Presentation on

Public Private investment

in port sector

1
 INFRASTRUCTURE ?
• “Subordinate Parts of an
Undertaking, especially, permanent
installations forming a basis”
• Power Projects, Transportation
Systems, Water Supply Systems,
Health Care etc.
• Essentially ‘Public Goods’
•
 INFRASTRUCTURE (cont).
• Infra project would mean upgrading
an existing facility or setting up a
new ‘Greenfield’ project
• Characterized by:
– Large project size
– Limited revenue flow
– High Risk
•
 What is PPP
• No Fixed Definition, Characteristics
1.Existence of a contractual relationship
between Government and a private
agency.
2.The function hitherto performed by
Government agency with respect to a
specific project is transferred to private
agency with a set of clear pre-decided
output parameters.
3.Usually a long-term relationship
 …contd
• contract, provides for measurement
of output and reimbursement of
private party by either user fees
or direct Government payments.
 Why Private Provisioning
• Govt.’s do not have adequate
funds to meet the growing demand
for World class infrastructure
services.
• Project Implementation/management
is more efficient in private sector.
• It has a better allocation
mechanism for project risk.
•
 ……..Contd
• Focus on the output leads to better
provision of service.
•
 Why is it Different -
Advantages
• It is not a conventional construction
mode contract implementation.
• Stress is more on the level and
quality of output than on ‘Bill of
quantities’ .
• The contract period extends over a
much longer time span.
• Risk sharing is over a much larger
canvas.
•
 ….contd.
• A better understanding of the cost over
the life of the project.
• Greater Innovation and Efficiency.
• Leads to better Value for Money.
• Avoids Moral Hazards for the govt.-
owner/governance conflicts , Agency
Issues.
• Can Incentivize Private sector player on an
output scale.
Public Private Partnership
(cont)

CONCESSION
AGREEMENT

CONST. AGREEMENT
 Project Cycle for a PPP Project (Sector Non-specific
Model)

Project Normal
Identificati Project Whether Contractio
on Preparation PPP? n
N
Yes o
Risk
Allocation

Financing
Framework

Bidding
Framework

Contract
Supervision
Typical Risks-Their Sharing
…Contd
 Legal Framework
Primary concerns of investors and
•

bankers are:
• There should be clear definition of
powers and duties of Ministries
and public authorities concerned.
• Government authority concerned
should have legal powers to
perform functions envisaged in
the BOT contracts.
• Issues which are not addressed
within the jurisdiction of existing
laws should be covered within the
 …contd.
• International experience
• National Experience
• No such law at central level.
• Strictly speaking we do not need one, then
why:
• separate law on PPP has a very strong
signaling impact.
• sends out strong signals regarding the
resolve of political executive to the
outside world. It also signals that
commitment of the country cannot be
changed at whims and fancies of
 ..contd
• Infrastructure law in Gujarat-PPP
framework
• lays down a clear road map for
private sector participation.
• Clarifies issues such as by including
issues such as type of projects,
authority for approval of risk
allocation, mode and manner of
procurement, user fee, etc.
• remove lot of uncertainty in the mind
of investors ,result in reduction of
transaction cost.
Funding Infrastructure Is Not A
Problem At all!
Provided:
•

• We get the equation right

• Through an equable Risk allocation
Process
– That involves proper Regulatory,
Contractual and Financial
Framework
• Infrastructure Provisioning is
essentially process oriented-
Financing a project can not be
 Features Of Infrastructure
Financing
• Physical Assets have little value
– Cash- Flow (or probability of it) is all
important
• Largely Local currency revenues-For
most of the state sector
projects_ports being an exception
• Long gestation period
• Tremendously dependent upon govt.-
Its policies ,Politics,change in
regime
 PPP Frame-work in Gujarat
• A nodal agency in the form of Gujarat
Infrastructure Development Board-
chaired by the Chief Minister.
• A law on PPP- Gujarat Infrastructure
Development Act-lays down the manner
of doing a project.
• Viability Gap Funding Scheme- operated
by GIDB.
• Centralized capacity building programs.
• A centralized project development fund.
•
 Contd…..

The Concession Agreement with various permutations and combinations

of the following arrangements for undertaking Infrastructure Projects can
be entered into by the Grantor with Concessionaire having due regard to
the specific requirements of each Project. The arrangements enumerated
below are only indicative:
•Build-and-Transfer (BT)
•Build-Own-Lease-Transfer (BOLT)
•Build-Lease-and-Transfer (BLT)
•Build-Operate-and-Transfer (BOT)
•Build-Own-and-Operate (BOO)
•Build-Own-Operate-Transfer (BOOT)
 Contd…

•Build-Transfer-and-Operate (BTO)
•Rehabilitate-Operate-and-Transfer (ROT)
•Rehabilitate-Own-and-Operate (ROO)
•Build-Own-Operate-Share-and-Transfer (BOOST)
Snap- Shot of PPPs in
Gujarat
Gujarat Captive Jetties (BOMT)

Maritime Private/Jt. sector port (BOOT)

Board Private Jetties (BOT)

Port Terminal through JV (Equity share by GMB) partner

Existing port Terminal through Private Investment

Models of PPP Rail linkages

(Pvt, Invest./SPV with RVNL)

Formation of Dredging Company

Shipbuilding/repairing Yard (Cluster Development)

Coastal area development/Ro Ro

Private participation in supporting services

23
 Some Examples
• Private Ports on BOOT model-
Pipavav, Mundra, Hazira etc.
• Captive Jetties on BOMT basis-
Reliance, ESSAR, Holcim jetties
• Private jetties on BOT basis.
 Some Issues
• Need for better project preparation.
• Clear-cut selection procedures.
• Need for backward linkages-road/ rail
linkages
• Need for Contract Supervision
• Need to ensure that returns on
public assests are enhanced
• THANK YOU