Friday, April 22, 2011

Key Take-aways from 7-day Training at IIM-A on PPP

1. PPP is not only for Physical Infrastructure like Roads but also being made applicable to social sectors like school education and district hospitals. Planning Commission is in an advanced stage in finalising CBSE English Medium Class 12 models. Also for Rural roads.
2. All projects may be theoretically done through PPP in the Annuity Model (PFI) but as a rule of thumb, not more than 16% payments through Annuity should be encouraged.
3. PPP are infrastructure service contracts. The Private Player capital should also be at risk. JVCs are discouraged. However, guidelines also exist for JVCs. For 11% equity, a Director is there on Board. For 26% equity, a blocking resolution strength occurs.
4. Even State Govt PPP projects are encouraged to be subjected to GoI Committee approval. This is a must if VGF is sought for.
5. Termination arrangements typically envisage 90% of outstanding debt after construction phase is over. Cocession period is sometimes extended by 1 year if traffic volume is less by 1%, subject to a max. Revenue share if more traffic growth occurs.
6. PPP projects take about 1 yr to finalise & award concession agreement but another 6 months for financial closure.
7.  EPC, as distinct from Item Rate Contracts, are also emerging where output standards (eg roughness of road or 'no-more-than-5-vehicles-in-queue-at toll-plaza ) type can be specified and tenders obtained. Some guidelines are available on Planning Commission website.
8. OMT Contracts for 15 year periods are also emerging.
9. A specialised PPP cell in State Govt needs to be activated
10. Land is not leased or mortaged in PPP projects. Land must come back to Govt at end of Concession Period.
11. For delay in handing over land, Rs. 50 per day per 1,000 sq m is sometimes paid by govt
Road density is 111/100 sq km in India (2009).
12. In PPP, Govt is not the Employer.
13. Regulators can be regulated too; rent seeking is a problem
14. Competitors in bids should not have more than 5% common equity
15. Traffic risk should be with conessionaire; VGF for equity support
16. 3Is: Instruments, Institutions, Individuals
17. There is great disparity in PPP norms across sectors
18. Time keeper & monitoring, monitoring outputs key element of contract: constant watch
19. In pvt sector, construction efficiency is better with a time-bound cost plus strategy (GMR)
20. Force Majeur is not defined anywhere; it is different in each agreement
21.

1 comment:

  1. Today morning, each of our Syndicate Group members were asked to mention two take-aways. I told the following:
    1. Even Regulators can be influenced. So, post concessionaire MIS information flow and monitoring is necessary.
    2. Exposure to PPP in emerging social sectors of Health & Education was valuable.

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