investors
• SPV model shall be useful for faster
  implementation and better coordination of the
  project instead of pure BOT model
• Concession period should be perpetual for 95
  years or initially for 30 years and extendable up
  to 90 years keeping the terms conditions
  unaltered
• There should be a provision of review of serve
  fees after certain period say every 8-10 years
• Providing Infrastructure status to the project
  for Income Tax purposes (for that the SPV will
  have to approach Central Board of Direct Taxes)
• State support incentives to the Developer such as
  sales tax exemption on all inputs, exemption of
  stamp duty and registration fees on transfer of
  land and on project agreements registered in the
  state, waiver of land conversion charges and
  building plan approval fees etc

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INVESTORS FEEDBACK

• Potential investors who attended meet
• Shapoorji Pallonji Co Ltd
• Jamshedpur Utilities and Services Company Limited
  (JUSCO)
• IVRCL Infrastructure Projects Ltd.
• Soma Enterprise Ltd
• IRCON
• DS Construction
• Ahluwalia Contracts (I) Ltd
• C C Construction Ltd
• Ramky Infrastructure Limited
• Jindal Water Infrastructure Ltd.
• Subhash Projects and Marketing Limited (SPML)
• UEM India Limited
• Omaxe
• Dura-Line India Pvt Ltd

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WAY FORWARD

• DSIIDC to be assigned rights by MCD to further
  assign to the Concessionaire in Okhla and
  Patparganj for road side parking, advertising
  rights and establishment of kiosks in open areas
  and to maintain street lighting.
• In Patparganj, the bulk charge rate of water will
  have to be decided between DSIIDC and DJB.
• Notification of user charges by GNCTD including
  maintenance charges being levied. The maintenance
  charge is a reasonable levy to recover cost of
  services and is a subsidized amount. For
  freehold cases, levy can be done if a policy
  notification by GNCTD backs executive action by
  DSIIDC to permit such a levy.
• Preparation of bid documents and conducting a
  transparent and competitive selection of bidder.
• Approvals from the cabinet sought with regard to
  permitting DSIIDC to develop and operate the
  project under a BOT Concession with a private
  partner for 30 years and take a 26 shareholding
  in the Special Purpose Vehicle (SPV)

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THANK YOU
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PRESENTATION STRUCTURE
Background
Project Contours - Bawana
Implementation Models - Options
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BAWANA INDUSTRIAL AREA Status

• Road
• Total Length 34560 mts Area 5 Lacs sqmt
• CC Roads are being constructed currently
  contract inclusive of 5 years maintenance

• Sewage / Effluent Collection Treatment
• Total Length of conveyance system 140563 mts
• 3 nos. intermediate Sewage Pumping stations
• CETP 35 MLD (Non Operational)

• Storm Water Drainage
• Total Length of drainage network 1,40,563 mts
• Mix of brick masonry RCC drains

• Municipal Solid Waste
• Total municipal waste generated / day 73 MT

• Parking
• No developed parking lots
• Available Plots
• Car 4 lots, Area 33600 Sqmt, 1460 ECS
• Truck 4 lots, Area 47000 Sqmt, 1175 Bays

• Water Supply
• System Designed for 28 MLD
• Length of Distribution network 1,25,000 mts
• Available total storage capacity 11.35 ML
• Source 12 nos. tube wells

• Horticulture
• Large Parks 24 Nos. (47.18 Acres)
• Small Parks 101 Nos. (30.14 Acres)
• Green Belt 185.39 Acres

• Street Lighting
• Total Street Lighting poles 8414
• Combination of 150 W, 250 W, 400 W

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BAWANA INDUSTRIAL AREA Project Scope (1/2)
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BAWANA INDUSTRIAL AREA Project Scope (2/2)
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PRESENTATION STRUCTURE
Background
Project Contours - Patparganj
Implementation Models - Options
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PATPARGANJ INDUSTRIAL ESTATE Status

• Road
• Total Length 8678 mts Area 0.76 Lacs sqmt
• All internal roads are Bituminous needs
  rehabilitation / repair

• Sewage / Effluent Collection Treatment
• Total Length of conveyance system 10000 mts
• No CETP / STP, outfall in nearby drain
• 2 nos. Intermediate sewage pumping stations

• Storm Water Drainage
• Total Length of drainage network 19042 mts
• Mix of brick masonry RCC drains

• Municipal Solid Waste
• Total municipal waste generated / day 8 MT

• Parking
• No developed parking lots
• Available Plots
• Car 7 lots, Area 10264 Sqmt, 640 ECS
• Truck 1 lot, Area 4055 Sqmt, 100 Bays

• Water Supply
• Current Demand 5.45 MLD
• Length of Distribution network 10000 mts
• Available total storage capacity 2.25 ML
• Source DJB Supply (erratic)

• Horticulture
• Small Parks 3 Nos. (2.73 Acres)
• Green Belt 4.84 Acres

• Street Lighting
• Total Street Lighting poles 364
• Combination of 150 W, 250 W, 400 W

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PATPARGANJ INDUSTRIAL ESTATE Project
Scope (1/2)
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PATPARGANJ INDUSTRIAL ESTATE Project
Scope (2/2)
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PRESENTATION STRUCTURE
Background
Project Contours - Okhla
Implementation Models - Options
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OKHLA INDUSTRIAL ESTATE Status

• Road
• Total Length 9200 mts Area 0. 61 Lacs sqmt
• All internal roads are Bituminous needs
  rehabilitation / repair

• Sewage / Effluent Collection Treatment
• Total Length of conveyance system 4384 mts
• Connected to Okhla STP
• 2 nos. Intermediate sewage pumping stations

• Storm Water Drainage
• Total Length of drainage network 19000 mts
• Mix of brick masonry RCC drains

• Municipal Solid Waste
• Total municipal waste generated / day 8 MT

• Water Supply
• Current Demand 2.84 MLD
• Length of Distribution network 6148 mts
• Source DJB Supply

• Parking
• No developed parking lots
• Available Plots
• Car 8 lots, Area 19320 Sqmt, 1080 ECS

• Street Lighting
• Total Street Lighting poles 427
• Combination of 150 W, 250 W

• Horticulture
• Large Parks 2 Nos. (3.35 Acres)
• Small Parks 3 Nos. (0.33 Acres)
• Green Belt 2.98 Acres

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OKHLA INDUSTRIAL ESTATE Project Scope (1/2)
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OKHLA INDUSTRIAL ESTATE Project Scope (2/2)
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Governments Contribution as Equity
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Quantum of User Fee Payable