chapter 3 trends related to road based ppp...
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Chapter 3
Trends related to Road based PPP Projects
3.1 Introduction
During the last several decades vehicle population in India has grown at a very high rate.
(Bose 2006). At the same time, the road network has expanded at a relatively rather slow
rate. As a result, the road infrastructure has been stretched to its extreme limits. There is a
wide and growing gap between the demand and the supply of road infrastructure. Roads are
the dominant form of surface transport in India. (India Infrastructure report, 2008). Only 14
percent of national highways are four laned. In fact, road-density is rather small at 2.75 km
per 1000 people and 770 km per 1000 sq. km. while world averages are 6.7 and 841,
respectively. Compared to China, its major economic rival, Indian road network is rather
poor (Ojiro 2003). China invests as much as 10 times more on roads than India does. The
gap between the availability of road infrastructure and its demand is huge and growing
which is to be met by PPP mode. This chapter discusses indepth road development in India
and the trends related to PPP projects across the world, its progress in India and in A.P
State.
3.2 Road Development in India
Since independence, there has been a tremendous increase in the volume of road traffic,
both passenger and freight. The total road length in India increased more than 11 times
during the 60 years between 1951 and 2011. From 3.99 lakh kilometer as on 31 March
1951, the road length increased to 46.90 lakh kilometers as on 31 March 2011.
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Concurrently, the surfaced road length increased both in absolute and relative terms.
The length of surfaced roads which was 1.57 lakh kilometers (39.35 per cent of total
road length) as on 31 March 1951 increased to 25.25 lakh kilometers (53.83 per cent of
total road length) as on 31 March 2011 as shown in the figure 3.1 below.
Figure 3.1 Total and Surfaced Road Length in India: 1951-2011
Despite their importance to the national economy, the road network in India is grossly
inadequate in various respects. The existing network is inadequate and is unable to
handle high traffic density at many places and has poor riding quality.
Among all the infrastructure sectors, road transport contributes the most to the country’s
GDP. The transport sector in India has contributed 6% of the national income over a
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period over a period of 10years from 1999-2000 to 2008-2009. Of this the road sector
contribution had increase from 63% in 2000 to 73% in 2009. (PwC analysis 2012).
The road network consists of National Highways, Expressways, State Highways, Major
Districts Roads, other Districts Roads and Village of 46.90 lakh km. has road density of
1.43 km per square km. The National highways in India have a total length of 70,934 km
and serve as the main road network of the country. Even though the expressways and
national highways constitute only about 2% of the length of all roads, they carry about
40% of the traffic as shown in Table 3.1 below.
Table 3.1 Distribution of Roads in India
Type Length (Km) % of Total
National Highways 71772 2%
Expressway 150342 4%
State highways 1437757 34%
Other roads 2577396 61%
TOTAL 4237267 100%
Source: www.nhai.org
Prior to the National Highways Development Programme (NHDP) initiated by the
NHAI, almost all National Highways and State Highways were 2-lane, undivided roads
with uneven surface causing traffic congestion, required more travelling time, more fuel
etc. The road side amenities which make the journey comfortable such as petrol pumps,
parking places, hotels and restaurants, service roads, toilets, repair shops, weigh bridges
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etc. were either missing or inadequately available in an unplanned manner mainly by
the private entrepreneurs. The main reasons for all above mentioned shortcomings is the
inadequacy of funds for maintenance and improving the quantity and the quality of the
road network and ‘development’ of the National Highways and the State Highways. The
status of the National and State Highways is shown in Figure 3.2 below:
Figure 3.2
Status of National and State Highways
Establishment of National Highways Authority of India (NHAI) and National
Highway Development Program (NHDP)
NHAI was established by an Act of Parliament viz. the National Highway Authority of
India Act, 1988, to implement the National Highways Development Programme
(NHDP) which constitutes 4/6 laning of the Golden Quadrilateral spread over seven
phases with an estimated expenditure of Rs 4, 71,975 crores and envisages the
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improvement of more than about 54000km of arterial routes of national highway
network to international standards. NHAI is responsible for the development,
maintenance, management and operation of National Highway totalling over 70,548 km
in length.
The NHAI has the mandate to implement the National Highway Development Project
(NHDP). The NHDP is one of the most ambitious projects launched in the independent
India. The NHDP comprises following phases as shown in Table 3.2 below:
Table 3.2 Phases of NHDP and Preferred Model of Development
NHDP
Phase
Description Length
(Km)
Preferred Model
for Development
I Golden Quadrilateral, North-south and East –
West Corridors
7,522 EPC
II North South and East west corridors and other
National Highway
6.647 EPC
III Four-Laning of certain National highways on
BOT basis
12,109 PPP
IV Upgrading single-lane highways to two lanes
and paved shoulders
20,000 PPP
V Upgrading four-lane highways 6,500 PPP
VI Expressways 1,000 PPP
VII Ring roads, bypasses and flyovers 700 PPP
Source: www.nhai.org
Phase I of NHAI was approved in December 2000 for 5,846 km. It is called the Golden
Quadrilateral (GQ) connecting the four major cities of Delhi, Mumbai, Chennai and
Kolkata, portions of the NS – EW corridors and connectivity of four major ports to
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National Highways. Phase II was approved in December 2003 with an estimated cost of
Rs. 34,339 Crores (at 2002 prices). It included the completion of the NS – EW corridors
and other 486 km highways. It links Kashmir in the North to Kanyakumari in the South
including spur from Salem to Kochi and Silchar in the East and Porbandar in the West.
Phase III started in March 2005 costing Rs. 22,207 Crores (at 2004 prices). It included
up gradation and 4-laning of 12,109 km of National Highways on the BOT basis. Phase
V was sanctioned in October 2006 for upgrading the two lane and four lane to 6-lanes
for 6,500 km of which 5,700 km is on Golden Quadrilateral (GQ). This phase is entirely
on a Design, Build, Finance and Operate (DBFO) basis. In the sixth phase 1,000 km of
Expressways was to be developed at an estimated cost of Rs. 15,600 Crores. Phase VII
was approved in December 2007 to develop ring roads, by-passes and flyovers to avoid
traffic bottlenecks on selected stretches at an estimated cost of Rs. 16,680 Crores.
The implementation of the NHDP faced many problems like delays in land acquisition
and removal of structures, shifting of utilities, law and order problems in some states
and bad performance of some contractors. But inspite of these problems, the projects are
being completed. This has a positive impact on the economy.
Special Accelerated Road Development (SARD) is a special programme of NHAI for
the North Eastern Region. This programme wants to improve the road connectivity to
state capitals, district head quarters and remote places in the North Eastern region. It
consists of over 3800 kms of National Highways and about 4900 kms of State Roads.
This will connect 85 district headquarters in the North Eastern States to the National
Highways and the State Roads.
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In order to give boost to rural connectivity, a rural road programme, Pradhan Mantri
Gram Sadak Yojna (PMGSY) was launched in October 2000. The primary objective of
PMGSY is to provide connectivity, by way of all-weather roads to the unconnected
habitations in the rural areas, so that habitations with populations of 1,000 and above
are covered in three years (2000 – 2003). All unconnected habitations with a population
of 500 persons and above are covered by the end of the Tenth Plan Period (2007). In
respect of the hill states (North-East, Sikkim, Himachal Pradesh, Jammu and Kashmir,
and Uttranchal) and the desert areas, the objective is to connect habitations with a
population of 250 persons and above. The programme also aims to achieve an equitable
development of the rural roads network in different states / districts so as to fully exploit
the potential for rural growth. The PMGSY is implemented as a 100 percent centrally
sponsored scheme.
The Central Government has created a fund, called Central Road Fund from collection
of cess from petrol and diesel. At present Rs. 2 per litre is collected as cess on Petrol
and High Speed Diesel (HSD) Oil. The Fund is used for development and maintenance
of National Highways, State roads, rural roads and for provision of road over bridges,
under bridges and other safety features at unmanned railway crossings.(www.nhai.org)
3.3 Evolution of PPPs in India
Evolution of PPPs could be found as early as in the 19th century like the Great Indian
Peninsular Railway Company (1853), the Bombay Tramway Company services in
Mumbai (1874). PPP models were therein power generation in Mumbai and Kolkata in
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the early 20thcentury. After the relative success of developing infrastructure through
PPP mode in Europe where Europe accounted for 37.8% of the world PPP projects
followed by Asia and Far East 36.7%, North America 15.8 %, paved the way for the
next phase of PPP development in India and other developing countries from 1991-
2006.
After independence in the sixty years of planning and development in India, and the
pressing need for more investment in infrastructure coupled with constrained
government resources changed the focus of GOI, to adopt PPP as a mode for
infrastructural development. Till the nineties, investment in infrastructure was almost
exclusively in the public domain, made by government departments, specialized
government agencies (SGAs) and public sector undertakings (PSUs). These investments
were financed by budgetary allocations, surpluses of SGAs/ PSUs, market borrowings
(mainly from the bank market), borrowings from multi-lateral agencies and a few
capital market bond issuances. The nineties also saw the pursuit of policies of economic
liberalization such as de-licensing of industry, increased market access by reduction in
customs duties, freeing of the exchange rate on the current account and enhancement of
the limits for foreign direct investment, resulting in an increased alignment of the Indian
economy to global markets. Investment in infrastructure, however, continued to be low
at levels ranging, over the years, between 3-6% of the gross domestic product (GDP),
well below the investment levels of comparable economies like China and other East
Asian economies, given the overall inadequacy of public resources. Given this
backdrop, it was inevitable that the government looked at increasing the levels of
infrastructure investment through private investment. To begin with, in 1991, a national
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power policy was announced which opened up power generation to the private sector
and provided various financial and fiscal benefits to investors. This was followed by the
national telecom policy in 1994, guidelines for private sector participation in major
ports in 1996 and a new civil aviation policy, all encouraging private investment in
these sectors. A major fillip was provided by the announcement in 1999 of the National
Highway Development Programme (NHDP) for systematic capacity enhancement
(mainly four-laning) of 13,000 kilometers (kms) of national highways in two phases.
This was followed by a decision to levy a cess on sales of petrol and diesel which would
be deposited in a Central Road Fund specially created for this purpose and which would
fund the development of national highways and rural roads.
India was in a position of attracting private participation in the infrastructure sectors
since the economic reforms were introduced in 1991. The first two phases of the NHDP
which envisaged smaller levels of private investment (14% of the number of projects)
have still offered around 48 projects to private investors. Given the initial success and
speedy implementation of the private sector projects, the programme has since been
expanded to a 7 phase programme covering 46,000 kms of national highways, with the
bulk of investment in the ensuing phases expected to come by way of private
investment. Under a PPP framework, new airports have been established at greenfield
locations in Hyderabad and Bangalore; modernization and expansion of the existing
airports at Delhi and Mumbai are underway. Plans are underway for developing
landside infrastructure at smaller airports under administrative control of the Airports
authority of India through private investment. A few smaller airports have been handed
over by some state governments to private investors for modernization and expansion.
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Several berth concessions (container terminals and some bulk/ multi-purpose berths),
have been awarded to private players at several major ports; a number of minor ports
have been handed over by various state governments (notably Gujarat and Andhra
Pradesh) to private investors for expansion and up gradation. Several of these facilities
are operating successfully, though there have been some regulatory challenges (over
issues such as competition and tariff setting) to overcome in major ports. A few small
sections on the Indian Railways (mainly for port connectivity) and more recently,
container services, have also been developed as private infrastructure projects.
All this has translated to aggregate private sector infrastructure investment of a little
over USD 96 billion over the period 1990-2007. It is estimated that private
infrastructure investment which now contributes to ~ 20% of the total investment in
infrastructure and therefore around 1% of the GDP would increase to a level of 30% of
the total infrastructure investment during the Eleventh Plan period (2007-12), which is
expected to translate to a level of 3% of the GDP by 2011-12. There were only 86 PPP
projects worth INR340 billion were awarded till 2004 (World Bank study) and most of
the projects were in road sector. In the next phase with the increasing acceptance of
PPP model, favourable policy reforms by the GOI and innovative PPP models lead to
growth in PPP from 450 projects costing INR 2,242 billion in November 2009 to 758
PPP projects costing INR 833 billion in July 2012.
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3.4 PPPs in Roads and Highways in India
Recent liberalization of the Indian economy has brought the urgency of developing
efficient roads and highways for increasing productivity and enabling the country to
compete effectively in the world market. According to Tenth Five Year Plan (2002 –
2007), “An efficient transport system is a pre-requisite for sustained economic
development. Roads are not only the key infrastructural input for the growth process
but also plays a significant role in promoting national integration, which is particularly
important in a large country like India. In a liberalized set up, efficient roads become
important in order to increase productivity and enhance the competitive efficiency of
the economy in the world market.
Since independence, there has been a tremendous increase in the volume of road traffic,
both passenger and freight. However, the main road network comprising of national and
state highways has not matched this traffic growth. Much of the expansion of the road
network has been through building the rural roads to provide connectivity to rural
masses, although 50 percent of the villages are still to be connected with all-weather
roads. The main reasons for all above mentioned shortcomings is the inadequacy of
funds for maintenance and improving the quantity and the quality of the road network
and ‘development’ of the National Highways and the State Highways. To bridge the
resource gap and to instil the competitive efficiency, efforts were being made to
associate the private sector with road projects. The Public Private Partnership (PPP)
using the BOT (Build – Operate – Transfer) was adopted by the Government of India to
‘develop’ the roads and highways.
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PPPs in highways started with NHDP. While the projects under NHDP Phase I and II
were predominantly implemented on EPC (engineering procurement and construction
mode) very few projects were experimented with on PPP mode. The first PPP on
national highways was construction of a railway over bridge (ROB) at Kishangarh located
in the Ajmer district of Rajasthan. This segment was formed in March 1998 on NH 8 and
was developed on BOT basis. However, the first policy framework for PPPs was introduced
in 1997 as decision of the Cabinet of the Central Government (Haldea, 2000). It provided
guidelines for toll based BOT projects. Later on, in December 2000, the cabinet committee
on economic affairs approved the first phase of the NHDP. It was agreed that road projects
under NHDP will be taken up for up gradation on BOT Toll and BOT Annuity basis, to the
extent possible (Planning commission, 2006). From then PPP became the preferred way of
procurement with NHDP phase III as can be seen in Figure 3.3 and Figure 3.4. There is
a drastic increase in the length of the highway awarded on PPP mode from the year
2005 onwards till 2010 then a decrease from the year 2011 as shown in the Figure 3.5:
17
39
107
17
25
2
0 20 40 60 80 100 120
NHDP 1
NHDP II
NHPD III
NHDP IV
NHDP V
NHDPVI
Figure 3.3 NHDP wise No of PPP Projects awarded
No of PPP Projects
Source : NHAI, PwC analysis 2011
120
1 1 0 2
12
2 0
30
2113
6
27
58
36
‐10
0
10
20
30
40
50
60
70
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Figure 3.4 Year wise No of PPP Projects awarded by NHAI
No of Projects
Linear ( No of Projects)
Source : NHAI, PwC analysis 2011
.
1 18 146545
120 0
16781278
843 885
2489
53634865
0
1000
2000
3000
4000
5000
6000
Figure 3.5 Year‐wise km length awarded under PPP
Figure 4.7 Year‐wise km length awarded under PPP
Source : NHAI, PwC analysis 2011
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It can be observed from the Figure 3.6 that there are two stages in National Highway
PPP, one before 2005 and another from 2005. In 2005, the government decided to give a
big thrust to PPPs. In a meeting chaired by the Prime Minister, it was decided that as much
as 2100 kms of NHDP phase II and all other future projects will be taken up on BOT basis.
Moreover, to overcome the above constraints the government launched several initiatives.
Following are the major steps taken to galvanize the PPP programme like standardization of
bidding and concession agreement, setting up of IIFCL in 2006, provision for viability gap
funding, setting of India infrastructure project development fund (IIPDF) and Public
private partnership appraisal committee (PPPAC). So we can say that the PPP phase in
road sector started from 2005. The number of projects decreased in 2008 can be
primarily accounted to global financial meltdown after which the number of projects
picked up to 58 in 2010. We can also see in Figure 3.6 that the length awarded under
national highway PPP also saw a maximum increase in 2009 to about 5400 km.
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The GOI gave a major boost to infrastructure from the Tenth Five Year Plan (2002 –
2007) onwards. GOI has announced various policy measures to attract the private
investors in the road PPP projects. It can be seen from Table 3.4 that over the years
investment in roads has increased considerably from 69.8 billion US $ in the eleventh
plan to 145.8 billion US $ in the twelfth plan and the percentage of private sector
investment increased from 23.7 billion US$ in the eleventh plan to 58.3 billion US$ in
the twelfth plan. The GOI has announced substantial policy measure like permission of
upto 100% FDI and provision of capital grants of upto 40% of the project cost to
enhance the viability of projects to attract domestic as well as foreign investors for PPP
on road projects. The private sector participation was merely 5% during five year plan
(2007-2012) and envisaged to increase to 34% in the 11th plan and 40% in the 12th plan
(2012-17) as seen in Table 3.3 below.
Table 3.3 Investment in Roads and Highways in Five Year Plans
Source: Planning Commission and PwC analysis ( 1USD = 45INR)
10th Plan (2002-07)
11th Plan (2007-12)
12th Plan (2012-17) Estimated
Roads and Bridges Investment ( US$ Billions)
32.2 69.8 145.8
Public 30.6 (95%) 46.1 % (66%) 87.5(60%) Private 1.6(5%) 23.7(34%) 58.3(40%)
Total plan investment in infrastructure(US$ Billions)
193.7 456.9 910.9
Roads and bridges investment as % of total infrastructure investment
16.6% 15.3% 16%
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The investment strategy of the GOI primarily relies on promoting investment through
Public private partnerships (PPPs). The success of the on-going twelfth Five Year Plan
critically depends on the development of infrastructure which in turn depends on the
success of Public Private Partnerships (PPP) projects in infrastructure in India.
4.5 International Trends in Road PPP Projects
All countries across the world are adopting PPPs as the preferred method of providing
infrastructure to their people. While the developed nations have a more matured
understanding of the model the developing countries are still in the process of
developing the model. World Bank and Organisation for Economic Cooperation and
Development (OECD) have important role as agenda setters and promoters of new
governance modes in PPP methods. A fairly similar pattern can be seen in the way
which PPP programmes are developed in different countries. Table 3.4 presents the PPP
projects in the road sector in different regions of the world from 1990-2012.
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Table 3.4 No of PPP Projects in Road Sector by region and year of financial closure with Index
YEAR
EAST ASIA AND PACIFIC
Inde
x
EURO
PE AND CEN
TRAL
ASIA
Inde
x
LATIN AMER
ICA &
CARR
IBEA
N
Inde
x
MIDDLE EAST AND
NORT
H AMER
ICA
Inde
x
SOUTH
ASIA
Inde
x
SUB SA
HARA
N AFR
ICA
Inde
x
TOTA
L
Inde
x
1990 3 100 0 0 29 100.00 0 0 1 100 1 100 34 100.00
1991 4 133 0 0 3 10.34 0 0 0 0 0 0 7 20.59
1992 4 133 0 0 5 17.24 0 0 0 0 0 0 9 26.47
1993 11 366 0 0 8 27.59 0 0 0 0 1 100 20 58.82
1994 22 733 0 0 19 65.52 0 0 0 0 1 100 42 123.53
1995 11 366 0 0 10 34.48 0 0 0 0 0 0 21 61.76
1996 28 933 0 0 9 31.03 0 0 3 300 0 0 40 117.65
1997 32 106 0 0 19 65.52 0 0 4 400 3 300 58 170.59
1998 14 466 0 0 25 86.21 0 0 10 1000 0 0 49 144.12
1999 7 233 0 0 0 0.00 0 0 10 1000 2 200 19 55.88
2000 7 233 0 0 8 27.59 0 0 2 200 0 0 17 50.00
2001 5 166 0 0 7 24.14 0 0 2 200 1 100 15 44.12
2002 4 133 0 0 5 17.24 0 0 7 700 0 0 16 47.06
2003 9 300 0 0 9 31.03 0 0 16 1600 1 100 35 102.94
2004 6 200 0 0 5 17.24 0 0 7 700 0 0 18 52.94
2005 6 200 0 0 8 27.59 0 0 8 800 0 0 22 64.71
2006 9 300 0 0 11 37.93 0 0 46 4600 0 0 66 194.12
2007 11 366 0 0 18 62.07 0 0 32 3200 0 0 61 179.41
2008 3 100 0 0 14 48.28 0 0 12 1200 1 100 30 88.24
2009 2 66 0 0 18 62.07 0 0 11 1100 1 100 32 94.12
2010 0 0 2 0 21 72.41 0 0 50 5000 0 0 73 214.71
2011 4 133 0 0 8 27.59 0 0 45 4500 1 100 58 170.59
2012 4 133 2 100 3 10.34 0 0 60 6000 0 0 69 202.94 Grand Total
206 6866 4 200 262 903.45 0 0 326
32600
13 130
0 811 2385.29
Source: http://ppi.worldbank.org (Private Participation in infrastructure database, World Bank)
125
An index was created to see the growth of PPP over the years. East Asia and Pacific
region showed a growth and the index increased from 100 in the year 1990 to high of
1066 in 1997 and then slowed down 133 points in 2012.There is substantial increase in
number of projects undertaken during the year 1996-98 and then there is a drastic
decrease during 2008-2011 which can be attributed to global economic crisis. Europe
and Central Asia region did not show any PPP projects which would indicate that they
are using other methods for road infrastructure development. Latin America and
Caribbean region shows that the index was 100 in 1990 and decreased considerably
over the years. North America and Middle East regions did not show any PPP projects
and Sub-Saharan Africa regions also were not very high on PPP projects. The overall
PPP index increased 100 in 1991 to 2385 in the year 2012 as seen in Table 3.4 and there
is a positive trend in the growth of PPP road projects as seen in Figure 3.7 and 3.8.
There is a gradual increase in the overall PPP projects initiated and the total investment
made in road PPP projects across the world, which shows that PPP mode is used widely
across the world for development of road infrastructure.
0
20
40
60
80
Figure 3.7 Total No. of PPP Projects in the Road Sector in the World
World Wide PPP projectsin the Road Sector
Linear (World Wide PPPprojects in the RoadSector)
Source: http://ppi.worldbank.org (Private Participation in infrastructure database, World Bank)
126
Source: http://ppi.worldbank.org (Private Participation in infrastructure database, World Bank)
Comparison of PPP Road Projects in across the World, in India and A.P
Projects in road sector were compared with number of projects undertaken in India and
in A.P and presented in Table 3.5 below:
0
5,000
10,000
15,000
20,000
25,000
30,000
1990 1993 1996 1999 2002 2005 2008 2011
Figure 3.8 Total Investment in PPP Road Projects Worldwide in US$ million
Total Investment in PPP road Projects Worldwide
Linear (Total Investment in PPP road Projects Worldwide)
127
Table 3.5 Number of PPP Road Projects across the World, in India and A.P
YEAR INTERNATIONAL
PPP ROAD PPP PROJECTS
PPP ROAD PROJECTS IN INDIA
PPP ROAD PROJECTS IN
AP
1990 34 1 0
1991 7 0 0
1992 9 0 0
1993 20 0 0
1994 42 1 0
1995 21 0 0
1996 40 4 0
1997 58 6 0
1998 49 10 2
1999 19 13 0
2000 17 2 2
2001 15 5 4
2002 16 9 5
2003 35 19 2
2004 18 7 0
2005 22 14 0
2006 66 54 1
2007 61 34 4
2008 30 16 8
2009 32 13 2
2010 73 57 6
2011 58 48 12
2012 69 60 4
Grand Total 811 373 63
Source: compiled from www. pppindia database and http://ppi.worldbank.org
128
From Table 3.5 above it can be seen that PPP projects in the road sector in India were
extensively used only from the year 1996 and in the year 1997 only six projects were
initiated. 10 projects were initiated in the year 1998 and 13 projects initiated in the year
1999. There was a drop in initiation of projects from the year 2000 to 2002. From the
year 2005, there was a drastic increase PPP road projects as NHAI had decided to
proceed with the NHDP program on PPP basis only. There is a slight drop in the year
2008 owing to global slowdown and there was an increase in project allotment from the
year 2010 onwards till the year 2012.
In the state of Andhra Pradesh, the PPP projects in the road sector started in the year
1998. There was a slow progression from the year 2000 with year 2004 and 2005
showing no progression in commencing PPP road projects. There was increase in
projects from the year 2006 with year 2011 showing maximum number of projects
initiated. Figure 3.9 shows that there is positive trend of PPP projects in road sector
across the world, in India and in A.P.
Figure 3.9
129
Table 3.6 describes correlation between the PPP road projects initiated across the world,
in India and in A.P:
Table 3.6 Correlations between No. of PPP projects across the world, India and A.P
Correlations
INTERNATIONAL ROAD PPP
INDIA ROAD PPP
AP ROAD PPP
INTERNATIONAL r 1.00 0.80 0.14 p 0.00 0.52 N 23 23 23INDIA r 0.80 1.00 0.35 p 0.00 0.10 N 23 23 23AP r 0.14 0.35 1.00 p 0.52 0.10 N 23 23 23
**
Correlation is significant at the 0.01 level (2-tailed).
From Table 3.6 it is observed that there is a positive correlation of 0.8 between the total
projects initiated across the world in India showing that India is also following the same
pattern of initiating PPP projects in the road sector. The correlation between PPP
projects initiated in India and in A.P is positive but not very strong because A.P is only
one state in A.P.
130
3.7 Sector wise PPP projects in India and in A.P
Sector wise comparison of PPP projects in India and in A.P shows that highest number
of projects are in the road sector followed by port sector with least number of projects in
railways. There are no projects initiated in railways in A.P. Table 3.7 shows that there
are 271 projects in India with an investment of about Rs 70,200 crores and 55 projects
in the road sector with an investment of 16,909 crores. It is also seen from the Table 3.7
below that port projects have very high investment when compared to the road sector as
43 projects require 66,499 crores whereas 271 projects in the road sector have costed
70,202.7 crores.
Table 3.7 Sector wise PPP projects in India and A.P
S no Sector
Sector wise PPP projects in India Sector wise PPP projects in A.P
No of Projects
% of the Total
Project cost No of Projects
% of the Total
Project cost
( Rs Cr) ( Rs Cr)
1 Roads &
Highways 271 63.02 70,200.70 55 50.5 16,909
2 Ports 43 10.00 66,499 4 3.7 12,596
3 Airports 5 1.16 19,111 1 0.9 2,487
4 Railways 4 0.93 1601.56 0 0.0 0
5 Power 24 5.58 17,111 3 2.8 1,371
6 Urban
Infrastructure 73 16.98 15,288 39 35.8 24,490
7 Education 10 2.33 1,069 7 6.4 306
Source: www.pppindiadatabase.com (March2012)
131
Figure 3.10 shows the graphical representation of PPP sector wise PPP projects in India
and in A.P. It is seen that at all India level there are more PPP projects in road sector
when compared to A.P but road sector tend to dominate all sectors.
Figure 3.10 Sector wise PPP projects in India and A.P
Roads & Highways, 271Ports, 43
Airports, 5
Railways, 4
Power, 24
Urban Infrastructure,
73
Education, 1
Sectorwise PPP projects in India
Roads & Highways, 55
Ports, 4Airports, 1Railways, 0Power, 3
Urban Infrastructur
e, 39
Water & sanitation, 7
Education, 7
Sectorwise PPP projects in A.P
Source: www.pppindiadatabase.com (March2012)
132
PPP Projects initiated in A.P
A.P is also following a similar trend in initiating PPP projects. Table 3.8 presents the
PPP projects initiated in A.P from 1998 to 2011:
Table 3.8 PPP Projects Initiated in A.P from 1998 -2011
Year PPP projects in all sectors Roads & Highways Road Projects as a % of the
total projects
No of Projects Initiated
Total Project costs ( Rs
Cr)
No. of Projects
Project Cost in Rs Cr
before 1998 2 435.7 2 435.7 100.0
1998-99 1 360.2 0 360.2 0.0
199-00 7 6694.6 4 250.26 57.1
2000-01 5 826.25 4 824.65 80.0
2001-02 14 2190.56 14 2190.56 100.0
2002-03 6 273.87 2 269 33.3
2003-04 2 655 0 0 0.0
2004-05 1 5200 0 0 0.0
2005-06 6 3919.1 1 71.57 16.7
2006-07 7 2254.94 4 1192.44 57.1
2007-08 14 3908.74 8 2249.97 57.1
2008-09 8 6380 2 875 25.0
2009-10 14 7677.35 6 5823.16 42.9
2010-11 15 18738.87 12 64.87 80.0 Source: Compiled from NHAI and AP PPP cell From the Table 3.8 above, it is observed that are only two PPPs initiated in A.P before
1998 and that is only in the road sector. The PPP projects increased from the year 2005-
06 with the road sector also following the same trend. There is a decline in the year
2003-04 and then there is an increase in awarding PPP projects thereafter.
133
The same can be observed from Figure 3.11 below:
Figure 3.11
Total PPP projects in all Sectors and Road PPP projects
Source: Compiled from NHAI and AP PPP cell
3.8 Distribution of PPPs across States in India
PPP in state highways started much later compared to the national highways. This is
mainly due to the absence of a body like NHAI, proper policies and institutional
strength at state level. However many as 15 states in India have adopted the PPP mode
for developing infrastructure and Andhra Pradesh is one of the pioneering and leading
state for PPP projects followed by Karnataka, Maharashtra, Uttar Pradesh. Table 3.7
shows the distribution of state highway PPPs.
National highways covered under Phases I, II, III and V span across most states in the union
of India. Therefore, the upgradation work on NH’s has been (is being) undertaken in most
states. As was stated earlier, regardless of the state, wherever possible the NHAI has tried to
award up gradation works on PPP basis. However, some States have attracted more PPPs
than others. That is, investors have shown preference for some States over others.
134
Table 3.9 shows the ranking of Indian states in terms of the number of PPPs attracted by
them:
Table 3.9 Distribution of PPP projects and Road PPP projects across different States
Rank States No of PPP projects No of PPP Road projects
1 Karnataka 106 22 2 Andhra Pradesh 99 20 3 Madhya Pradesh 88 10 4 Maharashtra 77 28 5 Gujarat 65 14 6 Rajasthan 61 18 7 Tamil Nadu 45 24 8 Punjab 34 10 9 West Bengal 28 11
10 Orissa 27 11 11 Sikkim 24 2 13 Uttar Pradesh 18 15 12 Kerala 18 11 14 Haryana 14 8 15 Delhi 12 4 16 Jharkhand 9 0 17 Bihar 6 1 18 Assam 4 0 19 Chhattisgarh 4 0 20 Jammu and Kashmir 3 0 21 Uttarakhand 3 0 22 Goa 2 0 23 Meghalaya 2 0 24 Himachal Pradesh 1 0 25 Arunachal Pradesh 0 0 26 Manipur 0 0 27 Mizoram 0 0 28 Nagaland 0 0 29 Tripura 0 0
Source: Compiled from NHAI and pppindia database
It is observed from the Table 3.9 above that out of all states in India, Karnataka, Andhra
Pradesh, Madhya Pradesh, Tamil Nadu, Maharashtra, Gujrat and Rajasthan are the favourite
135
states and together these states account for as much as 50 percent of all PPPs in the country.
States like Bihar, Orissa Kerala, Assam, Jharkhand etc. on the other hand, have failed to
attract many of the PPP projects and north east states like Arunachal Pradesh, Mizoram,
Manipur, Nagaland and Tripura have no PPP projects.
Reasons for Skewed distribution of Road PPP projects across various states in India
1. Diverse size of State and length of highways passing through
Indian states are quite diverse in terms of their size and the length of national highways
passing through them. More importantly, there can be scope for forming a PPP only on
projects that are parts of the highways up gradation programme undertaken by the NHAI.
Therefore, it is quite possible that states like Uttar Pradesh and M.P. have attracted a fair
amount of financial resources in PPP projects simply because NHAI has taken up many
projects in these states. Similarly, Delhi and Punjab may be lagging behind not because
projects located in these states are un-remunerative for toll based road facilities, but because
NHAI has not taken up too many projects where PPPs could be formed. If there is not much
up gradation work undertaken in a state, there is little scope for PPPs to add to the pot.
Ceteris-paribus, the larger is network of highways (in terms of the length covered or the
total costs of all projects) undertaken for up gradation the greater will be private investment,
and vice-versa.
2. Legal and Institutional Framework for PPPs at State level
In India, State governments have understood that achieving high volumes of private
investment in infrastructure is not easy, therefore they found it necessary to develop an
environment which is both attractive to investors and also seen to be fair to consumers. It
136
can be seen from table 3.8 that states which have taken initiatives for PPP development
have more PPP projects when compared to other states which have taken no steps to
promote PPP.
3. Traffic/Revenue Risk
Under PPPs most of the construction and maintenance related risks are passed on to the
private investors. Under BOT Toll contracts, the traffic and financial return related risks are
borne by investors. Therefore, as one would estimate, several factors are likely to influence
the decision making of the private investors in PPPs. For example, road projects with high
projected traffic are more likely to attract PPPs. Other things held constant, the higher is the
demand and willingness to pay for a better road service, more likely it is that the project
will attract private investment (Ananth and Singh 2009).
4. Gross Domestic Product of the State (SGDP)
A higher per capita SGDP is indicative of income as well as of the demand for transport
services in the state. States with higher SGDP are also the states with larger number of
economic activities that involve intensive use of surface transport, and vice-versa.
Moreover, when average per capita income is high, average road user will be more
willing and able to pay for the services of BOT toll roads. Therefore, states with
relatively high per capita income are likely to attract more PPP projects as compared to
the states with relatively low per-capita GDP. Table 3.10 shows the PPP projects
initiated in each state with the investment made in PPP and the SGDP.
137
Table 3.10 State wise PPP projects and State Gross Domestic Product
Sno State
Gross Domestic
Product of the state
2012 in RS Cr
(Source: CMIE)
No of PPP projects in all sectors(Source: pppindia database)
Total Project costs in Rs Cr.
PPP cell 1= Present 0= Absent
State Govt Initiatives for
PPP "1=
Infrastructure dev. act or
policy present " "0=
Infrastructure dev. act or
policy absent"
State wise Total
length of NH in KM ( Source:
NHAI.org) 2012
No of Road PPP projects (Source: pppindia database)
Road Sector Total
project cost in Rs
Cr (Source: pppindia database)
1 Andhra Pradesh 3732.14136 99 67999 1 1 4537 23+1* 15411.49
2 Arunachal Pradesh 19.34272789 0 0 0 2027 0 0
3 Assam 382.8209987 4 391 1 1 2940 0 04 Bihar 600.6136297 6 422.04 1 1 4106 13+2* 10253.95 Chhattisgarh 298.6159716 4 838 0 0 2289 5 3172.036 Delhi 651.9186336 12 10877.2 1 0 80 2* 5257 Goa 61.65585201 2 250 0 1 269 2 23438 Gujarat 1139.07676 65 18711.89 1 1 4032 14 13818.4659 Haryana 588.749247 14 756 1 0 1633 7+8* 7587.2
10 Himachal Pradesh 142.6565263 1 475 1 0 1506 1+1* 2015.09
11 Jammu and Kashmir 173.3759616 3 6320 0 0 1245 4 7060.46
12 Jharkhand 380.7270827 9 681 0 0 2170 4+2* 4974.5713 Karnataka 1069.90958 106 45699 1 1 4396 21+1* 14195.1914 Kerala 649.7575821 18 11972.5 0 0 1457 7 6981.66
15 Madhya Pradesh 899.048245 88 7788.55 1 1 5064 14+2* 12753.29
16 Maharashtra 2585.81446 77 45979 1 0 4257 19+2* 19174.66517 Manipur 36.09048456 0 0 0 0 1317 0 018 Meghalaya 42.54832049 2 762 0 0 1171 3 115219 Mizoram 17.9395432 0 0 0 0 1027 0 020 Nagaland 27.94035241 0 0 0 0 494 0 021 Orissa 445.5648367 27 7623.44 1 1 3704 8 7574.4522 Punjab 710.087273 34 1543.98 1 1 1557 5+3* 3353.1823 Rajasthan 934.549562 61 5253.41 1 1 7130 14+2* 11885.8924 Sikkim 9.04847432 24 7110.59 0 0 149 25 Tamil Nadu 1401.80423 45 12451.78 1 0 4943 28 15224.7726 Tripura 51.83130081 0 0 0 0 400 27 Uttar Pradesh 1891.83282 18 28570 1 0 7818 20+6 17342.3728 Uttarakhand 136.7683703 3 1275 1 1 2042 0 029 West Bengal 1451.33283 28 2055.4 0 0 2681 9+2* 8349.3
138
Regression analysis is conducted to understand the relationship between investment in
PPP projects for infrastructure and State Gross Domestic Product (SGDP).
Two levels of regression analysis were carried out. In the first level the relationship
between PPP projects in infrastructure and SGDP. The independent variable was GSPD
and the dependent variable taken was PPP project investment as seen in Table 3. 11
below. The hypothesis set was:
Ho: There is no relationship between SGDP and investment in PPP projects by each
state
Table 3.11
Relationship between PPP Projects & SGDP
Regression Statistics
Multiple R 0.86 R Square 0.74 Adjusted R Square 0.73 Standard Error 9286.18 Observations 24 ANOVA
df SS MS F Significance
F
Regression 1 5356793811 5.4E+09 62.1199 7.55419E-
08 Residual 22 1897129724 8.6E+07 Total 23 7253923536
Coefficients Standard Error t Stat P-value Lower 95% Upper 95%
Intercept -2824.62 2662.21 -1.06 0.30 -8345.71 2696.47 GDP 0.1735 2.20 7.88 0.00 12.78 21.92
139
It is observed from Table 3.11 that the correlation between the two variables is .86
which shows that there is a positive relationship between investments in PPP projects
for infrastructure with SGDP of each state. Adjusted R Square of 0.73 & a significance
level of 7.55E-08 indicate a Goodness of fit of the regression equation along with a
strong relationship between SGDP of each state and PPP project investment in the state.
Regression equation is given as:
Investment in PPP projects = -3713.462 +17.883GSDP
The null hypothesis is rejected as p-value is less than .005 the alternate hypothesis is
accepted that there is relationship between SGDP and investment in PPP projects in
each state.
The second level of regression was carried out to find the relationship between total
investments in PPP projects in all sectors to investment in road PPP projects in each
state as can be seen in Table 3.12.
140
Table 3.12 Regression Analysis for relationship between PPP projects in each state to PPP
projects in Road sector
Dependent variable Amount invested in Road PPP ProjectsIndependent Variable Amount Invested in PPP Projects in all sectors Multiple R 0.69 R Square 0.48 Adjusted R Square 0.46 Standard Error 4197.95 Observations 21 ANOVA
df SS MS F Significance
F Regression 1 312493904.8 3.12E+08 17.73 0.00047331 Residual 19 334833206 17622800 Total 20 647327110.7
Coefficients Standard Error t Stat Pvalue Lower 95% Upper 95%
Intercept 6019.42 1131.55 5.32 0.00 3651.05 8387.78PPP Projects 0.21 0.05 4.21 0.00 0.11 0.32
From the Table 3.12 above it is observed that there is a positive correlation between
investment in PPP projects and investment in road PPP projects. Out of every INR 1cr
invested in PPP projects, INR 0.21cr is coming from the Road PPP Sector. Road PPP
Sector is contributing 21% to the total investments in the infrastructure projects.
Regression equation is given as:
Investment in PPP projects in each state = 6019.42 + .21 Invst in Road PPP projects
141
3.9 Trends of PPP projects in Andhra Pradesh
Andhra Pradesh is the fourth largest state in the country which has been agriculturally
prosperous and now has also emerged as the key state for IT, pharmaceuticals and
biotechnology. Over 70 of the 500 top global corporations are present here. It is the first
state to have a comprehensive ITES/BPO Policy and also offers a wide range of fiscal
and policy incentives for businesses under the Investment Promotion policy 2010-2015.
(www.ibef.org). The state is a key player in the country's power sector with the highest
hydel power generation and with its proactive policies ensures a good investment
climate for investors contributing to a GSPD of US $85.8 billion in 2009-10. The
Government of A.P (GoAP) has taken proactive measures towards PPP approach to
facilitate infrastructure for sustainable economic development. The strategy paper on
infrastructure by government of A.P envisages that infrastructure is one of the 17
growth engines identified that will create the highest economic impact in short term.
The study conducted by Majumder (2008) on infrastructure and regional development
in India concluded that there is a multiple and complex linkage between infrastructure
and economic growth, as infrastructure affect production and consumption directly and
production and consumption affect the GSDP of the state. There is a positive growth
trend in GSDP and number of PPP projects initiated for development of infrastructure in
A.P in Table 3.13 below and Figure 3.12 below:
142
Table No: 3.13 Year wise GSDP and PPP projects in A.P
Year GSDP at current prices 2006-07
(Rs in Cr)
No of PPP projects
initiated in A.P
Cumulative No. of PPP
projects in A.P
Total Project Cost
( Rs in Cr)
Cumulative Project Cost in ( Rs in Cr)
Before 1999-00 3 3 1,246 1,246 1999-00 1,28,797 7 10 6,695 7,941 2000-01 1,44,723 5 15 2,830 10,771 2001-02 4,56,711 14 29 2,291 13,062 2002-03 1,67,096 6 35 2552 15,614 2003-04 1,90,017 2 37 2755 18,369 2004-05 2,11,802 1 38 5,450 23,819 2005-06 2,39,683 6 44 3,919 27,738
2006-07(R ) 2,77,286 7 51 3,355 31,093 2007-08(P) 3,26,547 14 65 3,909 35,002 2008-09(Q) 3,77,346 8 73 6,480 41,482 2009-10(A) 4,06,641 14 89 7,678 49,160 2010-11* Not compiled 15 103 18,739 67,899
R- Revised P – Provisional Q – Quick A- Advanced Estimates Source: compiled from Directorate of Economics & Statistics, A.P &www.ppp.ap.gov.in
Figure 3.12 Growth Trend of GSDP and PPP projects in A.P
Source: compiled from Directorate of Economics & Statistics, A.P & www.ppp.ap.gov.in
0
2
4
6
8
10
12
14
16
050,000
100,000150,000200,000250,000300,000350,000400,000450,000
No
of P
PP P
roje
cts
Val
ue
Rs
Cr
Year
GSDP (in Rs Cr)
No of PPP projects
Growth trend of GSDP(in Rs Cr)
Growth Trend of PPP projects
143
The Government of Andhra Pradesh has taken many initiatives to promote PPP projects
for development of social and physical infrastructure in the state which have turned out
to be positive and have enabled the state to keep in pace with the target of Eleventh
Five Year Plan.
1. A.P is the first state to enact the “Infrastructure Development Enabling Act”
(IDEA) which came into effect from August 2001.This act provides guidelines for
process for selection of developers, addresses issue of project delivery process,
risk sharing, dispute resolution and collection of user charges. It applies to all
infrastructure projects implemented in the state.
2. An AP state PPP cell was created in April 2007 under the Department of
Finance, Government of Andhra Pradesh as per the MOU signed by the
Department of Economic affairs, Ministry of Finance, Government of India for
mainstreaming PPP projects at state level. It is a nodal agency for processing all
PPP projects in the state. The PPP cell has created a repository of all information
relating to PPPs in state, including best practices, guidelines, schemes, and shelf
of projects which can be undertaken through PPP route. The cell coordinates with
all the government departments and Ministries of state at all stages of Project
development and also interacts with PPP cell at central level for proving
assistance through Viability Gap Funding. The PPP cell has signed a
Memorandum of Understanding (MOU) between Asian Development Bank
(ADB), Department of Economic Affairs (DEA) and the State Government to
provide advisory technical assistance under ADB Technical Assistance Project.
144
3. Infrastructure Corporation of Andhra Pradesh (INCAP) was set up in May 2005 as
a public limited company under the Department of Infrastructure and Investment,
Government of A.P to identify, conceptualize, promote, advice and to create
Special Purpose Vehicles (SPV) that will provide impetus to infrastructural
projects on PPP mode in the state. Some of the major projects undertaken by
INCAP are Development of Krishna Godavari Gas Network in energy sector,
Outer Ring Road Project for Hyderabad, Development of Inland Water Ways, all
new Airports, development of District Central Library at Visakhapatnam etc. It is
designated the role of a developer, advisor, financier and manger to render a full
range services from in every phase of project development from inception to
completion.
4. Andhra Pradesh Industrial Infrastructure Corporation (APIIC) incorporated in
1973 provides industrial infrastructure through development of industrial areas. It
has developed more than 300 industrial parks, food processing zones and Special
Economic Zones (SEZs).The first successful PPP project was HITEC City project
in 1996 with 89% equity by L&T and 11% by APIIC in shape of land . The
Corporation is a principle facilitator in developing mega projects like Visakha
Industrial water supply, Gangavaram port, Hyderabad International Convention
centre, Pahamlylaram Financial District Hardware Park etc. The corporation is a
nodal agency for government sponsored growth centres, export promotion,
industrial parks and integrated infrastructure development centres.
5. "Infrastructure & Investment department" has been created by the GoAP to
achieve the development and growth objectives of the State through creation of
adequate and 'state-of-the-art' infrastructure facilities in the State. The Department
145
is responsible for facilitation and monitoring of the Project from conceptualization
to the last stage in project delivery. For this purpose the department utilizes the
services of Andhra Pradesh Invest, Andhra Pradesh Infrastructure Authority
(APIA) for facilitating Public Private Partnership (PPP) Projects in infrastructure
and INCAP for execution and monitoring of infrastructure projects implemented
by it, and also the technical support staff such as Engineering Departments of the
respective line departments.
6. AP Urban Finance and Infrastructure Development Corporation (APUFIDC) is a
nodal agency for improving urban infrastructure, monitoring reforms in Urban
Local Bodies(ULBs) of A.P under Jawaharlal Nehru Urban Renewal
Mission(JNNURM) and provides financial assistance by way of loans and
advances, technical or any other assistance and guidance to the Urban Local
Bodies, Municipal Corporations, and Urban Development Authorities. JNNURM
in A.P has 95ULBs under it and has received sanction for 268 projects costing
12,528 crores out of which 27 infrastructure projects costing Rs 1143 cr are
completed which is a big step in improving the quality of life for citizens in urban
A.P.
146
Figure 3.13 Initiatives by Govt of A.P and GOI in the PPP Project Process
Source : Complied by the Author.
Infrastructure Development Enabling Act, 2001
INCAP
AP PPP cell
Preparation of Initial screening report and approval by Government / statutory authority, training officers for PPP capacity building
Contract closure and asset transfer stage
Operations Stage
Creation of SPV, Final draft of Concession Agreement and key project
Project Bidding Process
Development of contractual structure, bidding structure, financial structure, legal documentation
Project Feasibility analysis
Set make a shelf of PPP projects
Identify to meet the gap in Service Needs
Financial support through VGF, Long term debt finance through IIFCL etc.
Monitoring Performance and cost
APIIC
Sector specific organisations like • Roads - NHAI, APRDC • Urban Infrastructure -ULC, GHMC • Water & sanitation: HWSWB • Power: APGENCO, APTRANCO,
APCPDCL • Airports: Airport Authority of India • Ports: Ministry of Surface transport • Railways: Ministry of railways
In Coordinati
on with Infrastructure & Investment
147
The above Figure 3.13 shows the various steps involved in a PPP process from
initiation to implementation and contract closure with the support provided by the nodal
agencies like AP PPP cell, APIIC and INCAP, at every step in coordination with the
sector specific organisations in all sectors. The PPP cell provides financial and
technical support and provides a shelf for projects in various sectors to be undertaken
through PPP mode, while INCAP, APIIC coordinate the entire PPP process and help in
creating the “Special Purpose Vehicle” (SPV). The entire process of PPP contract is
under the guidelines provided by “A.P Infrastructure Development Enabling Act” (A.P
IDEA). The Infrastructure & Investment Department acts as an intermediary and
facilitates implementation of PPP Projects and hands over the project after execution to
the respective departments for operation and maintenance. E.g. all port projects in A.P
were implemented by this department, Rajiv Gandhi International Airport project was
implemented by Infrastructure and Investment department and later handed over to
AAI. (www.ppp.ap.gov.in). APUFIDC monitors ULB’s of A.P for promoting projects
for developing urban infrastructure.
Major PPP Projects completed in Andhra Pradesh
• “Hitech City” is the first major successful PPP project in the State developed in
1996 by Larsen & Toubro (L&T) with 89% equity and APIIC with 11%. The
project provides state of the art facilities with a dedicated power supply. More
than 100 MNCs are operating from the project. The project provides employment
generation to more than 65,000 persons.
148
• Rajiv Gandhi International Airport, Hyderabad was the first Greenfield Airport in
India on PPP model (Build Operate Own transfer mode) initiated in the year 2000
with a consortium formed by owned by GMR infrastructure (63%), Airport
Authority of India (13%), Malaysian Airports (11%) and Government of
A.P.(13%) with a project cost of Rs 2478 crores. It operations commenced in
2008 and shares 4% of gross revenue annually to GOI and caters up to 12 million
passengers per annum.
• Gangavaram Port is the green field sea port established near Visakhapatnam with
a project cost of Rs 2000 crores on a Build Own Operate Transfer (BOOT) mode
and commenced the operation from August 2008. Its world class multipurpose
port to handle ships up to 2,00,000 DWT. It’s the deepest port in India with a
depth of 21 meters. The port has handled the largest coal vessel to call at Indian
ports.
• Visakapatnam Industrial Water Supply Project (VIWSP) is the second successful
water sector PPP project in India after Tirupur Integrated Water supply which was
started in the year 2003 and opened for operation in December 2004. The project
was developed by APIIC and IL&FS.
• Hyderabad International Convention Centre & an Integrated Township project
consists of an integrated township, 18-hole international golf course, and a
convention centre with 6000 seating capacity and a business hotel. The
convention centre and business hotel commenced operation from 2006. The
project is jointly promoted by APIIC Ltd (26%) and EMAAR Properties (76%).
Besides equity return, APIIC receives 2% and 3% respectively of Gross Annual
Revenue as lease rentals.
149
• Nehru Outer Ring Road or ORR is a 158 Km, 8-lane ring road expressway
encircling the City of Hyderabad. It is built by HMDA and Hyderabad
Expressways Limited is a Special Purpose Company promoted by Gayatri
Projects Limited and Maytas Infra Limited at a cost of Rs.669 crores. The
expressway is designed for speeds up to 120 kmph and was opened on December
2012 which has eased traffic to a large extent.
The other upcoming important PPP projects under various stages of development in the
State are the Hyderabad Metro Rail Project at Hyderabad, major bridge across River
Godavari at Rajahmundry, development of Greenfield airports at Nellore, Ongole,
Tadepalligudem, Kurnool, Kothagudem, Ramagundam and Nizamabad. The major
Private players involved in infrastructure projects in A.P are L&T infrastructure Ltd,
GMR Infratech, IVRCL Infrastructure & projects Ltd, Sadbhav Engineering, Ramky
Infrastrcutures Ltd, IL&FS, NCC infra etc. Figure 3.9 shows the year wise major PPP
projects completed and initiatives taken by the Government of A.P for promoting PPP
projects.
150
Figure 3.9 Major PPP projects Milestones and Initiatives by Government of A.P
Year 1996 1998 2000 2002 2004 2006 2008 2010
Kakinada Deepwater project
Initiated 1999
First PPP “Hi-tech city”initiated 1996
Initiation of Rajiv GandhiInternational Airportproject at Hyderabad 2000
Gangavaramport project initiated ,2002
Commencement of Operation of “HICC” 2005
Initiation of Gangavaramport project at Visakhapatnam 2005
Vizag IndustrialWater Supply
Commencement 2004
Nellore TadaHighwaycompleted 2005
SPV formedfor ORR project
2005
Rajiv GandhiInternational Airportat HyderabadCompleted 2008
Gangavaramport project at Visakhapatnamunder Operation,2008
Construction of Major Bridge across River Godavari ,2008
APIIC incorporated in 1973
1st MCAfor Road sector by GOI
INCAP Incorporated 2005
Formation of AP PPP Cell 2007
A.P State Initiatives for encouraging PPP projects in Infrastructure
A.P Infrastructure Development Enabling Act 2001
Maj
or P
PP P
roje
cts
in A
.P
Hyderabad Metro Rail project
Financial closure 2010
Source: Compiled from https://ppp.cgg.gov.in
151
3.10 Summary
Chapter Three presents a brief insight into the road development in India, evolution of
PPP projects in India and need for PPP model in the road sector. The trend for PPP
projects in the road sector across the world are reviewed and compared with the PPP
road projects in India and in A.P state. Next status of PPP projects in all sectors and in
road sector, in all states in India is presented and reasons for skewed discussion of PPP
projects across various states is discussed. Regression analysis is conducted to
understand the relationship between SGDP and investment in PPP projects is
infrastructure. It is seen that states with higher SGDP have attracted more PPP projects
than other states. Lastly the trend of PPP projects in all sectors and in road sector was
reviewed and initiated taken by the Government of A.P to promote PPP projects are
discussed. At the end major PPP projects completed in A.P are highlighted.
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