Traffic trigger re-equilibrium discount

It is a conditional clause in the PPP highway contract.

If traffic increases beyond a limit, the private developer is
required to increase road capacity to maintain minimum
level of service.
Another conditional clause in PPP highway
agreement.
If the private developer cannot provide minimum level
of services to road user, hell have to reduce the toll-
fees.
1. In India, Initial PPP projects were successful (early 2000s), because private companies finished within
deadline. Many highways, ports, airports successfully working.
2. With booming Indian economy (before sub-prime crisis), the private companies started overleverage
i.e. creating assets on borrowed money beyond a sustainable level. Even companies with modest balance
sheets started bidding for big PPP projects beyond their aukaat.
3. They had hoped, the booming economy would reward their risk taking ability e.g. lot of highway traffic
= well mint crores via toll collection.
4. They had hoped even in worst case scenario, Government would redraw the PPP contracts extending
deadlines or allowing them to collect more toll charges.
5. But with subprime crisis, global economic slowdown, these companies couldnt finish projects on time,
OR sustain the losses (because expected traffic did not come.)
6. They couldnt raise fresh loan / equity /capital / finance because of the slowdown.
7. Government did not help them. In fact Government aggravated the problem by stalling environment
clearance, policy paralysis, corruption, rent seeking etc.
8. Even when PPP contracts were redrawn, matter was stuck in courts because of corruption allegations.
9. Result= #epicfail, bank NPA increased.
2. overleveraged companies cant finish highway projects, so
o simplify corporate debt market regulation, to help them get fresh capital
o Allow them to EXIT, let new player takeover the project.
3. Highway tolls should have correlation between
o reasonable profit for the private player
o users capacity to pay
4. Setup a Separate institute for designing PPP contracts. (Budget 2014 implemented this)
5. Division of work
o infrastructure construction work should be handed over to giant companies having expertise in
construction
o After the asset is built, the operation work / toll collection work should be given to another company
having expertise in operation part.
Budget 2014 Solution?
1. Budget 2014 announced new institution called 3P India (500 cr provided)
2. 3P India will ensures proper PPP contract-making with proper grievance
redressal mechanism
3. 3P India will not provide funding / finance to any PPP projects.
Shipping reforms
1. Main problems: ageing fleet, manpower shortage.
2. While India made great success metro rails and airport infra. but shipping
infrastructure has been neglected.
3. India does not have world class ports.
4. Third-generation ships are not able to enter the harbour. Their goods have to be
offloaded in Srilanka, then sent to India in smaller ships.
5. Indias port charges are considerably higher than in many developed countries.
6. Port congestion, delay in turnaround, takes lot of paperwork to load/unload cargo,
slow process of customs clearance, inadequate road and rail connectivity
7. There is urgent need to replace our ageing ships with new ones. But Government-
owned shipyards like Visakhapatnam are not receiving new orders due to global
slowdown.
Shipping related announcement
1. Will frame new policy, so increase employment, Indian shipbuilding and maritime
transport.
2. Sixteen new port projects are proposed
3. New SEZs at Kandla and JNPT.
4. Will develop Tuticorin outer harbor.
5. Inland navigation: Jal Marg Vikas (National Waterways-I) on Ganga. Between
Allahabad and Haldia. Deadline: 6 years, 1620 kms, 4200 c
top users of coal
1. Thermal Power plants
2. Iron-Steel
3. Cement
4. Brick-Ceramic, unorganized small scale
Why coal shortage in India?
1. Environment Clearance
2. Cyclone Phailin
1. declined coal supply from Talcher, Odisha
2. Rourkela (SAIL); Angul (Jindal) = Steel production affected.
3. Labour strike in Odisha
What is Fuel supply agreement?
1. Signed between coal India (CIL) and power plants
2. Guarantees 20 years coal supply to the powerplant.
3. If coal India fails to supply minimum 80%, then penalty.
4. Coal India will have to Import if it faces domestic coal shortage. (no penalty, if customer
rejects imported coal)
5. 160 agreements signed. Target: ~78,000 MW worth coal supply
coal sector Future reforms
1. Improve 3 critical railway lines- Jharkhand, Odisha, Chhattisgarh
2. Make clearcut guidelines on Environment clearances + rehabilitation
3. Revamp coal-mining policy:
4. Revamp Coal India ltd. and its 8 subsidiaries as per TL Shankar Committees
recommendations.
5. Only allow large companies to enter Coal Mining business. Because they have deep
pockets to comply with Environment protection requirements. Smaller companies try
to cut corners or evade taxes.
6. Remove administered pricing for coal.
7. Pass Coal Regulatory Authority Bill, 2013. (but lapsed)
8. Pass Coal mines nationalization bill(, allowing non-captive coal mining by Indian
companies for coordinated and scientific development and utilization of the coal and
lignite resources). (pend. in RS since 2000)
What is Coal Mining nationalization Bill?
1. Original act in 1973- It prohibits private companies from mining and selling coal.
2. Exemption given to captive mining i.e. thermal powerplant, steel companies
themselves mining coal for as raw material.
3. Result? Coal mining sector doesnt attract foreign investment.
4. 2000: New bill wants to permit all private companies from mining coal. Pending in
Rajya Sabha
5. Budget 2014: coal announcements
before after
Each variety had different tax rates (anthracite,
bitumen, coking, etc)
Result? litigation between companies and tax
authorities- about quality and payment
uniform tax on all
varieties
Custom duty: 2.5%
counter veiling duty:
2%
promised full coal for all power plants setup by 2015
Rail road connectivity between coal mines and power plants
Will invest in Ultra- Modern Super Critical Coal Power Technology- to coal
consumption and CO
2
emission
Clean Energy cess
Levied on coal, peat and lignite
to finance clean energy projects and research
Budget 2014 Increased this cess
before after
Rs.50/tonne Rs.100 / tonne
Coal washeries
Budget 2014 promised to Setup more coal washeries.
Coal from mines- contains dirt + incombustible material
This increases weight, transport cost. More smoke & pollution when burned.
Coal washing removes these impurities and useless material.
Hence it is one type of Clean coal technology.

Basin centered gas (Survey)
one type of unconventional gas
also called tight gas sands
In the deeper parts of sedimentary basin.
Their Reservoir has no Nature fractures, have to use hydraulic fracturing technique
to extract gas.
Hydraulic fracturing technique
technique employed to extract gas from reservoirs without natural fractures
drilling=> special fluid pumped
fluid contains water + sand + chemicals
This pumping creates fractures in the basin.
Gas migrates into the well.
15% of US Gas production via Hydraulic fracturing technique
India doing trials since 2010
Shale gas & challenges in its extraction?
Colourless, odourless, lighter than air.
just like Coalbed methane locked in coal seams, , Shale gas is a Natural gas
trapped within shale rock formations in sedimentary basins.
India locations: Cambay, Gondwana, Krishna-Godawari onland, and Cauvery.
ONGC, OIL, GAIL exploring these sites.
Subject falls under Director General of Hydrocarbans (DGH)
MoU between USA, and India for technical knowledge sharing
Why shale gas not a priority in India?
Difficult to store and transport
Shale gas too requires hydraulic fracking method for extraction. Therefore creates
following problems
Hydraulic Fracking Needs Indias problem
Large Area
land acquisition
environment clearance
Large Water Supply
shortage
Guar Gum (Fluid Viscosity Agent)(
produced in R.J.)
Shortage. imported guar gum too
costly
What is underground coal gasification method?
Underground coal gasification is a method to extract gas from deep, unrecoverable
coal reserves, where manual (labour) mining is impossible or costly.
They dig two wells
o injection well: water+oxygen+gasification agent pumped from here
o production well: synthetic gas (syngas) comes out from here