MP Draft PPP Policy

Final Report
Policy Framework and Institutional Roadmap for PPP in Madhya Pradesh

Government of Madhya Pradesh and Department for International Development, UK
May, 2011
Submitted by Deloitte Touche Tohmatsu India Private Limited
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TABLE OF CONTENTS
TABLE OF CONTENTS ......................................................................................................................................................... 1 1. INTRODUCTION ......................................................................................................................................................... 6 1.1 1.2 2. BACKGROUND .............................................................................................................................................................. 6 OBJECTIVES OF THE ASSIGNMENT ..................................................................................................................................... 7
PPP IN MADHYA PRADESH ........................................................................................................................................ 8 2.1 2.2 EXISTING SCENARIO IN MP ............................................................................................................................................. 8 PPP IN MP ................................................................................................................................................................ 11
3.
INSTITUTIONAL ARRANGEMENTS FOR GOVT. OF INDIA FOR PPP ............................................................................ 19 3.1 3.2 3.3 PPP FRAMEWORK AT CENTRAL LEVEL.............................................................................................................................. 19 POLICY FRAMEWORK FOR PPP AT CENTRAL LEVEL ............................................................................................................. 22 ISSUES WITH PPP PROJECTS AND PROCESSES AT CENTRAL LEVEL .......................................................................................... 22
4.
PPP IN OTHER INDIAN STATES ................................................................................................................................. 24 4.1 4.2 4.3 4.4 4.5 4.6 4.7 INTRODUCTION ........................................................................................................................................................... 24 GUJARAT ................................................................................................................................................................... 24 TAMIL NADU .............................................................................................................................................................. 26 MAHARASHTRA .......................................................................................................................................................... 28 ANDHRA PRADESH....................................................................................................................................................... 30 ORISSA ...................................................................................................................................................................... 32 CONCLUSION .............................................................................................................................................................. 34
5.
INTERNATIONAL PRACTICES IN PPP ......................................................................................................................... 38 5.1 5.2 5.3 5.4 INTERNATIONAL PPP EXPERIENCES ................................................................................................................................. 38 PPP FRAMEWORK FOLLOWED IN SOUTH AFRICA ............................................................................................................... 39 PPP FRAMEWORK FOLLOWED IN SOUTH KOREA................................................................................................................ 41 LEARNING FROM INTERNATIONAL EXPERIENCES ................................................................................................................. 43
6.
PROPOSED PPP POLICY FOR MADHYA PRADESH ..................................................................................................... 44 6.1 6.2 INTRODUCTION ........................................................................................................................................................... 44 DRAFT PPP POLICY .................................................................................................................................................. 45
7.
PROPOSED INSTITUTIONAL ROADMAP FOR PPP IN MP ........................................................................................... 61 7.1 7.2 7.3 INTRODUCTION ........................................................................................................................................................... 61 INSTITUTIONAL ARRANGEMENTS FOR PPP ........................................................................................................................ 65 POSSIBLE OPTIONS FOR PPP FACILITATION AGENCY........................................................................................................... 72
8.
WAY FORWARD....................................................................................................................................................... 83
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2011 Deloitte Touche Tohmatsu India Pvt. Ltd.
9.
ANNEXURES ............................................................................................................................................................ 84 9.1 9.2 9.3 9.4 9.5 9.6 9.7 9.8 ANNEXURE 1: LIST OF STAKEHOLDER INTERACTIONS ........................................................................................................... 85 ANNEXURE 2: DETAILS OF EXPERIENCE OF GOI IN PPP....................................................................................................... 86 ANNEXURE 3: DETAILS OF PPP IN OTHER INDIAN STATES .................................................................................................... 87 ANNEXURE 4: DETAILS OF INTERNATIONAL EXPERIENCE IN PPP............................................................................................ 99 ANNEXURE 5: VALUE FOR MONEY ................................................................................................................................ 104 ANNEXURE 6: TYPICAL PPP MODELS ............................................................................................................................ 105 ANNEXURE 7: PROCESS OF APPOINTMENT OF TRANSACTION ADVISORS ............................................................................... 109 ANNEXURE 8: TERMS OF REFERENCE FOR THE STUDY ....................................................................................................... 111
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List of Tables
Table 1: Department wise targets for PPP given by Govt. of Madhya Pradesh ....................................................................... 15 Table 2: Mapping of PPP projects in pipeline on the PPP process map................................................................................... 17 Table 3: Institutional Framework for PPP at central level ....................................................................................................... 20 Table 4: Comparison of Institutional Framework for PPP in 5 states ...................................................................................... 35 Table 5: Comparison of the previous and the new regulatory framework in South Korea ..................................................... 41 Table 6: Inter-se responsibilities of various institutions in a PPP project cycle in Madhya Pradesh ....................................... 69 Table 7: Sector wise details of PPP projects in Maharashtra ................................................................................................... 93 Table 8: No. of PPP projects at various stages of PPP cycle in Maharashtra ........................................................................... 93
List of Figures
Figure 1: Sector wise status of PPP projects in Madhya Pradesh (number & value) ............................................................... 12 Figure 2: Status of PPP projects in Madhya Pradesh ............................................................................................................... 12 Figure 3: Status of PPP projects in road sector in Madhya Pradesh ........................................................................................ 13 Figure 4: Status of PPP projects in urban sector in Madhya Pradesh ...................................................................................... 14 Figure 5: Status of PPP projects in water sector in Madhya Pradesh ...................................................................................... 14 Figure 6: PPP process map for Madhya Pradesh ..................................................................................................................... 16 Figure 7: Institutional Framework for PPP at central level ...................................................................................................... 22 Figure 8: Institutional Framework for PPP in Gujarat .............................................................................................................. 25 Figure 9: Institutional Framework for PPP in Tamil Nadu ........................................................................................................ 27 Figure 10: Institutional Framework for PPP in Andhra Pradesh .............................................................................................. 30 Figure 11: Institutional Framework for PPP in Orissa .............................................................................................................. 32 Figure 12: Existing Institutional Framework for PPP in Madhya Pradesh ................................................................................ 61 Figure 13: Existing PPP process and approval mechanism in Madhya Pradesh ...................................................................... 63 Figure 14: Issues / gaps identified in existing PPP arrangement in Madhya Pradesh ............................................................. 64 Figure 15: Roles and responsibilities of the proposed institutional framework for PPP in Madhya Pradesh ......................... 66 Figure 16: Key features of the proposed institutional framework in Madhya Pradesh .......................................................... 72 Figure 17: Proposed Institutional Framework Option 1: DIF becomes PPP Facilitation Agency .......................................... 74 Figure 18: Proposed Institutional Framework Option 2: A separate agency under Finance becomes Facilitation Agency for PPP ........................................................................................................................................................................................... 76 Figure 19: Proposed Institutional Framework Option 3: A separate agency outside Finance becomes Facilitation Agency for PPP ..................................................................................................................................................................................... 78
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Abbreviations
List of Abbreviations
ADB APIIC BEE BOO BOOT BOT BTL BTO CA CIDCO CoI DCA DEA DIF DLEC DPI DPR ECI FDI FOB GID Act GIDB GOAP GoI GoMP Asian Development Bank Andhra Pradesh Industrial Infrastructure Corporation Black Economic Empowerment Build Own Operate Build Own Operate Transfer Build Operate Transfer Build Transfer Lease Build Transfer Operate Concession Agreement City and Industrial Development Corporation of Maharashtra Ltd Committee on Infrastructure Draft Concession Agreement Department of Economic Affairs Directorate of Institutional Finance Department Level Empowered Committee Directorate of Public Instruction Detailed Project Report Empowered Committee on Infrastructure (Orissa) Foreign Direct Investment Foot over-bridges Gujarat Infrastructure Development Act Gujarat Infrastructure Development Board Government of Andhra Pradesh Government of India Government of Madhya Pradesh MPPDF MPRDC MPSIDC MSRDC MUIF MUINFRA NRI O&M PDF PFI PFMA PICKO PIMAC PMC PPA PPP PPPAC PPPAU PSC PWD RFP RFQ SA SLEC TA Madhya Pradesh Project Development Fund Madhya Pradesh Road Development Corporation Madhya Pradesh State Industrial Development Corporation Ltd Maharashtra State Road Development Corporation Limited Maharashtra Urban Infrastructure Fund Maharashtra Urban Infrastructure Development Authority Non-resident individuals Operations and Maintenance Project Development Fund Project Finance Initiative Public Finance Management Act Private Infrastructure Investment Center of Korea Public and Private Infrastructure Investment Management Center Project Management Consultant Project preparatory assistance Public private partnership PPP Appraisal Committee PPP Appraisal Unit Public Sector Comparator Public Works Department Request for Proposal Request for Qualification Sponsoring Agency State Level Empowered Committee Transaction Advisor
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List of Abbreviations
HLCA IA IDEA IDFC IIFCL IIPDF IL&FS INCAP JnNURM MCA MFMA MMRDA MoF MP MPIIFB High Level Empowered Committee (Orissa) Andhra Pradesh Infrastructure Authority Andhra Pradesh Infrastructure Development Enabling Act Infrastructure Development Finance Company India Infrastructure Finance Company Limited India Infrastructure Project Development Fund Infrastructure Leasing & Financial Services Ltd Infrastructure Corporation of Andhra Pradesh Jawaharlal Nehru National Urban Mission Model Concession Agreement Municipal Finance Management Act Mumbai Metropolitan Region Development Authority Ministry of Finance Madhya Pradesh Madhya Pradesh Infrastructure Investment Fund Board TC TNRDC TNUDF TNUDP TNUIFSL TPC UADD UK ULB USD VFM VGF Technical Consultant Tamil Nadu Road Development Company Tamil Nadu Urban Development Fund Tamil Nadu Urban Development Project Tamil Nadu Urban Infrastructure Financial Services Limited Total Project Cost Urban Administration & Development Department United Kingdom Urban Local Body US Dollars Value for Money Viability Gap Funding
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1. INTRODUCTION
1.1 Background
Madhya Pradesh has undertaken several measures in terms of investments in physical and social infrastructure and many policy changes to strengthen the enabling environment for infrastructure development in the last few years. However, there are enough indications that capital expenditure by government is not enough to meet the infrastructure deficit in the state. Investments and development in physical and social infrastructure therefore remains the key to economic growth in the state, which the GoMP also recognizes the urgency and need for. Even where investments have been made, adequate provisions have not been made for maintenance of these assets and the quality of services to the ultimate users also needs substantial improvements. A strong public private partnership (PPP) framework has been identified as critical to providing a thrust in the development of infrastructure and provision of infrastructure services in the state. The Government of Madhya Pradesh (GoMP) has taken several initiatives in the last few years to develop infrastructure through PPP mode and develop enabling environment for encouraging PPP in the state. For example: Directorate of Institutional Finance (DIF) has been formed to serve as the Nodal agency for PPP projects. A PPP Cell under DIF has been created which constitutes a state level committee for PPP. The Committee is chaired by Chief Secretary, GoMP. The PPP Cell offers hand-holding assistance in planning and bidding out PPP projects. Apart from being the nodal agency for PPP projects in the state, it is also responsible for strengthening performance management in government. Madhya Pradesh Infrastructure Investment Fund Board (MPIIFB) has been constituted to mobilize resources for infrastructure projects including roads, irrigation, water supply, solid waste management and drainage or a multipurpose project comprising two or more such areas. MP Project Development Fund (MPPDF) for funding preparatory activities of PPP projects is also constituted.
At the state level, Madhya Pradesh has been one of the pioneers in building roads under PPP mode. However other transport sectors, urban sectors and social sectors need more focus on PPP in MP. It is reported that, in the last few years PPP projects worth Rs. 8,600 crores have been awarded and projects of Rs. 5,000 crores are in the pipeline. To accelerate the development of social and physical infrastructure and to substantially enhance the delivery of services to the public in many sectors, GoMP has decided to give a major thrust to the PPP formats in many of these initiatives. It is with this background that GoMP, with the assistance of DfID, UK, appointed consultants Deloitte to formulate a PPP policy and suggest Institutional arrangements for effective PPP implementation.
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1.2 Objectives of the Assignment

The objectives of the study are to:
develop an overarching PPP policy framework focusing on both social and physical infrastructure, encompassing all the sectors. prepare an institutional roadmap for the implementation of the provisions of the PPP Policy including infrastructure development fund, project development fund, appraisal authority, approving authority etc.
This draft report presents a draft PPP policy and a roadmap for suitable institutional arrangements, along with tracing the current situation of PPP in Madhya Pradesh and providing a backdrop of what are good PPP practices elsewhere in the country and overseas.
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2. PPP IN MADHYA PRADESH

2.1 Existing Scenario in MP
2.1.1 Existing Infrastructure Scenario in MP
As of March 2010, a cumulative infrastructure investments of over USD 16.6 billion has been made in Madhya Pradesh. Out of this, more than USD 14 billion worth of investments have been made in generation and distribution of electricity. A total installed generation capacity of more than 8200 MW is available with the state. The adjacent diagram shows investments in six hard infrastructure sectors in the state. It is seen that power and roads has about 95% share of investments in the hard infrastructure sectors. The total road length maintained by PWD in the state is more than 72,000 kms. It has 16 national highways. However, there is a huge potential for further improvement. The national average for all types of road network is 83 km/100 sq. km., whereas in M.P. it is only 53.68 km/100 sq. kms. It has 5900 kms of railway network and 5 airports (Bhopal, Jabalpur, Gwalior, Indore and Khajuraho). Under the Jawaharlal Nehru National Urban Mission (JNNURM), 22 projects (of value US$ 479 million) have been sanctioned for urban centres such as Bhopal, Indore, Jabalpur and Ujjain. The Asian Development Bank (ADB) has also funded 16 projects worth US$ 33.8 million for Bhopal in the areas of water supply, sewerage and sanitation, storm-water drainage and solid-waste management. In the past 3-4 years, focus on social sectors like education, health has been growing. MP has 50 District Hospitals, 333 Community Health Centres, 1155 Primary Health Centres, 56 Urban Civil Hospitals. There are 10872 high schools & higher secondary schools, 97800 primary schools, 39882 middle schools and 878 Ashram Shalas (elementary level to serve children and families who reside in remote areas especially tribal population).
2.1.2 Sector policies

Almost all sector policies in MP encourage private sector participation in their respective sectors. Some even specify PPP as preferred mode of development. For example State Road Policy has initiated formation of Road Maintenance Fund which would participate in PPP projects in roads and highway sector. Many policies have specified various incentives in terms of tax holidays, land
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concessions, low entry/ exit barriers to encourage more and more private participation in their respective sectors. Highlights of relevant policies with respect to private sector participation are given below: State Roads Policy The objective of State Road Policy was to meet transportation requirements efficiently across all road networks in the state through upgradation of state roads, urban roads and rural roads. However, due to paucity of funds for upgradation/ maintenance of roads, State Road Policy has identified PPP for development of road and highway sector in the state. A Road Maintenance Fund has been created by pooling the toll revenue and assistance obtained from CRF, Mandi Cess and Road Tax. This fund would be offered as 'equity participation' to BOT operators under PPP contracts who would pool in their own resources and bid for a road project. This would encourage PPP which would not only increase the available pool of funds but would enhance maintenance/ reconstruction activities by application of modern techniques. The policy states that viable projects will be offered to private sector under BOT scheme, especially for construction of (i) new bridges (ii) re-construction of distressed and narrow bridges (iii) bye-passes (iv) widening of high density corridors and (v) strengthening and maintenance of economically viable sections of highways. The policy also provides incentives (attractive entry/ exit clause, land concessions and tax holidays) to the private sector to ensure commercial viability of road projects. The State Road Policy has been supported by amendments and enactment of enabling legislative structure: Amendment of Indian Tolls (M.P.) Act, 1932 To facilitate private sector participation in road projects, GoMP has amended the Indian Tolls (M.P.) Act 1932 which permits the levy of toll on new construction as well as improvement of road and bridge projects. Madhya Pradesh Highway Bill 2001 In order to facilitate implementation of the policy effectively and within the prescribed time frame, a legal framework for the regulation and development of road sector has been prepared. It has been prepared on the guidelines of a Model Highway Act issued by Govt. of India. The bill is yet to be enacted.
Tourism Policy, 2010 Tourism Policy for Madhya Pradesh was approved by the State Cabinet in 2010 to promote balanced and sustainable tourism, Tourism Policy particularly focuses on attracting private investment and advocates land use for the purpose of tourism centers. One of the guiding principles of the policy is to create institutional mechanism to promote private investment and to promote PPP in tourism. In order to enhance tourism, guidelines and procedures to attract private investment have been made transparent. Land bank policy is strengthened to promote tourism. For tourism projects, land for 90 years lease or development agreement for 30 years is permitted along with exemption of stamp duty. A databank has been prepared for destination marketing. Concessions on taxes in tourism sector have been given in many cases.
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State Water Policy (2003) MP has formulated a State Water Policy in 2003 which has been prepared in accordance to the guidelines and general directions in the National Water Policy, keeping in view the specific necessity for the state of Madhya Pradesh. The policy has specified water allocation priorities (in that order) for the state Drinking water supply, Irrigation and afforestation, power generation/industrial and tourism. The policy identifies use of information systems, quality control mechanisms for drinking water, management and control of water zones, irrigation and land management etc. The policy does not talk directly about PPP. However, the policy does encourage non-government participation in the water sector in project planning, construction and maintenance. Housing Policy, 2007 Housing policy of 1995 was amended in 2007 due to change in demand for urban housing due to rapid urbanization. Considering growing need for urban housing, provision for participation of private and corporate sectors has been made in the policy to meet the requirement of social housing in the state. Provision of providing government land at concessional rates for development of habitations to construction agencies has also been made. The policy encourages PPP to meet the shortages of houses. Provision has been made to grant permission for township development in agricultural areas scrapping the existing practice of compulsory for diversion of lands. Health Policy Around 75% of the total funding in health sector is a private sector funding. There is an urban rural divide since 70% of the qualified practitioners are in urban areas. Given the numbers and spread of private health care providers in rural areas (often the less than qualified providers) and substantial presence of qualified and less than qualified providers in urban areas, it is obvious to explore possibilities of the role the private sector can play for improved public health in the state. Government puts forward specific measures for encouraging public private collaboration in the fields of immunization, reduction of maternal mortality and control of infectious diseases. Further, measures are suggested to use the human and financial resources of non-government organizations (NGOs) and private sector for management of some government owned facilities. Industrial Promotion Policy 2010 and Action Plan In order to attract industrial investments, establish industrial houses, GoMP has taken many policy initiatives. The industrial policy was revised recently with effect from November 2010. For ensuring speedy approvals of investment proposals, rules and procedures have been streamlined under Madhya Pradesh Investment Facilitation Act 2008 (single window clearance). One of the key objectives of the Industrial Promotion Policy is to attract private sector participation in industrial infrastructure and encourage FDIs and investments by NRIs. The policy also intends to rationalize rates of commercial taxes to make the industry attractive.
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2.2 PPP in MP
PPP in Madhya Pradesh started with a road sector project in 1992 by MP Bridge Corporation. A road sector project was conceptualized and developed in early 1990 (Pithampur-Indore highway project). Primarily reason for this PPP initiative in 1990s were two fold firstly urgent need for the PithampurIndore highway was felt and secondly there was dearth of funds with the government to implement the project. Post 2000, many PPP projects were conceptualized across many other sectors also like urban infrastructure, water supply and sanitation, social sector etc. For example, Dewas Industrial Water Supply project was one of Indias early water supply projects developed on a BOT basis. This green field project was awarded on a domestic tender for a contract period of 30 years. Madhya Pradesh State Industrial Development Corporation Ltd (MPSIDC) awarded this project to MSK Projects (I) Ltd. The cost of this project was around USD 20 million, 70% of which was provided by IDFC and 30% came from developers equity.
2.2.1 Status of PPP Projects in MP

It is understood that around 88 infrastructure projects have been taken up or initiated on PPP in the state with a definite increasing trend in recent times. The value of these projects is estimated to be more than Rs.13,800 crores. This section highlights key trends in terms of number and value of PPP projects and status of these projects across various identified infrastructure sectors. It is seen that most of the PPP projects are from in the road and highway sector. This sector accounts for around half of the total value of PPP projects in the state. Road and highway sector has had the advantage of standardized process/ documents/ guidelines for PPP (even at central level) and authorities have also found it easier to establish suitability of PPP for road projects. MPRDC (MP Road Development Corporation) is responsible for sponsoring most of the PPP projects in the road sector. Over the years, they have acquired PPP project preparation capacities. However, there is absence of these capacities in other departments / agencies. It may also be noted that average size of road projects are comparatively larger than other infrastructure projects (like projects in urban or social infrastructure). It is seen that more than Rs.1800 crores worth of PPP projects have been completed in road sector compared to less than Rs.5 crores worth of PPP projects in all remaining sectors. More than Rs.4600 crores worth of PPP projects are under construction and in the pipeline in road sectors, whereas more than Rs.7300 crores worth of PPP projects are under construction and in the pipeline in other sectors. The exhibit below describes sector wise breakup of PPP projects (completed & pipeline projects) in the state.
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Figure 1: Sector wise status of PPP projects in Madhya Pradesh (number & value)
It is seen than out of 88 projects, over 50% belongs to road sector and over 17% belong to urban sectors. However, in terms of value, around 47% and 3% belong to these sectors. Health and sports sectors have also seen relatively larger projects. Only 5 projects in health and sports sector comprise of 25% of total value of PPP projects in the state. The two large projects include the 195 hectare Medical Hub at Tigaria Badshah and Sports City in Bhopal having project cost of Rs.2000 crores and Rs.900 crores respectively. It is seen that only 16 projects (out of these 88 projects) have been completed having value of less than 15%. Out of these14 projects belong to road sector. All the remaining projects are in the pipeline and construction phase. The exhibit below describes status of PPP projects in the state.
Figure 2: Status of PPP projects in Madhya Pradesh
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Projects in pipeline include all projects before bids are invited from bidders. It includes projects under various stages like project conceptualization, DPR preparation, awaiting DLEC / SLEC / cabinet approvals, transaction advisor selection, bid document preparation etc.
2.2.2 Status of PPP projects in Road Sector

As mentioned before, 14 out of 16 completed projects belong to road sector. It is seen that there are 14 projects in the construction phase also. The fact that 28 road sector projects have been bid out on PPP highlights the fact that road sector has matured in the PPP learning curve. They have standardized procedures, standardized bidding documents and institutional capacity to manage PPP transactions. It is seen from the experience that most projects get stuck in bidding / pipeline stage is due to its nonviability. However in case of road sector, since most of the projects are financially viable, 28 projects have been successfully bid out. The diagram below describes the status of the road sector projects in terms of numbers and value.
Figure 3: Status of PPP projects in road sector in Madhya Pradesh
2.2.3 Status of PPP projects in Urban Sector

It can be seen that there are many urban PPP projects in the pipeline stage. Most of these projects are unattractive for the private sector. Some of them have even gone for re-bid due to no response from bidders. The two completed urban projects are Bus stops for city service and public toilets in Bhopal. The two under construction projects are multi-level parking and FOBs in Indore. Unlike other sectors, urban sector projects can be conceptualized at departmental level as well as local body level. In most cases local bodies do not have the capability to undertake and manage a PPP transaction. Hence most local bodies follow conventional method of procurement for projects sponsored by them.
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The diagram below describes the status of the urban sector projects in terms of numbers and value.
Figure 4: Status of PPP projects in urban sector in Madhya Pradesh
2.2.4 Status of PPP projects in Water Sector

The two under construction projects in water sector are augmentation of water supply network in Shivpuri and Kandwa. The two projects under bidding stage are ADB projects for 24X7 and NRW reduction for Indore and Bhopal. Since these projects are pilot projects, the value of these projects is very small. Hence they represent only 3% water sector PPP project in the state. The diagram below describes the status of the water sector projects in terms of numbers and value.
Figure 5: Status of PPP projects in water sector in Madhya Pradesh
Going forward, it is seen that PPP has been identified as a preferred mode of procurement of water infrastructure projects. The section below highlights PPP targets identified for various departments in GoMP.
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2.2.5 PPP targets has been identified for next 3 years

Procurement of infrastructure projects through PPP has been identified as the priority. GoMP intends to double the investment in the State through PPP in next three years. GoMP intends to attract Rs.25000 crores of investment in three years in projects developed through PPP. Department-wise PPP targets have been proposed. Department wise targets for Rs.18500 crores are given in the table below.
Table 1: Department wise targets for PPP given by Govt. of Madhya Pradesh Sl. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. Department Medical Education Public Works Department (Road Sector) School Education (DPI) Horticulture and Food Processing School Education (Rajya Shiksha Kendra) Urban Admin & Development Department Commerce, Industries & Employment Energy Biotech Food & Civil Supplies (Warehousing) Transport Health Higher Education Technical Education Tourism Housing Water Resources (To be indicated by the department) Total Target for 2010-12 (in Rs. crores) 200 6000 900 500 500 1000 4000 2000 200 500 1200 100 100 100 200 1000 NA 18500
Source: Govt. of Madhya Pradesh In order to achieve these targets, GoMP has attempted many policy and regulatory initiatives and set up an institutional mechanism. A discussion on the exiting institutional mechanism is presented in a later section of this report.
2.2.6 PPP Process Map

The PPP process followed in Madhya Pradesh has been mapped and shown below:
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Figure 6: PPP process map for Madhya Pradesh

Project Conceptualization / Study
Line Ministry / Implementing & Sponsoring Agency
Preparatory / In-principle Approval Stage
Final Approval / Tendering Stage

Signing of Concession Agreement
Project Conceptualization
|A|
DPR preparation and assessment of feasibility
Appointment of transaction advisor / project development
|C|
Formulation of project documents like project agreements, rights and obligation of each party Is VGF required
Shortlisting of bidders
|H| |E|
RfQ tendered by the department NO Selection of Concessionaire
|B|
YES Preparation Memorandum of Consideration (MFC) Preparation of project proposal
|G| |F|
Issue of RfP and CA to shortlisted bidders
Disbursement of IIPDF funds
Disbursement of MPPDF funds
Approval of application for MPPDF funds after scrutiny and analysis
MPPDF
PPP Cell, DIF, GoMP
Verify and forward State VGF Proposal
Vetting of RfQ and Project Proposal with suggested modifications
Vetting of Project documents including RfP, CA with suggested modifications
MPIIFB
Approval for State VGF
Approval Committees (DLEC/ SLEC)
Approval from DLEC / SLEC depending on project value
Approval from DLEC / SLEC depending on project value
GoI LEVEL Cabinet Approval Empowered Comm./ (Cabinet / Line Insti. Ministry)
|D|
In-principle Approval Final Approval
Approval of MFC application and disbursement of funds if approved
In principle approval given by Empowered Comm./Insti. Depending upon project size
GoI LEVEL PPP Cell, DEA, GoI
Screening of MFC submitted by Sponsoring Agency
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Legend:
PPP Process IIPDF Process MPPDF Process Central VGF Process State VGF Process
Roles performed by every institution at every stage are clearly mentioned in the diagram. The process map shows the approval process of central VGF, state VGF, IIPDF, MPPDF and PPP approval process in the current scenario. For approval of IIPDF and central VGF, central government level institutions like Empowered Committee / Institution and PPP Cell, DEA are also involved. The PPP projects of MP which are in pipeline (as on March 2011) have been mapped in the process diagram above from A to H. The details of these projects are given in the table below.
Table 2: Mapping of PPP projects in pipeline on the PPP process map
Reference no. |A| A.1 |B| B.1 B.2 B.3 B.4 B.5 B.6 |C| C.1 C.2 C.3 C.4 C.5 C.6 C.7 |D| D.1 D.2 D.3 D.4 D.5 D.6 D.7 |E| E.1 E.2 E.3 |F| F.1 F.2 F.3 F.4 Project Multi-level Parking at New Mkt Minerals-based SEZ on 250 acres Agro-based SEZ on 248 acres PPP Projects exploration at select MCs in MP MLP In front of Nigam Shopping Complex Daulat Ganj MLP at Old Bus Stand Kampoo Bus Terminals (3) Van Vihar Ph-II on 350 ha Sports Complex on 42.140 hect spread over 3 locations Logistics Hub at Talavali Chanda on 151.845 hect ISBT on 10 hect Convention Centre on Airport Road Medical Hub at vill Tigaria Badshah on 194.727 hect Hospital Project at Old Nigam Work Shop, Dholi Bua ka Pull Water Supply Improvement Pithampur Betul-Sarni-Parasiya 124.10 kms Damoh-Bahtiyargrah-Hirapur 69.60 kms Jhabua-Jobat-Zeerpanya-Kukshi 95.50 kms Rau-Mhow-Mandleshwar 74.40 kms Sarangpur-Akodia-Shujalpur 39.86 kms Khandwa-Dehtalai-Burhanpur 127.25 kms BioTech Park on 181 acres (Common research facilities/ Residential/Commercial) Logistics Park Powerkheda (115 acres) Commercial Cplx construction and O&M of Bus terminal Food Park at Karmadi 80 acres Food Park at Anjana Saraiyat 60 acres Food Park at Adampur Chhawni 50 acres Parking Cum Commercial at Gandhi Mkt, Maharaj Bada for 300 cars, 252 shops relocation. (5,228 Sq. Mt.) Location Bhopal Hargarh, Jabalpur Umariya-Dungariya, Jabalpur 11 cities Gwalior Gwalior Bhopal Bhopal Indore Indore Indore Indore Indore Gwalior Pithampur
Indore Hoshangabad Rewa Ratlam Harda Bhopal Gwalior
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Reference no. F.5 |G| G.1 G.2 G.3 G.4 G.5 G.6 G.7 G.8 G.9 G.10 G.11 G.12 G.13 G.14 G.15 G.16 G.17 |H| H.1
Project ADB Pilot - 24x7 and NRW Water reduction Kalpana Nagar Swimming Pool O&M Fitness Centre O & M of Prakash Swimming Pool Mandsaur-Pratapgarh 11.526 kms Hata-Fatehpur-Rajpura-Solapuir-Bajna-Dargawon 64.42 kms Sendhwa-Khetia 57.3 kms Semaria-Manikpur 16.36 kms Deharda-Ishagrah 32.93 kms Tikamgarh-Maheroni 15.7 kms Badwani-Palsod-Sendhwa 56.89 kms Dhar-Nagda 22.50 kms Mhow-Ghata Billod 26.88 kms Sardarpur Badnawar 42.98 kms Water-based Tourism activities on Indira Sagar Dam - II Water-based Tourism activities on Indira Sagar Dam - I Eco-Tourism Park (7 hectares) ADB Pilot - 24x7 and NRW Water reduction ADB Pilot - 24x7 and NRW Water reduction Dindayal Chalit Aspatal Yojana
Location Gwalior Bhopal Bhopal
Vill Hanvantiya, Khandwa Vill Hanvantiya, Khandwa Rewa Indore Bhopal
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3. INSTITUTIONAL ARRANGEMENTS FOR GOVT. OF INDIA FOR PPP

3.1 PPP Framework at Central level
The enabling environment for Infrastructure development is significantly different from the situation a few years ago when issues such as lack of political will, varied interest groups at the centre and the state levels, red-tapism, and lengthy tedious approval processes were considered major bottlenecks. Apart from the above there were limited incentives for the private sector due to constraints in Government regulations with only select areas open to private participation, the reluctance of users to pay for the infrastructure facilities and project returns not meeting investor expectations. The 11th Plan approach paper and various working groups identified an ambitious program for infrastructure development in the Road, Rail, Air, Water Transport, Power, Telecommunication, Water Supply, Irrigation and Storage. Out of the total investments in infrastructure, 30% is envisaged to come through private investments. It has been recognized that for creating world class infrastructure, it is necessary to explore PPP in all sectors of infrastructure. To facilitate this process, the government is pushing for reforms that encourage private sector participation and has recently made various legal and regulatory changes to enable PPPs in infrastructure. GoI has actively promoted PPPs across sectors through various initiatives. A three-tier approval system has been instituted. Initiatives for facilitating PPP including model documents, financing mechanisms and provision of technical assistance have been established. The institutional framework for PPP projects can be categorized into the following: PPP Advisory: These include the Committee on Infrastructure (CoI), Planning Commission including PPP Appraisal Unit (PPPAU) PPP Approval Mechanism: These include PPP Appraisal Committee (PPPAC) for approving PPP projects and Empowered Committee / Institution for approving VGF. PPP Financing Mechanism: These include 1) Viability Gap Funding (VGF), 2) India Infrastructure Finance Company Limited (IIFCL), 3) India Infrastructure Project Development Fund, and 4) other institutions like IDFC, IL&FS, and other financial institutions including commercial banks Government Ministries / Sponsoring Agencies: These include Ministry of Finance (MoF), Department of Economic Affairs (DEA) including PPP cell in DEA and, PPP coordinators in line ministries.
The table below summarizes the Institutional Framework for PPP at central level:
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Table 3: Institutional Framework for PPP at central level
Name PPP Advisory Committee on Infrastructure (CoI)
Role
It was instituted under the Chairmanship of the Prime Minister in 2004 with an objective to initiate policies that enable creation and management of infrastructure, facilitate mechanisms for PPPs, and monitor the progress of key infrastructure projects. The committee has since issued guidelines for implementation of PPP projects including bidder selection guidelines, specifications and standards for projects, model concession agreements, and financing plans.
Planning Commission
It is the apex planning body of government. It plays a pivotal role directly and through PPP Approval Committee (PPPAC) and PPP Appraisal Unit (PPPAU) as a member, a unit created to appraise PPP projects and suggest suitable modifications.
PPP Approval Mechanism PPP Appraisal Committee (PPPAC) It is an important institution for approval of PPP projects which was established in 2005. PPPAC first gives in-principle approval to a project put forth by a central government ministry / autonomous undertaking and sends it to DEA, Planning Commission and concerned line ministries for approval. Subsequent to their approval, PPPAC gives final approval to the project. An Empowered Committee and an Empowered Institution have been established for approving Viability Gap Funding up to USD 50 million and USD 25 million respectively, for projects which satisfy the eligibility criteria of the VGF scheme. 1
Empowered Committee / Institution
PPP financing mechanisms Viability Gap Funding (VGF) This scheme of government support is envisaged to bridge the viability gap of infrastructure PPP projects up to a maximum of 20% of project in cases where the project is awarded on competitive bidding and the private party has 51% or more equity stake.2 This scheme is funded by MoF through budgetary allocations and the assistance is provided in the form of capital grant to fund a part of the project cost. Eligible sectors for VGF include Roads and bridges, railways, seaports, airports, power and urban transport. It was established in 2006 with a mandate to provide long term debt for
India
1
Empowered Institution (an institution, company or inter-ministerial group designated by the Government for VGF scheme) will release the Grant to the Lead Financial Institution (the financial institution (FI) that is funding the PPP project) and will obtain reimbursement from the Finance Ministry. The Empowered Institution, the Lead Financial Institution and the Private Sector Company shall enter into a Tripartite Agreement for the purposes of this scheme. 2 The sponsoring ministry, state government or statutory entity can provide support over and above VGF subject to a maximum of 20% of project cost
Name Infrastructure Finance Company Limited (IIFCL)
Role infrastructure projects either by way of refinance or by direct lending, up to 20% of capital cost, to project companies with a preference for infrastructure PPP projects. Role of IIFCL is complimentary to that of existing infrastructure financing institutions. In addition IIFCL enjoys Government guarantee for the funds it raises from domestic and international markets (limits to be set at the beginning of each year) whereas other institutions do not have such guarantee. IIFCL is expected to fill in the gap in long-term debt financing for infrastructure projects and complement the efforts of commercial banks and other financial institutions. It also provides refinance to banks and FI for loans with tenor of five years or more. The commercial banks in India participate in the infrastructure project funding and typically provide three-fourth of the total funds. IIFCL has also been identified as the channeling agency for using part of foreign exchange reserves to finance import of capital goods for infrastructure projects.
India Infrastructure Project Development Fund
IIPDF was announced in the Budget Speech for 2007-08 and was subsequently created with a corpus of USD 25 million to quicken the pace of preparation of a shelf of bankable projects which can be offered for competitive bidding. Upto 75% of the feasibility level project development cost may be financed from this fund as interest free loan and is envisaged to be recovered from the successful bidder. If the project does not take off, then the same is converted to a grant. Any state government & local body can avail of this facility for developing PPP projects.
Government ministries/ Sponsoring Agencies Ministry of Finance (MoF) The Ministry of Finance is the nodal ministry responsible for examining concession agreements from the financial angle, deciding on guarantees to be extended, and generally assess risk allocation from the investment and banking perspectives. There is no generic policy in India which governs the provision of guarantee by the MoF for PPP projects. The projects undertaken by government and its bodies have implicit sovereign guarantee. There have been instances of explicit sovereign guarantee in case of projects funded by multilateral institutions DEA is the nodal agency of the Union Government to formulate and monitor country's economic policies and programmes having a bearing on internal and external aspects of economic management. DEA services the Public Private Partnership Approval Committee (PPPAC). The PPP cell in DEA coordinates the PPP related activities at central level, including VGF (detailed later) and appraisal of PPP projects at the centre These play an important role in identification of PPP projects within their respective areas. They are also part of the PPPAC as project sponsor to suggest necessary modifications before approval of project. Nodal officers have been nominated in key line ministries such as Urban Development, Civil Aviation, Road Transport, Railways etc. for coordination of PPP projects.
Department of Economic Affairs (DEA)Ministry of Finance
Line Ministries (Roads, Ports, Civil Aviation, etc.)
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The institutional framework at the central level can be described by the diagram below.
Figure 7: Institutional Framework for PPP at central level Financing Mechanism VGF Viability gap assistance IIFCL Financial assistance through long term debt IIPDF Project preparatory assistance
Policy and Legislation

No PPP policy or overall infrastructure policy Various sector specific policies Various initiatives to encourage PPP like standardization of bid documents, project preparatory assistance, and viability gap funding
Sponsoring Agency State Nodal Agency Line Ministries / Departments at state level
Approval Committees Empowered Committee/ Institution PPPAC
Advisory Planning Commission Committee on Infrastructure
PPP Cell, DEA under MoF
PPP Coordinators in every Line Ministries at Central level
Details of the PPP projects (quantum and value) are attached as Annexure 2.
3.2 Policy Framework for PPP at Central level

As on date, India does not have an overall Infrastructure PPP Policy. However, talks are going on in Planning Commission and DEA to formulate an overarching policy guideline at the Central level soon. However, at various times, the GoI has made various policy statements outlining the need to provide a strategic thrust towards PPP especially in infrastructure.
3.3 Issues with PPP Projects and Processes at Central level

GoI has made extensive effort in institutionalizing PPP with special focus on defining PPP, preparing policy, guidelines and model documents, establishing an approval mechanism, setting procurement
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methods and processes. But there are some gaps and issues identified in the PPP mechanism at the central level which should be addressed. There is an absence of a comprehensive PPP Policy at the Central level. Planning Commission is considering developing such policy which will be applicable to all infrastructure sectors. There is no overarching legislation for PPP at the central level. Social sector needs more encouragement in undertaking PPP including through additional and innovative financial incentives in addition to VGF. There are constant changes in the processes and guidelines which sometimes hinder the growth for PPP e.g. evaluation criteria changes, timeline changes for bidding, changes in tax applicability, interpretations etc. In addition, the time taken to obtain clearances by private parties after getting selected also varies hugely depending on quality of ground work done by bidding authorities in advance. This also acts as a deterrent. Absence of capacity in bidding agencies also sometimes comes in the way of getting serious private parties.
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4. PPP IN OTHER INDIAN STATES

4.1 Introduction
There are a number of states in the country which have adopted PPP models successfully to provide efficient infrastructure services to people while others are still in the process of coming to terms with PPP. Realizing the importance of speedy development of infrastructure through PPP, some states like Andhra Pradesh and Gujarat institutionalized PPP even before a formal mechanism was established at the central level. Studying the PPP framework adopted by various states has given important insights into various policies, institutional, financial and regulatory options that have been used to operationalize PPP. There are different frameworks adopted by different states and it is possible to use specific examples for Madhya Pradesh given the local context. The states chosen for the purpose of analysis here included Gujarat and Andhra Pradesh - both of which operationalized PPPs through an over-arching institutional and legal framework for PPPs including the creation of a specialised institution. Tamil Nadu and Maharashtra have also achieved some success in undertaking PPP projects by creating specialised sector specific agencies with private sector participation and also by leveraging public funds to undertake PPP projects. Another state added to the comparison list was Orissa as it has implemented a PPP policy and has a formal three-tier hierarchical mechanism for approving PPP projects. The key lessons that emerge from the comparative analysis are presented at the end.
4.2 Gujarat
4.2.1 PPP in Gujarat
Gujarat has been one of the leading states in implementing PPP projects and has been one of the few states that have enacted special legislations for infrastructure development through PPP that cuts across sectors and have created institutions for undertaking these initiatives. The Gujarat Infrastructure Development Board (GIDB) is the nodal agency to promote private sector participation in all infrastructure sectors in Gujarat. Presently the major infrastructure sectors where PPP projects have been successful are Roads and Ports. The Gujarat Infrastructure Development Act, 1999 (BOT Law) provides the legal framework for private sector participation in financing, construction, operation and maintenance of the project. GIDB was established under the Gujarat Infrastructure Development Act, 1999 (GID Act) to promote private sector participation in Infrastructure Projects. GIDB focuses on overall planning, coordination between various sector specific departments, concession agreements, selection of developers etc. rather than developing infrastructure facilities on their own. GIDB is an over-arching body for infrastructure development in Gujarat (hard as well as soft infrastructure sectors). GIDB itself does not develop infrastructure but acts as a catalyst for their development. GIDB is mandated with the following functions:
To promote private sector participation in financing, construction, operation and maintenance of the Infrastructure projects. To develop the projects through pre-feasibility/ feasibility studies of the project. To advise the state government and its agencies on the matter of Policy. To lay down priority of the projects. To consider proposal and proposed concession agreement to be entered into between the state government/agency and the private sector developer. To monitor the projects undertaken in the state.
Figure 8: Institutional Framework for PPP in Gujarat
Conceptual diagram of PPP Institutional framework in Gujarat
GIDB
Nodal agency for PPP headed by Chief Minister Overall planning & framework studies Advise on Policy matters Prioritization of projects Provide state VGF (20% oTPC) Nodal agency for preparing VGF proposals for Centre
PPP Initiatives
Formulated a State VGF Scheme and guidelines for its operation Model documents Vision documents ( BIG 2020) Sector Policies
Empowered Committee (Executive Committee) Approval of feasibility study less than Rs. 1.5 crore Appraise all proposals requiring VGF and puts it up to the state Government for approval GID Board (Steering Committee) Approval of feasibility studies costing more than Rs. 1.5 crore Approval of all PPP projects PPP Cell / Project preparation develops shelf of projects conducting feasibility studies drafting of model documents bid process management appraisal of projects for approval and VGF Project preparation Bidding Approval Selection of developer Project execution Monitoring
Line Departments / Sponsoring agency
Details of GIDB and other agencies, policies and legislative framework pertaining to PPP in Gujarat are attached in Annexure 3.
4.2.2 Key Learning from Gujarat

Gujarat is a progressive state and has undertaken many PPP projects in various sectors. The state has institutionalized the PPP mechanism so well that process of doing PPP projects is clearly understood and followed by line departments. Some of the important lessons to be drawn from Gujarat are given below. A nodal agency for PPP projects, headed by the Chief Minister/ Chief Secretary should be created at the state level. Such agency should be a one point of contact for all departments for project preparation and approval of PPP projects which also helps in expediting the project development and implementation. Nodal agency should also be mandated to build capacities of other line departments. Political consent at various stages of project development helps in faster movement of the PPP project in the project cycle. Swiss challenge must be encouraged as a procurement method for PPP as it allows for innovation.
4.3 Tamil Nadu

4.3.1 PPP in Tamil Nadu
Tamil Nadu has made some success in promoting public-private-partnership (PPP) in some infrastructure sectors, including power, roads, ports and urban. The State Government has encouraged private sector participation in the process of infrastructure development. Tamil Nadu was the first state in the country to setup a genuine public - private partnership venture for infrastructure development in the year 1998. The Tamil Nadu government has agencies in different sectors promoting PPP but not an overall coordinating agency as in case of Gujarat or Andhra Pradesh. Some of the Joint venture companies established at the state level for specific PPP projects are shown below.
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Figure 9: Institutional Framework for PPP in Tamil Nadu
Tamil Nadu Road Development Company (TNRDC)
TNRDC was formed to encourage PPP in road sector. TNRDC is a 50:50 joint venture between TIDCO and IL&FS. It was set up with the objective to catalyze private sector participation and investment in Road sector and is mandated to initiate commercialization of operations and maintenance of Road assets.
Tamil Nadu Urban Development Fund (TNUDF)
In order to attract private capital into urban infrastructure development TNUDF was established in 1996. TNUDF is the first public private partnership between Government of Tamil Nadu and three Financial Institutions (viz., ICICI, HDFC, and IL&FS) for providing long term finance for civic infrastructure on a non-guarantee mode. The TNUDF aims to raise resources and long-term finance for infrastructure in Urban local bodies on a sustainable basis, support and strengthen Urban reforms, and institutional strengthening and capacity building. It also promotes PPP arrangement to channel private capital in municipal infrastructure. The Fund is managed by Tamil Nadu Urban Infrastructure Financial Services Limited.
Tamil Nadu Urban Infrastructure Financial Services Limited (TNUIFSL)
TNUIFSL is a Public Limited Company and is a partnership in the Urban sector, between Government of Tamil Nadu and three all India-FinancialInstitutions namely, ICICI Bank Limited, Housing Development Finance Corporation Limited (HDFC) and Infrastructure Leasing and Financial Services Limited (IL&FS). TNUIFSL undertakes fund management (including the TNUDF) on the basis of management contracts
Tamil Nadu Urban Development Project (TNUDP)
TNUDP is a state government project with assistance from the World Bank. A part of the project is to enhance the institutional capacity and strengthening the financial and managerial capacities in ULBs. Under this project, the TNUDF, the first private institutional arrangement in the country, has been established to assist municipalities in raising funds from markets to finance specific infrastructure projects. It also helps local authorities to structure and develop infrastructure projects.
Details of the projects and PPP agencies in Tamil Nadu are attached as Annexure 3.
4.3.2 Key Learning from Tamil Nadu

Tamil Nadu has achieved success in PPP using JV model for project preparation and execution. It does not have a nodal agency or an umbrella legislation to support PPP but there are some merits in adopting such model. Key learning from PPP mechanism in Tamil Nadu is listed below. Involvement of private player from project conceptualization stage itself helps in accomplishment of PPP projects as suitability of PPP is established at the onset. PPP projects can also be funded through schemes like capital subsidy as given in Tamil Nadu apart from viability given funding. This can give additional incentive to the private players to undertake a PPP project.
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4.4 Maharashtra
4.4.1 PPP in Maharashtra
Maharashtra does not have any specific institutional or regulatory framework for PPP across sectors. Presently, individual organisations / agencies are responsible for carrying out the PPP projects according to their own policies and guidelines and the thrust of PPPs in the state have been in ports and roads sectors. Currently, PPP cell acts as the nodal agency and there is now a nodal officer in the state who is responsible for overseeing all PPP projects in the state. A PPP Policy has been formulated at the state level and is under the process of approval from the Cabinet. The Maharashtra government has several infrastructure departments such as the Public Works Department, Urban Development Department, and Water Supply and Sanitation Department which have organizations (authorities and corporations) working under them to coordinate the PPP projects in their respective sectors. The key agency responsible for PPP in ports is the Maharashtra Maritime Board (which is the nodal agency for development of minor Ports in Maharashtra). The PPP projects in the road sector are under the purview of the Public Works Department (PWD) and the Maharashtra State Road Development Corporation Limited (MSRDC). Planning authorities such as MMRDA, CIDCO, Nagpur Improvement Trust and Pimpri Chinchwad Development Authority under the Urban Development Department have implemented PPP projects such as the Mumbai Metro and other Urban Infrastructure Projects. In order to undertake road sector development through private sector participation, the Government of Maharashtra had come out with a Policy on implementation of Road & Bridge Projects through private sector participation in 1996. The key provisions of the policy include the following: Certain concessions been granted to the private sector developer to make the project financially attractive. The entrepreneur is envisaged to meet the project cost and recover the same through tolls. In some cases, based on the financial feasibility of the project, the government may decide to contribute towards the project upto 40% of the project cost. The Power to decide whether the project can be taken up through private sector participation are as follows: o For works/projects with estimated cost less than Rs. 50 crores, the Public Works Department may take decision and the tender should be approved by the Public Works Department on consultation with the Finance Department and after approval of the Minister for Public Works Department. For works with estimated cost more than Rs. 50 crores, the proposal should be placed before the Cabinet for approval. The tender for such works should also be placed before the Cabinet for approval.
Maharashtra has also developed a Toll Policy, which provides for the tolls to be levied depending upon the project cost for different categories of vehicles. Although the government does not give any traffic
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guarantee, in cases where tolls cannot be charged for 15 days or more, there is a provision that the government would compensate the concessionaire. Salient features of Proposed PPP Policy An Infrastructure Authority is proposed to be created for facilitating PPP projects in the state. Decentralized approach o o It is proposed that no approvals will be required from Infrastructure Authority. Such authority will only be facilitated from PPP cell on technical matters.
As per existing rules, all the projects costing more than Rs 25 Cr necessarily be sent to Cabinet Sub-committee on Infrastructure chaired by CM VGF Approval o o o Departments may approach GoI for VGF directly in case no State Support is required Departments have to approach GoI through State Government, in case State share of 20% is required or Departments have to take approval from State Government if entire 40% of total VGF is required from State Government.
VGF to be housed in Planning Department o Principal Secretary (Planning) is Member Secretary of Infrastructure Sub Committee
PDF to be created and housed in PPP Cell Risks Disclosures in all the PPP Projects VfM analyses for PPP projects need to be done PPP Regulator to be established with sunset clause Panel of States own Transactional Advisors in addition to GoI TAs must be established.
4.4.2 Key Learning from Maharashtra

Maharashtra does not have an overarching legislation or organization for doing PPP projects but still the state has executed many PPP projects successfully. Some of the factors facilitating PPP in Maharashtra are given below. PPP facilitators like model documents and toolkits (PPP and Sector toolkits) enhance the amenability of PPP. A dedicated fund for supporting PPP projects at Urban Local Bodies, like MUIF, assists in developing PPP projects at grass root level.
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4.5 Andhra Pradesh

4.5.1 PPP in Andhra Pradesh
Andhra Pradesh is one of the leading states in India with a successful track record of implementing infrastructure projects under PPP framework. The state is amongst the first ones to have a comprehensive legislation relating to development of Infrastructure (AP Infrastructure Development Enabling Act). In addition, AP has also constituted an Infrastructure Authority (IA) to co-ordinate and develop various infrastructure initiatives under Public Private Partnerships. The following diagram shows a broad level institutional framework for PPP in Andhra Pradesh.
Figure 10: Institutional Framework for PPP in Andhra Pradesh In May 2005 the Government of Andhra Pradesh (GoAP) established a new department called the Infrastructure and Investment Department for achieving the infrastructure goals in select sectors `through a holistic approach'. It was envisaged to create an environment for the upcoming projects through single window facility. The Government of Andhra Pradesh enacted the Andhra Pradesh Infrastructure Development Enabling Act (IDEA-2001) and two organizations have been set up - the Infrastructure Authority and Infrastructure Corporation of Andhra Pradesh.
Infrastructure and Investment Department
Infrastructure Authority (IA)
IDEA provided for the establishment of the Infrastructure authority (IA) under the Infrastructure and Investment department of the GoAP. The Authority has the Chief Secretary as the Chairman, and other members include the Managing Director of APIIC, Director of National Academy of Construction and Secretaries of Departments of Finance & Planning, Transport, Roads & Bridges, IT, Municipal Administration & Urban Development of GoAP.
Infrastructure Corporation of Andhra Pradesh (INCAP)
The GoAP created the Infrastructure Corporation of Andhra Pradesh (INCAP) on 31st May, 2005 as a part of the Department of Infrastructure and Investment working directly under the supervision of the Honble Chief Minister. INCAP was envisaged to facilitate infrastructure development by assisting the setting up and development of PPP projects in the state. INCAP is also envisaged to enable the creation of Special Purpose Vehicles that will provide impetus to infrastructure investment in the State. The Infrastructure Corporation aims to facilitate project preparation, project financing mechanism, the government role as sponsor / developer , access to long term funds and enhanced administrative support for Investors, including mobilizing and leveraging finances from government, public, private bilateral and multilateral entities including Viability Gap Funding from the Government of India where needed.
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Facilitators Andhra Pradesh Infrastructure Policy The Andhra Pradesh Infrastructure Policy provides guidelines for attracting and facilitating private investments in infrastructure. It provides for a transparent selection mechanism, administrative support for reduction in procedural delays and a risk sharing mechanism. The Policy applies to all infrastructure projects implemented with Private Public Partnership (PPP) and requiring Government support. The Infrastructure Development Enabling Act (IDEA) was enacted as a result of this policy. Infrastructure Development Enabling Act.(IDEA) 2001 It is applicable to all Infrastructure Projects implemented through PPP in the specified sectors of the Act. The Act provides for the establishment of the Infrastructure authority (IA) with the Chief Secretary as the Chairman, and members including Managing Director of APIIC, Director of National Academy of Construction and Secretaries of Departments of Finance & Planning, Transport, Roads & Bridges, IT, Municipal Administration & Urban Development of GoAP. The act formalizes the project delivery process by defining the procedures for the following: Project identification Project prioritization Method of Selection of the developer Selection criteria Development of Model Concession Contract
The Act provides for the establishment of a Rs.10 million Infrastructure Projects Fund. It also entrusts the IA to administer this fund. Details about PPP agencies or organizations, projects, regulatory and policy framework in Andhra Pradesh are given in Annexure 3.
4.5.2 Key Learning from Andhra Pradesh

Having gone through the PPP project cycle many times for projects in different sector, AP has some experiences and recommendations for successful PPP. Given below are some key learning after studying PPP projects and processes in AP and based on interactions with official from PPP Cell, AP. For successful implementation of PPP, approval processes and committees for approving projects with different project cost should be established. Arbitration mechanism must be clearly spelt out in the PPP document (Guidelines / Policy/ Act). Standardization of processes including appointment of Consultants and Transaction advisors also contributes towards success of PPP. Legal support for implementing any process or mechanism in PPP is required as it then becomes binding on the departments and agencies to follow. A dedicated Project Development fund aids preparation of projects in PPP format which otherwise may not get developed through Department budget.
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4.6 Orissa
4.6.1 PPP in Orissa
Orissa has institutionalized PPP and established a state level PPP Policy in 2007. The Policy document clearly spells out the mechanism for undertaking PPP projects. It has also put in place an effective and efficient institutional mechanism for speedy clearance of the projects. Though the success stories of PPP projects in the state are few but Orissa has well established institutional and framework for PPP which is worth emulating. The three-tier hierarchical approval mechanism adopted by Orissa is a national practice and is an effective mechanism. The approval mechanism of PPP projects is as shown in diagram below.
Figure 11: Institutional Framework for PPP in Orissa
High Level Empowered Committee (HLCA) Approve project costing greater than Rs. 500 crore or involving any grant or other financial support from GoO Line Departments Empowered Committee on Infrastructure (ECI) Approve project costing lesser than Rs. 500 crore or not involving any grant or other financial support from GoO
ECI deliberates and recommends PPP projects to HLCA
PPP cell housed in P&C department assists ECI in approving PPP projects
Technical Secretariat housed in IDCO assists PPP cell.
Role of ECI The ECI shall be the nodal agency to co-ordinate all efforts of the State Government regarding development of infrastructure sectors, involving private participation and funding from various sources. The Powers and Functions of the ECI would include: To prioritize, approve shelf of projects, sanction, authorize expenditure for PPP projects Adopt, adapt and develop Model Concession Agreements for various sectors Recommend projects for Viability Gap Funding
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Manage the Infrastructure Development Fund proposed to be created to facilitate infrastructure development, to recommend projects along with amount required from the Fund to meet the objectives of this Policy Deliberate and recommend to HLCA the final bids for approval of the projects above Rs. 500 crores. Deliberate and recommend to HLCA any special grants and concessions Coordinate the efforts of other departments for the furtherance of the objectives of this Policy. Shall have power to inspect visit, review and monitor any PPP Projects regarding its implementation, execution, operation and management. To recommend enacting a special legislation for formation of appropriate regulatory mechanism robust grievance redressal mechanism as may be required for the project. To sanction PPP Projects and approval of concession agreements for projects upto Rs. 500 Crores.
Functions of the PPP Cell and Technical Secretariat (TS) The Functions of the PPP Cell and its Technical Secretariat would include: To identify, conceptualize and create a shelf of projects in consultation with the owner department and recommend approval of such projects for PPP from time to time to the ECI. To assist different government departments in preparing pre-feasibility reports by itself or through consultants. To assist the respective departments for preparing Detailed Project Reports Shall have the powers to appoint / select consultants to take the projects upto selection of developer stage in consultation with the concerned department. To help respective departments to conduct the bidding process for appointment of developers. To interact with the Planning Commission, GOI and other funding agencies like World Bank for obtaining approval under VGF and any other fund created for such purpose. To recommend the requirement of multilateral/bilateral funding for furthering the objectives of the Policy. To act as the nodal agency for capacity building for PPP in the state. To further this function it shall conduct/recommend exposure visits and training programs on PPP. Recommend appropriate regulatory mechanism / robust grievance redressal mechanism as per requirement of the project. Recommend requirements from the PPP Fund for development of projects, gap funding and for any other requirement for furthering the object of the Policy. It also assists in formulation and
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recommendation of any legislation if required for creation, administration and monitoring of the Fund. The PPP cell shall develop internal evaluation guideline in consultation with the respective departments to evaluate and assess the projects whether the projects are to be funded by the State Government, through multilateral/bilateral funding and/or implemented with Private sector participation.
4.6.2 Key Learning from Orissa

Institutional mechanism for PPP in Orissa is stronger and well established than many other Indian states. Therefore, there are many lessons which are worth emulating from Orissa. PPP Policy document enunciating institutional, legal and approval mechanism for PPP facilitates departments to undertake PPP projects. A structured hierarchical approval process adds to faster movement of PPP project in the project cycle. PPP cell can be the technical secretariat to such approval committees.
4.7 Conclusion
4.7.1 Conclusion based on State wise PPP study
After studying the PPP scenario in the selected states, a comparative table highlighting the policy, legislative and institutional framework has been prepared. The table is as shown below
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Table 4: Comparison of Institutional Framework for PPP in 5 states State Legislation/ Policy Agency/ Institution Facilitators Role of agency Overall planning, policy support, coordination between departments, monitoring the progress of PPP, project preparation, capacity building and approval (Executive Committee as the Secretariat to Board) PPP cell provides state support for PPP through line departments; MUIF meant to facilitate access to institutional finance and capital markets and MUINFRA assists urban local authorities in developing projects. Coordination with line departments, monitoring of progress, status of clearances, management of infrastructure fund, project preparation, seeking GoI assistance PPP Cell promotes PPP in infrastructure and helps in project development and prioritization. It also guides and approves the project and assists in procuring VGF funding for the projects JVs are run as joint management by government and private sector. The managing directors are from the private sector.
Gujarat
GIDB Act,1999 (BOT law)
GIDB nodal agency for PPP/ PPP Cell
Sector policies, VGF fund (proposed), MCAs
Maharashtra
No overarching legislation
PPP Cell/ MSRDC/ MUINFRA
PPP Toolkits (water and urban transport) Maharashtra Urban Infrastructure Fund (MUIF)
Andhra Pradesh
Infrastructure Development Enabling Act(IDEA), 2001
Infrastructure authority / PPP Cell/ INCAP
Sector Policies, Infrastructure Fund / Project Development Fund
Orissa
PPP Policy, 2007
PPP Cell HLCA & ECoI for approval
Various forms of government support; VGF fund proposed
Tamil Nadu
No overarching legislation / Nodal agency
JVs with private sector for end to end PPP-project preparation to implementation in road, water and urban infrastructure / PPP Cell
Sector policies / To attract private investments, government sometimes gives capital subsidy of 25% up to Rs. 2.5 million.
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Based on the analysis of PPP framework at the national and state level, some key lessons have been drawn which may be considered while preparing the PPP policy and institutional framework for Madhya Pradesh. At the central level, there is a three-tier institutional framework consisting of CoI, PPPAC and PPPAU. Similar structure also exists in states such Orissa and Karnataka. In such a structure, the apex committee/ institution is headed by the Chief Minister/ Prime Minister ensuring maximum decision making authority. The intermediate level is often headed by the Chief Secretary and consists of key secretaries. It advises and supports the apex committee in implementing PPP policy decisions. The third layer consists of an institution that provides the necessary technical and administrative support to the higher level institutions. There is no single framework that has been adopted by all states. While some states have created over-arching legislative and institutional framework, others have created sector specific institutions or undertaken PPPs through joint-ventures The CoI at central level is headed by the Prime Minister. The nodal agency at the state level is often headed by the chief minister and also has cabinet ministers as part of the high level board or committee. One of the reasons for this could be to expedite the decision making process for PPPs. A suitable financing mechanism has been put in place in most states as well as at the central level. In some cases this has been done by allocating dedicated pool of funds for PPP projects. In other cases, initial government contribution has been used for raising debt for undertaking PPP projects The role of nodal agencies varies across different states. These agencies perform a coordination role for PPP in almost all states. In some states, they also act as the implementing agency for PPP projects including the bid process management as well as monitoring the implementation. Another key difference across nodal agencies is their involvement in financing infrastructure projects. The degree of centralization of roles across PPP projects in a single agency will depend upon a number of factors such as overall strategy adopted by the state, prior experience of PPP within line departments, etc. In most states as well as the central level, the infrastructure departments have primary responsibility for sponsoring PPP projects, nodal institutions can play an advisory or support role or can provide key decisions to enable the infrastructure departments to undertake PPP projects. It is essential to establish a transparent regulatory framework to facilitate PPP projects as well as grant various concessions and incentives like VGF to make projects and investment opportunities viable and attractive. A PPP cell that acts as a single window clearance agency and facilitates speedy development of the projects is very helpful for investors Joint ventures have been used to combine private sector skill and expertise in project, development, and management with governments understanding of regulation and procedures may bring about a win-win situation
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Some states have also used the policy framework to define preferable PPP agreements / contractual models and user charges etc. for varied nature of projects like roads, logistics, health, education and tourism etc. The policy should provide for capacity building of various officials across key government departments at different levels, covering the principles of model concession agreements (developed by other states / agencies), key components of certain laws, analysis of major risks in certain PPP initiatives etc.
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5. INTERNATIONAL PRACTICES IN PPP

5.1 International PPP Experiences
Due to the advantages of bringing in private sector into public service provisioning as also due to fiscal and other budgetary constraints, governments of most emerging economies are encouraging private involvement in infrastructure development. However, in many countries the governments have found it difficult to attract private sector due to mismatch with private sector expectations. It is believed that expectations of both private sector and the government should be addressed in public-private arrangements. Various parameters like risk perspectives, legislative and regulatory environments which support private investment, project funding packages, project formulation and the means of reducing project preparation and gestation period needs to be considered in match both expectations. In the UK, Partnerships UK was set up in the year of 2000 as an offshoot of work done by HM (Her Majesty) Treasury. It is a joint venture between public and private sectors with majority shareholding by the private sector. It offers the commercial expertise and experience in the development and delivery of numerous Private Finance Initiatives and other Public Private Partnerships projects. Unlike most Indian PPP cases studies, the PFI projects in UK are viewed as the provision of services, and not about the acquisition of assets. In UK, the private sector makes a long-term commitment to maintain assets and provide services, and the government makes a long-term commitment to procure those services and pay for services or availability of facilities and a significant risk is transferred to the private sector. Public sector investment projects are considered for PFI where they are likely to represent value for money, and where it meets the UK governments criteria for efficiency, equity and accountability. In the case of Ireland, there has been quick buy-in of PPP with objective to tap private sector efficiencies and fiscal advantages of PPP. To facilitate the PPP process, the National Development Finance Agency of Ireland was set up to mobilize resources to finance PPP projects and to provide financial advice to government agencies seeking to form PPPs. Chiles experience with PPP has been considered successful and a significant portion of the sizeable infrastructure gap was fulfilled through this model. Chiles success with PPP has been reinforced by a solid institutional framework, well developed procedures to identify & evaluate the projects, adequate sharing of risks framework, and reforms to ensure the availability of financing for projects. Government in China started using the PPP strategy since 2000 to make use of market competition in order to ensure the effective use of resources in the provision of public facilities and services. However, some local governments place too much emphasis on attracting private investments by offering even more favorable terms than the normal national status. Due to weak fiscal position, some eastern European countries like Czech Republic, Hungary and Poland have embarked upon PPP for investments in infrastructure. A number of European Union (EU) countries like Finland, Germany, Greece, Italy, the Netherlands, Portugal and Spain also have modest experience in PPP projects. The PPP in most of these countries are dominated by road projects. The
EU Growth Initiative envisages the use of PPP type arrangements primarily to develop trans-European road network. Apart from these South American and European countries, South Africa and South Korea (chosen for a detailed study here) also have robust institutional and legislative structure for enabling PPP. Following sections describe the PPP frameworks followed in these two countries.
5.2 PPP Framework followed in South Africa

5.2.1 PPP Unit under National Treasury functions as the nodal agency for PPP
In 1997, PPP in South Africa was introduced through 7 projects with the help of a package of policy, legislative and institutional reforms to enable environment for PPP. These projects were two toll roads projects (SA National Road Agency); two maximum security prisons (Departments of Public Works and Correctional Services); two water services projects (two municipalities) and one tourism concessions (SA National Parks). Thereafter, National Treasury of South Africa established a PPP Unit at National Treasury in 2001. It serves many roles as a nodal agency for PPP. It acts as a technical secretariat since it provides technical assistance to institutions throughout the PPP project cycle. It acts as advisor to National Treasury for treasury related approvals It also performs advisory role in policy formulation, PPP manual, sectoral toolkits etc. It is the single point database of all the information on PPP It also undertakes role of capacity development of various institutions
PPP Unit is housed in the National Treasury as well as in all the nine Provincial Treasuries. PPP units possess sector-specific expertise as well as expertise related to financial, legal, business development, project evaluation, municipal transactions and BEE (Black Economic Empowerment) aspects of PPP projects. For every PPP project, the relevant treasury (national / provincial) assigns a project advisor and a project officer to the project. Project advisor is responsible for providing technical assistance and for recommendation for the Project Development Facility. Project officer is responsible for overall institutional tasks as per National Treasurys PPP Manual and Standardised PPP Provisions. Essentially, the project officer is responsible for the entire life cycle of a PPP project.
5.2.2 PPPs in SA has firm regulatory support at national and provincial levels
South Africa has established a firm regulatory framework in terms of which national and provincial government institutions can enter into public private partnership (PPP) agreements. The central legislation governing PPPs for national and provincial government is Treasury Regulation 16 issued to the Public Finance Management Act, 1999 (PFMA). Treasury Regulation 16 to the PFMA defines a PPP, and sets out the phases and tests it will have to go through.
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PPPs for municipal government are governed by the Municipal Systems Act, 2000, and the Municipal Finance Management Act, 2003. Municipalities are not subject to the PFMA or to Treasury Regulation 16.
5.2.3 PPP project cycle consisting of four treasury approval focuses on three regulatory tests
PPP project cycle enables the three regulatory tests3 of affordability, value for money, and risk transfer to be applied at every stage of preparing, procuring and managing a PPP agreement. The adjacent diagram describes the PPP Project Cycle as per Treasury Regulation 16 of PFMA. It describes the activities to be performed at each stage prior to getting Treasury Approvals. Treasury Regulation 16 sets out six distinct phases of the project cycle. It requires that the institution apply these tests throughout, and that specific treasury approvals are given various phases of the project cycle. TA:I: Feasibility Study to determine whether the proposed PPP is in the best interests of an institution which is defined by three regulatory tests TA:IIA & TA:IIB: Procurement for procurement documentation TA:IIA is required. Post evaluation of bids but prior to selection of bidder TA:IIB is given based on fulfillment of three regulatory tests TA:III: Contracting PPP agreements before TA:III is given treasury approval is sought for after conducting management and legal due diligence
Accounting officer or the accounting authority is responsible for getting all the treasury approvals.
5.2.4 Key learning from South Africa Experience

For the last ten years, the PPP Unit at South Africas National Treasury has been an important driver for the development of infrastructure. The success has been possible because of an enabling legislative and regulatory framework, together with institutional support from National Treasury and Provincial Treasuries. Other factors contributing to the success are:
3
Documentation of PPP Manual, Standardised PPP Provisions Three regulatory tests focusing on suitability of PPP
Whatever the PPP type, structure, payment mechanism, or sources of funding, all South African PPPs governed by Treasury Regulation 16 are subjected to three strict tests: Affordability Can the institution afford the deal? Value for Money Is it a value-for-money solution? Appropriate risk transfer: Is substantial technical, operational & financial risk transferred to private party?
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Procedural certainty Project development facility (lowering bid costs and bid risk) Focus on training and capacity building Effective communication strategy (PPP quarterly, database, media briefings) Political support and commitment to the program
More details on the PPP experience in South Africa are given in Annexure 4.
5.3 PPP Framework followed in South Korea

The Private Participation in Infrastructure (PPI) programme of the Republic of Korea was formally launched in 1994. However, due to Asian financial crisis in 1997 and budgetary constraints, Government of South Korea had to revisit a lot of PPI initiatives and make changes accordingly towards the end of 1990s.
5.3.1 PPP nodal agency in South Korea performs multiple roles

As PPP nodal agency, PIMAC performs multiple roles as pre-feasibility assessor, approver, advisor and transaction advisor. It also works alongside Ministry of Planning and Budget (MPB) for prefeasibility studies and deliberation for review committees. Primary functions performed by PIMAC are summarized below: Conducting Pre-Feasibility Study and Reassessment Study of Feasibility for large-scale publicly-financed projects Providing policy advise on public investments in Korea Developing plans for PPP and implementing PPP projects Assisting the Finance Ministry and the PPP Review Committee with Value for Money assessment prior to the issuance of the request for proposals Assisting competent authorities in project preparation Assisting in PPP transactions formulating requests for proposal, review of concession agreement evaluation of project proposal, and contract negotiation with potential concessionaire.
Apart from PIMAC which is an independent agency, Government of South Korea has modified various regulatory parameters to attract private investments in infrastructure sector.
5.3.2 Change in regulations to attract private investments

A new PPI law was adopted in 1998, and various incentive packages are offered to the private sector and rules and procedures for project selection, evaluation and approval have been simplified. Major changes in the new PPI law are summarized in the table below:
Table 5: Comparison of the previous and the new regulatory framework in South Korea Previous Law Concession types BTO, BOO New PPI Law Unsolicited projects: BTO, BOT, BOO
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Previous Law BTL not allowed (government pays pre-determined lease payments and operating costs to the private sector) No requirement
New PPI Law Solicited projects: No limitation
PPP involving lease agreements Feasibility study
BTL has been allowed to attract investments in sectors like military housing, health, education and convention centres. Mandatory Recognition criteria for unsolicited projects set out in the decree Minimum revenue guarantee Foreign exchange risk guarantee Recognition of buyout Rights
Fiscal support
Fragmentary recognition
Support agency Revenue risk sharing
None Minimum Revenue Guarantee of 80%
Establishment of PICKO and the Infrastructure Investment Fund Minimum Revenue Guarantee of 90%
Under PPI Act, the central government shall have a duty to propose the Annual Plan for each PPP project. After that the relevant ministries and the local government will make the Basic Private Investment Plan for each project.
5.3.3 Well defined PPP procurement processes for solicited and unsolicited proposals
For solicited project, the competent authority (sponsoring agency) identifies a project for private investment and announces a RFP. For an unsolicited project, a private company (project proponent) submits a project proposal, and then the competent authority examines and designates it as a PPI project. Procurement processes for both solicited and unsolicited proposal have been separately laid out. A solicited proposal can be either BTL (build-transfer-lease) or BTO (build-transfer-operate) format but an unsolicited proposal cannot be BTL format.
5.3.4 Learnings from South Korea Experience

PPP in South Korea has been driven by key regulatory initiative to attract new interments from private sector. An attractive incentive package, establishment of credit guarantee fund along with risk minimizing measures (enhancement of minimum revenue guarantee, introduction of BTL schemes) has ensured a good success story for PPP in last 10 years. PIMAC has also documented PPI guidelines for VFM testing, RFP preparation, bid evaluation, concession agreement preparation to deliver transparency and objectivity in PPP project implementation. The government obligation arising from PPI contract constitutes a national liability and hence needs approval from the national assembly. However in case of PPI service contract, government obligation arising from service contracts does not constitute a liability since the private companies arranges the financing and the government payment is contingent on performance of their construction and operation. Also in case of BTL contract, MPB forecasts the investment ceiling for BTL projects in the
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fiscal year and submits it to the National Assembly along with the annual budget. Hence for those projects, it need not take approval from National Assembly. For all other PPI contracts an approval from National Assembly is required. Hence the national liability arising out of PPI contract is preplanned, measured and consolidated at national level. More details on the PPP experience in South Korea are given in Annexure 4.
5.4 Learning from International Experiences

The location of the PPP Unit within the government's institutional regulatory hierarchy is important as well, whether or not it is directly attached to a particular ministry or department. Generally, the international experience is that those positioned higher in the hierarchy tend to be more efficient and capable in their regulatory duties, because they tend to enjoy more political support. PPP initiatives undertaken by these agencies have been in-line with national interests, both developmental and financial. In case of South Africa, PPP Unit is positioned high within the government hierarchy. The unit was created under National Treasury and designed to block financially irresponsible PPP projects. A unique aspect of the South African PPP Unit, which was originally drawn from the UK system, is that it requires a formal treasury approval for every PPP project at different stages of implementation to ensure PPP suitability of the project. It is seen that many PPP units in many countries have extended mandate and performs the roles of an advisor, an approver, an transaction advisor, a reviewer, an assessor etc. Some of them are also responsible for capacity building activities of line ministries/ departments. Selection of right PPP model is essential for successful implementation of PPP. It is seen that success of PPP is dependent on risk sharing mechanism, government guarantees, stability of the policy environment and commercial consideration of the projects.
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6. PROPOSED PPP POLICY FOR MADHYA PRADESH

6.1 Introduction
Madhya Pradesh is progressively executing more and more physical and social infrastructure projects in the State recognizing that such development is critical to the overall economic growth of Madhya Pradesh. For implementing the physical and social infrastructure projects, the state Government has deliberated and decided that Public Private Partnership (PPP) is a suitable format as it has many advantages. Some of the typical benefits of PPP are the enhanced and efficient delivery of public services, attraction of private investments for the projects, risk sharing with the private sector and innovation and flexibility that private sector brings in. PPP is an instrument for providing sustainable and efficient services to the public by leveraging private investments and limited Government funds in order to utilize efficiencies, innovativeness and flexibility of the private sector in physical and social infrastructure project execution and service delivery. PPP can be defined in many ways which will be discussed in detail in the Policy document. PPP has many advantages and if it is streamlined and institutionalized well then it can bring in tremendous change in physical and social infrastructure services and delivery thereof. Government of Madhya Pradesh has taken many initiatives to implement PPP including establishment of state level PPP cell, MPIIFB, MPPDF, a robust approval mechanism for PPP and has provision for Viability Gap Funding of PPP projects which have financing gaps. Another step in this direction is to roll out an MP PPP Policy. PPP Policy is a document for guiding the implementing agency including the Line Departments, ULBs, Government agencies and corporations to undertake PPP projects in preferred manner. The next section of the Chapter outlines the Draft PPP Policy which will enunciate the following. Objectives of the Policy Key underlying principles Definition of PPP, suitability of PPP (details in Annexure 5), risk sharing framework, PPP models (details in Annexure 6), Land for PPP Scope and Coverage of PPP Policy Roles and responsibilities of PPP agencies involved, Procurement mechanism for PPP Approval Committees three- tier approval mechanism Support of Government of Madhya Pradesh financial and administrative support Regulatory framework.
The details of the Institutional Framework to implement the Policy in Madhya Pradesh are elaborated in next chapter. (Refer to Chapter 7).
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6.2 DRAFT PPP POLICY

6.2.1 Preamble
Public Private Partnership (PPP) is a model or a format of Government/ Public Sector and Private Sector working together in Partnership with an aim to provide sustainable, efficient and enhanced physical and social infrastructure (hereinafter referred to as infrastructure) and select public services by leveraging private sector expertise, efficiencies and investments. It is widely accepted now in India and other developed and developing countries that PPP is a useful model that could be used to successfully achieve rapid and required socioeconomic development. With the right policies, processes and regulations, PPPs: provide enhanced and efficient delivery of public services. lead private investments into construction or rehabilitation of public service assets. utilize the private sector efficiency and management expertise in delivering of public services and creation/ rehabilitation of public assets. bring in innovation and flexibility in construction, delivery and management of public assets and services. provide for improved maintenance of infrastructure assets thus increasing useful lives of assets in an economical way. create an atmosphere for public sector reforms by introducing transparency, accountability and efficiency and changing the role of the public sector into that of a facilitator and monitoring agency rather than a provider of public services in select services. allow for risk sharing between the private and public party and hence reduce the risk on public sector.
6.2.2 Objectives of PPP Policy

The Government of Madhya Pradesh has already determined that it wants to encourage PPPs and increase the role of PPPs in physical and social infrastructure asset creation/rehabilitation and in delivering public services. The Government is now formulating and rolling out the PPP Policy with the following key objectives: Provide clarity on definition of PPP and specify the sectors and services to be covered for use of PPP models. Define clearly the underlying principles of PPP which can be used by the implementing ministries/ agencies to conceptualize the overall PPP programs/ projects, prioritize them for roll out, choose the optimum models and structures, define the charges for usage of services and create monitoring and regulation frameworks. Outline the implementation mechanism for PPP (at various levels) and define the facilitation/support systems that could be expected from the Government to undertake projects on PPP basis. Provide clarity in approval and procurement mechanism for PPP.
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Provide guidance to Government agencies and local authorities to undertake infrastructure projects on PPP mode.
6.2.3 Key Underlying Principles 1) Definition of PPP

PPP is defined as a contract between the Government or statutory entity on one side and a private party on the other side, wherein the private party assumes substantial financial, technical and operational risk in the design, financing, building and operation and maintenance of a project. A PPP project shall have the following attributes: PPP contract is for definite long concession period (typically 10 years or more). Capital investment in part or full is incurred by the private party for the purpose of construction / rehabilitation / modernization of infrastructure assets Private party is responsible for operation and maintenance of the assets Private party receives performance linked payments that conform (or are benchmarked) to specified, pre-determined and measurable performance standards. Revenue risk is shared/ borne by the private party
In a typical PPP contract private party will assume some or all of the following roles: Levy user charges/tariff in agreement with terms of the Government; Use land acquired/ leased by Government for service provision and also commercial purposes; Transfer back the public assets at the end of concession period; Assume substantial financial, technical and operational risks in connection with the performance of its function; and Receive performance linked payments.
For clear understanding by the users of the Policy, the Government is also specifying what is not a PPP. PPP is not: a simple outsourcing of functions where substantial financial, technical and operational risk is retained by the public institution. a privatization or divesture of state assets and/or liabilities. a commercialization of a public function by the creation of a state owned enterprise. a donation by a private party for a public good.
2) Suitability of PPP
A project shall be done under PPP if it is likely to result in a net benefit to the Government when several parameters such as cost of project, price of services, quality and quantity of infrastructure, risk transfer, etc. are considered. Departments of the State Government, Government agency, or local authority, will assess the suitability of undertaking their projects through PPP. Such an analysis will be carried out at the time of conceptualizing the project.
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Some tools and techniques for assessing the suitability of project are outlined below. a) Public Sector Comparator (PSC) To arrive at the cost of procurement by public sector, and to ensure that the analysis is comparable between alternatives, usually a Public Sector Comparator (PSC) is computed. Public Sector Comparator (PSC) estimates the hypothetical rather than actual risk-adjusted cost if a project were to be financed and implemented by Government. In simpler terms, PSC estimates full lifecycle risk adjusted cost to the Government in order to achieve stated service delivery parameters of the project. The base PSC costing includes all capital and operating costs associated with the project. The risk-adjusted PSC model includes costing for all the risks associated with the project. The public sector does not usually cost these risks, but it is necessary to get the understanding of the full costs to Government of the proposed project.
Key characteristics of the PSC model expressed as the net present value (NPV) of a projected cash flow based on the appropriate discount rate for the public sector based on the costs for the most recent, similar, public sector project, or a best estimate costs expressed as nominal costs depreciation not included, as it is a cash-flow model The central functions of the PSC model promotes full cost pricing at an early stage is a key management tool during the procurement process, assisting the institution to stay focused on the output specifications, costs and risk allocation is a reliable way of demonstrating the projects affordability provides an initial indication of value for money is a consistent benchmark and evaluation tool encourages bidding competition by creating confidence in the financial robustness and integrity of the feasibility process is sufficiently robust that the service could be procured conventionally if, at any stage, the PPP fails to show value for money
b) Value for Money Value for Money (VfM) is defined as the difference of the whole life-cycle costs of a procurement of a conventional public procurement project and a project procured as a PPP project. In simpler terms, VfM framework compares different modes of project delivery under common parameters in order to identify the appropriate model that is most beneficial to the Government.
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Factors which shall form part of the evidence base for considering value for money in PPP are: A major capital investment program, requiring effective management of risks associated with construction and delivery; The structure of the service is appropriate, allowing the public sector to define its needs as service outputs that can be adequately contracted for in a way that ensures effective, equitable, and accountable delivery of public services into the long-term, and where risk allocation between public and private parties can be clearly made and enforced; The nature of the assets and services identified as part of the PPP scheme, as well as the associated risks, are capable of being costed on a whole-of-life, long-term basis; The value of the project is sufficiently large to ensure that procurement costs are not disproportionate; The technology and other aspects of the sector are stable, and not susceptible to fast paced change; Planning horizons are long-term with confidence that the assets and services provided are intended to be used over long periods into the future; and The private party has the expertise to deliver, there is good reason to think it will offer VfM and robust performance incentives can be put in place.
Source: Value for Money Assessment Guidance, 2006, HM Treasury, UK
c) Usage based fee and affordability by the Users Unlike public investments, in any PPP projects, private sector looks for revenue models to ensure financial returns on their investments that reflect risks they are bearing. Since Government finances are stressed, the Government is keen therefore to recover charges from users wherever feasible and affordable by the users. Where there is an affordability issue, the Government is keen to let the private sector collect money from the Government but based on usage of services and linked to performance by the private sector as per contractual conditions. Government is also keen to financially incentivize the private sector to achieve cost efficiencies so as to keep the overall costs as low as possible. The principle of user-charges is one of the important elements of successful PPPs. The user charges shall be set in such a manner that users should be able to afford the service as well as be incentivized for efficient and economical use of the asset/service. Levying user charges (tolls, fees, tariffs, cess etc.) is essential to recover costs of infrastructure and to create a stable and dedicated financial source for construction / redevelopment / rehabilitation / replacement of project assets and their ongoing operations and maintenance. Wherever appropriate, the Government agency proposing to go in for PPP may also prepare a usercharge policy for the sector/ services giving the rationale and clearly identifying the need, if any, for extending targeted subsidies, exemptions and concessions to a particular user category. The User Charges policy will take the following into consideration: Direct and indirect savings to users Cost recovery extent and principles of recovery Willingness to pay and affordability to pay
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Requirement and extent of Government support; cross-subsidies, if relevant Linkages between charges and service standards Administrative ease of charging or recovery of applied charges. Polluters pay principle may be adopted with justification for adoption (i.e. payment based on extent of damage/impact caused e.g. Trucks paying more road toll than cars as extent of usage of roads by truck is more extensive and damaging to roads than cars).
Therefore, the implementing ministries/ agencies must assess and establish affordability of proposed user charges and methods of compensating private sector linked to performance. Appropriate changes in the project structure (such as shadow user charges, viability grant funding, subordinate lending instruments and other concessions) must be examined prior to commencing the procurement of private sector. It is mandatory for line departments or implementing agencies to undertake PSC, VfM and User Affordability tests before seeking in-principle approval for the PPP projects.
3) PPP Models
Any PPP project may be structured or arranged based on different models which would vary depending on requirement of private investment, role of private party, ownership of capital assets, allocation of risks, duration of contract and so on. The model chosen could be anywhere on the continuum from Management Contracts with relatively low private investments to Build-OperateTransfer (BOT) contracts with substantial private investments. The Government has no specific preference to any of these models but would like to see justification of why a certain model is being suggested. Reasoning could be based on inherent advantages of the model or market forces. However, the Government will not encourage any model that does not incorporate most of the typical characteristics of a good PPP as enlisted below (all or some of these features are present in most of the PPP models and are usually determined at the conceptualization stage of the project): Fixed concession period/ duration of contract User charge policy and rates clearly spelt out; If there are no direct user charges, then policy on performance linked service payments Clear allocation of responsibility between the private and public parties involved; and risk sharing allocated based on based on the principle that each party bears the risk it is best suited to handle Adequate and detailed arrangements for carrying out operations & maintenance as per industry good practices during the contract period; specifications detailing out service parameters and levels to be achieved, user interfaces and grievance redressal mechanisms, and linkage between performance and remuneration/ incentives/ penalties Clarity on ownership of original assets and newly created assets during contract period A robust contract monitoring mechanism
Choice of an appropriate PPP model shall be based on the following criteria PPP model chosen is in coherence with the PPP Policy
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Chosen model has the best or acceptable VfM Chosen model is bankable. Assessment of the bankability will be done with the help of the State Level Facilitation and Development Agency for PPP Chosen model is able to incorporate an acceptable risk sharing model The implementing agency has sufficient capacity (cost and manpower) to undertake the chosen PPP model- e.g. BOT (Annuity) requires annual payment to the private party during the concession period and hence the concession giving agency/ entity should have enough budgetary allocation or other sources of funds Chosen model has an acceptance by potential investors Chosen model is largely acceptable to the user community/ affected public (this is critical and needs to be established)
4) Risk Sharing Framework

PPP projects are long-term in nature and involve a large number of contractually binding obligations to be fulfilled by both private and public stakeholders through the projects agreements, legal and regulatory stipulations at state and national levels. The objective of the state is to ensure enhanced infrastructure service delivery to people. Hence the ultimate risk for the public sector is in the form of uncertainty regarding the development of asset, financial obligations on state funds and quality of private sector service. The following considerations will be utilized to design the sharing of the risks between public and private party in a PPP project: Information regarding all foreseeable project related risks is compiled together and treatment of these risks is addressed in the agreements Risks are typically assigned to parties best able to handle them with an incentive for taking the risk The risks extrinsic to project and beyond the control of parties to agreement are assigned based on mutual agreement of the parties Attempt is made to cap the extent of a risk by providing a suitable remedial measure in the agreement Provisions are made for review of parameters that are difficult to forecast and prone to high fluctuations. Such review guidelines specify review period, basis of review, review benchmarks, etc. (for example, Currency risk and Inflation forecasts) All the risks regarding design, construction project management, compliance with environmental regulations, quality and technical standards, matters relating to efficiency, innovativeness and technology are assigned to private party The risks regarding demand of services, cost of project and cost of finances are assigned to private party wherever it is considered feasible and appropriate Risks related to approvals, land acquisition, inter-governmental co-ordinations, and agreed Government funding contributions are assigned to Government
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5) Land for PPP

Following are the guidelines for land related aspects for PPP projects: The Government will make available the required land for PPP projects on standard terms and conditions as already practiced by the Government when giving land to a Government agency for a development project Most of the Greenfield PPP projects are likely to require Government support in terms of provision of land. Giving land required for the infrastructure asset creation/ rehabilitation therefore will be a condition precedent for the Government The proposed projects may include land required for the infrastructure creation/ rehabilitation which may also have limited commercial exploitation component. The Government is not keen to use land as a major component essentially to attract private investment into infrastructure sectors However, there could be exceptional circumstances where there is excess land or real estate component that is being used by the implementing department/ agency to make the project more attractive to the private sector. For such circumstances, the Government is keen that the implementing department/ agency puts in sufficient safe-guards to ensure that the public land made available for PPP projects is not put to any other use other than what is agreed upon under the concession agreement Government of Madhya Pradesh may consider issuing up a set of separate guidelines for provision, usage and valuation of such excess land in PPP projects In most cases, land will be given as a lease or on license basis or right-to-use only and will not be sold to the private party. The lease or right to use period will be coterminous with the main concession contract period Contract agreement shall not allow for mortgaging of public land by the private party after they are given the rights to use the land for the PPP project The Resettlement and Rehabilitation Policy of Displaced Persons, as adopted by the State shall be followed
6.2.4 Scope and Coverage of PPP Policy

The PPP Policy is applicable to any PPP projects in sectors indicated below (which may be modified from time to time by the Government): Roads, bridges and bypasses Airports, Airstrips and Heliports Inland container depots and logistics hubs Industrial parks, Theme Parks like IT/BT Parks, Knowledge Parks, Special Economic Zones and Townships, Industrial Training Centres Water extraction, transmission, treatment and distribution
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Waste water- municipal, industrial and commercial Power generation, transmission and distribution systems Solid waste management Sewerage & sanitation Inland water transport Tourism and related infrastructure Convention Centers & Exhibition Centres Urban transportation systems Railway & Related Projects Health (health centres, hospitals, diagnostic centres, mobile health facilities, health services and all other related facilities) Education (schools, colleges, vocational education facilities, training centres, education services and all other education related facilities) Accommodation (housing, hostels, shelters, public buildings, townships and related facilities) Any other sector / facility as may be specified for inclusion by the Government
6.2.5 Role of various support agencies

Role and responsibilities of agencies that will be involved in promoting PPP project are as below. State level Facilitation and Development Agency for PPP A new PPP Facilitation and Development agency will be created in the Finance Department and will act as a facilitator to support the line departments in undertaking PPP projects. It will also prepare model PPP documents for guidance (after approval by Finance Department and Legal Department). It will perform the following functions based on demand from line departments/agencies: Assist the departments in conceptualizing and developing a shelf of projects for implementing under PPP format Facilitate and advice departments in preparation of PPP business cases, VfM and PSC analysis, contract documents, bidding documents, risk sharing frameworks, etc. to support PPP projects Assist departments in running the bid process for PPP projects Assist departments in hiring the services of Transaction Advisers, Feasibility/ DPR Consultants, Architects, Independent Engineers, etc. On behalf of Government or particular departments, promote PPP projects among investors; organize workshops and meetings with investor groups, developers, operators, industry associations, bankers, etc. on various aspects of PPP and in particular in marketing PPP investment potential in the State On behalf of Government or departments, facilitate training and capacity building of department officers to undertake PPP Work closely with various departments of the State in enhancing transparency in PPP procurement, and in monitoring information of PPP project progress and effectiveness
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Work closely with various auditors offices in auditing, to the extent required, of public funds in PPP projects Carry out special tasks assigned to it by the State Government from time to time
State Level PPP Cell The present PPP cell in Directorate of Institutional Finance will continue to be the nodal agency to coordinate all efforts of the State Government regarding development of infrastructure sectors, involving private participation and funding from various sources. The functions of the PPP Cell will be: to assist the State Level Empowered Committee (SLEC) in considering, analyzing and approving PPP projects, including granting in-principle approvals, final approvals, VGF sanctions. to assist SLEC in approving any special grants and concessions to PPP projects. to assist SLEC in examining and adopting model concession agreements and model bidding documents. to manage the Project Development Fund created to facilitate development of infrastructure projects, to recommend projects along with amount required from the Fund to meet the cost of project development. to coordinate the efforts of other departments for the furtherance of the objectives of this Policy. to maintain all records on information pertaining to approval of PPP projects.
Implementing agency Implementing agency will be the concerned State departments or State agencies or the local bodies. Role of the implementing agency will be to identify projects, create a shelf of projects, prioritize them, conceptualize and prepare the PPP projects. They will also seek in-principle and other approvals from the approving authority from time to time. They may hire consultants and transaction advisors for preparation of business cases, initial analysis, feasibility studies, the Detailed Project Report (DPR), for bid process management etc. The departments will also select the final bidder and sign the concession agreement for executing PPP project. Responsibility of monitoring of the project will also rest with the implementing department/ agency. They will take, depending on need, the help of State Level PPP Facilitation and Development Agency. The ownership of the PPP project procurement process will be of the Implementing Agency. However, it may take advisory and technical support from the Facilitation Agency whenever required.
6.2.6 Capacity building of support agencies

Government is acutely aware of the need to urgently build the capacities of implementing agencies as also in State PPP cell in Directorate of Institutional Finance to undertake the roll out of PPP projects. For this purpose, the Government will collaborate with reputed capacity building institutions and consultants in Madhya Pradesh and outside. In the longer run, when the Facilitation Agency is fully in
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place and is having adequate capacity, it will take on the task of coordinating these capacity building efforts.
6.2.7 PPP Procurement Process 1) Project Prioritization / Shelf of Projects

The first stage of the PPP process will begin at the early level of formulation of department plans. When department plans are formulated, the departments could keep in mind that some investments/ projects/ services can be taken up through PPP route. An Option Analysis to examine if PPP format is possible should be carried out. This will lead to creation of shelf of PPP projects.
2) Project Preparation
a) Feasibility Report For all the prioritized project Feasibility study will be conducted. This study will comprise at least the following components: Project definition and description Market/ demand assessment justifying the need for the project Technical feasibility, including choice of technology options Financial feasibility PSC and VfM analysis Option Analysis to finalize PPP model Risk Sharing Framework Analysis of affordability and acceptability by user communities Analysis of capacity (cost and manpower) of the department to undertake the chosen PPP model and to monitor the contract Environment and social impacts Timetable for procurement involved
b) Project Report Departments shall carefully assess if there is any advantage or necessity to prepare a Detailed Project Report (DPR). In most cases where PPP option has been chosen, DPRs would not be required to be prepared and Feasibility Reports would suffice. However, there may be unique situations where a DPR may be required to take the project to the next stage. Such instances could include: If the nature of the project is such that it is being attempted for the first time or is very innovative requiring detailed examination and perhaps designing before any private sector shows interest If increased competition is created by investment of time and resources by the department in DPR preparation
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If approvals are likely to come only when a detailed DPR is made available to the approval committees If technical specifications relating to services and O&M could be drafted only when a DPR is available
3) PPP procurement
A typical procurement process of a PPP will include the following distinct stages: Expression of Interest (EoI) / Request for Qualification(RfQ) Request for Proposals(RfP) Evaluation and selection of Bidder Award of Contract / Signing of Concession Agreement Financial closure
a) Request for Qualification This is the first stage of a two-stage bidding process and identifies the pre-qualified bidders for the PPP project. It shall have the following objectives: Selecting a limited number of the bidders/bidding consortia that are qualified technically and have sufficient experience, financial capacity and commitment to prepare proposals and execute the project Setting out the rules of participation in the procurement process clearly and unequivocally Disseminating information on the project Giving guidance on the expected kinds of participants in the bidding consortia Gathering information from bidding consortia that is verifiable and can be evaluated.
Only pre-qualified bidders will be allowed to enter the RFP stage.
b) Request for Proposal The bidding documents will include the terms and conditions of the agreement, rights and responsibilities of the parties, remedies, scope of project and its description, standards and specifications, implementation schedule, operation and maintenance standards, during or at the end of the concession period. Consequences of foreclosure of the project by the private party and termination of the agreement by Government will also be specified. Bidding documents will also address various risks of the project appropriately, by properly allocating them between the parties. The documents will be prepared by the Implementing Agency which may seek external support in doing so. It will be given to the selected bidders at least one month before the closing date for submission of the bids. Typically an RFP document has following three parts: Part I - Instructions to bidders
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This will comprise the best available information about the project, its likely benefits to both the parties, likely nature of concession agreement and any other information relevant to the project which shall be known to the bidder while bidding. It will mention about the bid security to be deposited by the bidder at the time of application. Part II - Draft concession agreement (DCA) Part III - Schedules to DCA Schedules are annexure to the RFP containing all the technical/ engineering details as also service parameter specifications relevant to the project. The Implementing Agency will adhere to the schedule mentioned in the RFP. Schedules may comprise any or all of the following: Any map or drawing related to the site or project Clearly spelt out service/ output specifications Any technical or engineering details of existing assets Any other supportive documents to help bidder understand the project A detailed list of clearances required for the particular project
If the PPP project requires Central VGF then the Schedules to DCA shall also contain the following as they are a prerequisite for central VGF clearance: Draft state support agreement Escrow agreement O& M agreement if applicable Shareholders agreement, if applicable
After preparation of bid documents, the final approval on these bid documents from the DLEC / SLEC followed by approval from line ministry / cabinet will be obtained. At this stage, projects which require Government support will also seek final approval from the competent authority. This will constitute an acceptance by the Government of meeting its obligations relating to Government support for the project.
c) Evaluation and Selection of Bidder After the final approval is obtained, bids will be invited by the implementing agency. The bids received will be assessed based on the technical and financial capability as specified in the bid documents. Evaluation of bids shall be a transparent process, wherein a committee consisting of evaluators from the Implementing Agency and a third party shall be formed to assess without any bias. To enhance transparency, the technical bids will be opened in the presence of all parties and handed over to the evaluation committee. Any qualifying requirements such as bank guarantee, demand draft or any other document will be examined to ensure that the technical proposal is complete in all respects and can be evaluated. The financial bids shall be opened only when the technical evaluation is completed and scores are
declared. Weights and scores will be applied to the bids to select a final bid with the highest score. Evaluation of the received bids from shortlisted bidders will lead to the selection of the final bidder.
d) Award of Contract / Signing of Concession Agreement After evaluation of the bids and selection of the preferred bidder, a letter of acceptance of the bid will be issued by the Implementing Agency in favor of the successful bidder. The letter of acceptance will specify the formalities to be completed by the successful bidder for signing of the agreement. If the successful bidder is required to furnish performance security, or any other guarantee etc., prior to the signing of the concession agreement, it shall be so stated in the letter of acceptance. Draft of the concession agreement shall be provided to the bidders prior to the bidding, which shall, inter-alia, include the form of agreement. The agreement will be signed by the company constituted by the successful bidder and the Government department/entity that will be responsible for implementing the project after filling the relevant details in the DCA. An appropriate dispute resolution mechanism shall be included in the contract agreement for resolving any dispute arising after signing the contract. The options may include conciliation or arbitration as per prevailing laws to amicably resolve the disputes.
e) Financial Closure This marks the start of concession period. Financial closure refers to the tie-up of the funds with Banks/ Financial Institutions etc. required by the private party for the project. In case, the financial closure does not occur within the period stipulated in the bid documents, the concession agreement shall be deemed to have been terminated by mutual agreement of the parties with consequences as indicated in the bid documents.
6.2.8 Approval Mechanism

The existing three-tier institutional framework PPP Cell as Technical Secretariat, DLEC/ SLEC and Line Ministry/ Cabinet for approving PPP projects in the state shall continue to apply.
a) Approval Committees (DLEC and SLEC) Department Level Empowered Committee (DLEC) and State Level Empowered Committee (SLEC) are already constituted through a Circular 16 issued in September 2010, for approving PPP projects with different ceiling of PPP project cost. DLEC is chaired by Principal Secretary of the department concerned. It can grant approvals to projects with Project Cost of not more than Rs.10 crores and which do not require VGF. After the project has received approval from DLEC, approval from the concerned Line Ministry is also required. At a later point in time, after some departments obtain in-depth experience, the Government would consider empowering such DLECs to approve projects with higher project cost.
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SLEC is chaired by Chief Secretary GoMP. It has been authorized to grant approvals to PPP projects with project cost more than Rs.10 crores or/and requiring VGF from state / Centre. After the approval from SLEC, project is sent to Cabinet for further approval. While approving the project on PPP mode, the approval committee shall check for the following before granting the approval. Whether: the project conforms to the policy guidelines for the sector. the implementing agency/department has sufficient execution capacity (to procure the private party, to get into agreements and to monitor the implementation and operations). the implementing agency/ department has sufficient financial capacity to undertake PPP project (sufficient funding arrangements for initial and ongoing payments as required in the option/ model chosen, including termination payments in case of termination happens mid-way). Value for Money (VfM) analysis has been carried out. risk sharing and allocation of risks is considered acceptable. sufficient user consultation has taken place and broad acceptances are in place; also that the project does not levy unreasonable user charges or tariff and conforms to the user charge principle. contingent liabilities arising from the project are within acceptable levels as determined by Finance Department. There shall be an appropriate accounting mechanism for estimating contingent liabilities arising out of projects and accruing year on year. This shall be undertaken by the Finance department of the State. Their representation in DLEC / SLEC wherein there will be a check for acceptable contingent liability using the framework developed would be useful in fulfilling this monitoring function. the project is likely to breach optimum levels of annuity commitments that can be made by the State which can be checked by adding up year on year annuity payments to be made in future. the requirement of VGF is within the permissible guidelines of the Centre and state.
b) Two stage approval process PPP Projects will require two-stage approval In-principle Approval and Final Approval. The inprinciple approval will be provided by the concerned approval committee and subsequently by the Line Ministry / Cabinet based on feasibility report of the project in PPP mode. Once the bid documents are prepared, they will be put up to the concerned approval committee for the final approval. After seeking approval from the approval committee, PPP project shall be subsequently approved by the Line Ministry / Cabinet. Final approval, along with others shall also check for any material deviation in the project concept and structure. The following conditions, inter alia, shall constitute material deviation: Change in the structure or form of PPP e.g. if the Project changes from BOT (Toll ) to BOT (Annuity) Substantial change in project cost, size and scope. Extent of acceptable change in project cost shall be determined by the implementing agency based on best industry practices. For
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example, if the project cost changes by 10% owing to increase in market price of material used for construction then it may not go for revised approval Increase in quantum of financial support required for the project Change in the bidding process e.g. national vs. international bidding, financial parameter (revenue sharing, upfront grant,), single to two stage bidding etc. Significant change in risk allocation between Government entity and private sector developer
6.2.9 Support from Government of Madhya Pradesh

Government of Madhya Pradesh has taken many initiatives to provide financial support to the PPP projects. The details of key initiatives are given below.
a) Madhya Pradesh Infrastructure Investment Fund Board (MPIIFB) MPIIFB is a statutory board created through enactment of Madhya Pradesh Infrastructure Investment Fund Board Act or Madhya Pradesh Adhosanrachna Vinidhan Nidhi Board Adhiniyam Act, 2000. The board is chaired by the Chief Secretary and has maximum fund limit of INR 1,000 crores. The Board, may, out of its funds, give loans and advances for infrastructure projects (including roads, irrigation, water supply, solid waste management and drainage). Under the above mentioned act, State Government has formulated Madhya Pradesh Infrastructure Investment Fund Scheme, 2001 which allows for establishment of a fund for investment in infrastructure projects in the state. There is a ceiling for providing Central VGF to projects with such requirements. Cap of 20% of the project cost is applicable to all PPP projects requiring Central VGF. It is also allowed to provide further 20% of the same Project cost as VGF by the state. However, if the state wishes to provide more VGF to any project or sector such as social sector, then it may be recommended by Finance Department and decided by the Cabinet from case to case basis as and when need arises.
b) Madhya Pradesh Project Development Fund (MPPDF) MPPDF was setup recently through Circular 17 issued in September 2010. MPPDF is setup with an objective to provide financial support (in form of interest free loan or advance) at project proposal preparation stage. This enables preparation of quality proposals for feasible and economical projects which increases its chances of final approval. The objective of MPPDF is to increase the quality and quantity of projects that can be implemented through PPP. MPPDF shall finance the cost of conducting feasibility studies, environment impact studies, financial structuring, legal reviews, development of project documentation including concession agreement, commercial assessment studies (including traffic studies, demand assessment, capacity to pay assessment) etc.
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In the long-run, Government of Madhya Pradesh will create a framework for undertaking PPP commitments through budgetary allocation at the department level. Departments will be able to extend multi-year budgetary support to PPP projects. This will enable the departments to undertake various forms of PPP projects in future. To undertake the scheme of budgetary allocation to PPP projects, legal enactment and reform of Government budgeting system will be taken up. The Government will also provide the necessary assistance to departments to avail benefits under various schemes such as the Infrastructure Initiative Fund (IIF), ASIDE (Assistance to States for Infrastructure Development for Exports), National Urban Renewal Mission (NURM), Central Viability Gap Fund (VGF), and bilateral and multilateral agencies. An important support to private party in executing PPP projects will be the provision of land by Government of Madhya Pradesh based on some predetermined conditions and principles as specified before. Apart from financial support for PPP, the Government will also provide other forms of support, as deemed necessary, for infrastructure projects. All PPP projects will receive administrative support for obtaining necessary clearances.
6.2.10 Regulatory Framework

For projects and services rendered through a PPP framework, the Government considers it necessary to formulate a robust regulatory framework as soon as feasible. Regulatory frameworks so designed may be operationalized through setting up independent regulators in some instances and through Government acting as regulator in other cases. Regulation will include economic regulation (including tariff regulation) and service regulation. Regulation applicable will be specific to each sector and would not be generic across all sectors.
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7. PROPOSED INSTITUTIONAL ROADMAP FOR PPP IN MP

7.1 Introduction
7.1.1 Existing Institutional Framework for PPP in MP
The existing institutional framework responsible for promoting PPPs in the state, coordinating with various departments/ agencies and assisting in appraisal and approval processes has Directorate of Institutional Finance as the nodal agency. Directorate of Institutional Finance DIF was formed in 1976 and was transferred to Department of Finance in 1977. DIF is primarily responsible for formulation of projects and arrangement of institutional finance for projects sponsored by various departments, boards, corporations of the State Government and also for providing assistance in implementation of acts and rules. PPP Cell A PPP Cell is located inside DIF. Its main function is to coordinate and assist the line departments in all the activities related to PPP in the state. PPP Cell is also responsible for organizing PPP capacity building programs for all line departments in the state. It maintains the database of all the PPP projects in the state. It also acts as a technical secretariat to DLEC/ SLEC for approval of PPP projects. Implementing Agency Implementing agency could be any line department, board and corporation of the state governments or a local body which conceptualizes a project and is responsible for implementation of the project. Current Institutional Framework with respect to PPP can be depicted by the diagram below:
Figure 12: Existing Institutional Framework for PPP in Madhya Pradesh
Directorate of Institutional Finance PPP Cell

PPP assistance
Corporations
MPRDC, MPSIDC, MP Warehousing & Logistics Corporation, MPAKVN UADD, PWD, Forest, Housing & Environment, Industries, Tourism, Transport Municipal Corporations, Councils
Departments
Project appraisal
Local Bodies
Approval
DLEC / SLEC
Others
Madhya Pradesh Ecotourism Development Board, Indore Development Authority
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7.1.2 Funding Mechanism and Approval Mechanism

Madhya Pradesh Infrastructure Investment Fund Board (MPIIFB) MPIIFB is a statutory board created through enactment of MP Infrastructure Investment Fund Board Act (MPIIFB Act) or MP Adhosanrachna Vinidhan Nidhi Board Adhiniyam Act, 2000. The board is headed by Chief Secretary and has maximum fund limit of INR 1,000 crores. The Board, may, out of its funds, give loans and advances for infrastructure projects (including roads, irrigation, water supply, solid waste management & drainage). MPIIFB Act or MP Adhosanrachna Vinidhan Nidhi Board Adhiniyam Act, 2000 has been enacted for creation of MPIIFB. Also Madhya Pradesh Infrastructure Investment Fund Scheme, 2001 has been formulated to allow for establishment of a fund for investment in infrastructure projects. Madhya Pradesh Project Development Fund (MPPDF) MPPDF was setup recently through guidelines issued in September 2010. It was setup with an objective to provide financial support (in form of interest free loan or advance) at project proposal preparation stage. This enables preparation of quality proposals for feasible and economical projects which increases its chances of final approval. The objective of MPPDF is to increase the quality and quantity of projects that can be implemented through PPP. MPPDF covers cost of conducting feasibility studies, environment impact studies, financial structuring, legal reviews, development of project documentation including concession agreement, commercial assessment studies (including traffic studies, demand assessment, capacity to pay assessment) etc. Approval Committees Department Level Empowered Committee (DLEC) and State Level Empowered Committee (SLEC) GoMP has constituted Department Level Empowered Committee (DLEC) and State Level Empowered Committee (SLEC) to give approval for PPP project, through a circular issued in 2010. It is chaired by Principal Secretary of the department concerned and Chief Secretary GoMP respectively. The composition of the two committees is: DLEC: It comprises of the Principal Secretary of the department concerned, DIF, Secretary (law), Advisor (State Planning Commission), any other Secretary (relating to concerned department), Member Secretary( Head of the concerned department) SLEC: It comprises of Chief secretary of the MP, Principal Secretary (Finance), Principal Secretary (Law), Principal Secretary (Planning),Principal Secretary (department concerned), Principal Secretary (any other related to the concerned department). DIF acts as a member secretary. PPP Cell also acts as a technical secretariat to SLEC.
The two committees have been constituted to give approvals for PPP projects. DLEC can grant approvals to projects with Project Cost of not more than Rs.10 crores and which do not require VGF. SLEC has been authorized to grant approvals to PPP projects with project cost more than Rs.10 crores or/and requiring VGF from state / Centre.
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7.1.3 Existing PPP process and approval mechanism in MP

The PPP process followed in MP is similar to what is followed in many states in India. Implementing agency is responsible for conceptualization of the project, preparation of project documents (DPR, financial assessment), preparation and issue of bid documents (RFQ, RFP, Concession Agreements), conducting the bid process to procure the private party and monitoring of the implementation of the project post-award to the preferred bidder. The implementing agency may take the assistance of technical consultants and transaction advisors in this process. In some cases, the PPP cell also provides guidance (in terms of review of bid documents, facilitating selection of transaction advisor) to the implementing agency in these activities. Every PPP project in the state follows a two stage approval process in principle approval and final approval which is given by the Line Ministry / Cabinet (depending on the value of the project). Line Ministry and Cabinet are assisted by DLEC and SLEC respectively. Both DLEC and SLEC were institutionalized as per PPP guidelines and Circular 18 issued by the Government. At present SLEC is assisted by PPP Cell, DIF in reviewing the project documents and bid documents related to the PPP project. The existing PPP process map and approval mechanism in Madhya Pradesh is presented in the diagram below:
Figure 13: Existing PPP process and approval mechanism in Madhya Pradesh
Existing PPP Process and Approval Mechanism in MP

Project identification, conceptualization & pre-feasibility IA
IA: Implementing agency TC: Technical Consultant TA: Transaction Advisor
Preparation of project documents
IA, TC
In-principle approval by DLEC / SLEC
PPP Cell
In-principle approval by line ministry / cabinet
Preparation of bid documents like RFQ, RFP, CA
IA, TA
Final approval by DLEC / SLEC
PPP Cell
Final approval by line ministry / cabinet
Recommend state VGF funding
PPP Cell, DIF
Running of bid process & signing the contract
IA, TA
Execution and monitoring of the PPP project
IA
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7.1.4 Identified issues / gaps

GoMP intends to invest Rs.25000 crores in three years in projects developed through PPP. GoMP has set PPP targets for various departments for the next three years. In order to achieve the above target a robust institutional and policy framework and standardized guidelines are essential. From time to time, GoMP has issued government circulars and PPP guidelines to facilitate and institutionalize PPP in the state. However, during discussions held with various stakeholders, certain issues/ gaps were identified in the existing arrangements which require attention. List of stakeholders interacted with, is provided in Annexure 1. These have been summarized in the diagram below:
Figure 14: Issues / gaps identified in existing PPP arrangement in Madhya Pradesh
1. Clarity on definition of PPP There is inadequate clarity on What is a PPP and What is not a PPP. Various agencies at central and state levels have defined PPP differently. A standardized definition for Madhya Pradesh needs to be decided considering the principles of PPP. 2. Need project preparatory assistance Most departments / corporations require project preparatory assistance particularly in preparation of pre-feasibility study, DPR preparation, PPP project structuring, bid documents, and concession agreements. They also need assistance in appointment of Transaction Advisors (TAs) for the identified projects. 3. Need a Facilitation agency for PPP There is absence of overarching Facilitation agency for PPP in the state. At present, DIF under Department of Finance is responsible for coordination
of the PPP activities in the state. However, many departments / corporations / local bodies undertake PPP project on their own after cabinet approval. This leads to uncoordinated planning and implementation of PPP projects in the state which also happen without assessing the full and long term impact of the PPP projects on governments future liabilities and contingent liabilities. Hence, a need for an expanded Facilitation agency was felt by many departments from whom assistance on testing the suitability of the PPP projects, planning, and guidance can be obtained. 4. Lack of capacity of line departments Many line departments acknowledged that they lack capacity not only in terms of preparation of conceptualizing the right PPP structures but also preparation of technical documents like DPR, transaction documents like RFQ/RFP and Concession Agreements. However, they also lack capacity to conduct procurement process for appointing the advisers and consultants. 5. Suitability of PPP Suitability of a project under PPP needs must be addressed. Many departments/ agencies are unclear about the key reasons of why a PPP can be considered and how to assess suitability of going in for PPP vis--vis a public procurement model. The well-known tools and techniques of such an assessment are not known to the implementing agencies. Sometimes, PPP is chosen as a model without a complete understanding of its advantages and risks. 6. PPPs are not bringing in innovation Many stakeholders did not see any innovations coming out of going in for standardized PPP models and agreements. In such sectors as social (health, education, water etc.), the socio-political dynamics of a project are quite complex and sensitive requiring innovative solutions. Whether PPPs can improve the chances of such innovation was not clear. Innovation in PPP procurement can be encouraged through Swiss Challenge Method. Swiss challenge accommodates an unsolicited proposal from a private party to invest and implement a project that government may be interested in. The Government then gives it to that party after going through a competitive process of finding any other private parties who may be willing to offer same or better proposals. However, due to two reasons due to lack of transparency in the process and due to subjectivity in evaluation of bids this method has not found many takers.
7.2 Institutional arrangements for PPP

In view of the stated objectives of the Government of MP to give a major thrust to PPPs and considering the issues identified above, several proposal options were considered for a suitable institutional arrangements for advancing PPPs. These were also discussed in a workshop mode with key stakeholder departments of the State. On an overall basis, it was agreed that: The existing legal/ regulatory arrangements are adequate and no separate legislation is required for advancing PPPs There is a need for a comprehensive PPP policy to be formulated and articulated The existing institutional arrangement needs immediate further strengthening primarily to strengthen the capacity of the implementing line departments and provide handholding assistance to them
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Approval and implementation of agreed proposals needed to be done in a time bound manner
It is with this background that the Draft PPP Policy has been prepared and presented in this report and a draft proposal for a strengthened institutional arrangement has been described. The approval process has not been changed much but has been described here to present a complete proposal. Roles of DLEC and SLECs presented here, therefore, are for comprehensive documentation purpose. The objective of a good PPP institutional arrangement is to support and facilitate PPP in the state. The agencies/entities constituting the institutional arrangement should collectively serve as a one-stop shop for all PPP projects in the state. The entities involved in implementing PPP should have suitable organization structure considering roles and responsibilities defined above. Also skills required to perform tasks related to the life cycle of a PPP project need to be mapped against the proposed organization structure. The roles and responsibilities of such entities can be categorized into six Regulatory/ Mandatory Functions and four Demand Driven Functions as follow:
Figure 15: Roles and responsibilities of the proposed institutional framework for PPP in Madhya Pradesh
Required Functions
Regulatory/Mandatory Functions
1. Technical secretariat to DLEC / SLEC 2. Information repository / knowledge bank for all PPP projects in the state 3. Preparation of sample model PPP documents (bid documents including model concession agreements) 4. Compilation and tracking of Contingent liabilities arising out of PPP project at the state level 5. Analysis and recommendation on State VGF proposal to MPIIFB 6. Monitoring the progress of PPP projects in the state and updating information in the PPP repository
Demand Driven Functions

1. Transaction advisory assistance to government departments / corporations / local bodies 2. Project preparatory assistance (PPA) / documentation assistance to government departments / corporations / local bodies 3. Workshops / conferences / investors meets to market PPP potential / investment potential in Madhya Pradesh 4. Capacity building and training on PPP for government departments / corporations / local bodies
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Description of these functions is given below: Regulatory/ Mandatory Functions 1. Technical secretariat to DLEC / SLEC As a technical secretariat there is a need to appraise the projects, assess suitability of PPP for the projects, review the bid documents, assess the risk sharing framework suggested in the concession agreement / project structure and assess the viability funding requirement for the project (if any). 2. Information repository / knowledge bank for all PPP projects in the state At present, PPP cell compile information on PPP projects which come to DIF for VGF funds or are more than Rs.10 crores. Information on PPP projects less than Rs.10 crores and without VGF funding are solely done by the implementing agency and hence information of such projects are unavailable with PPP cell. In order to make the PPPs effective, it is essential to create an information repository/ knowledge bank for all PPP projects in the state. 3. Preparation of sample model PPP documents There is a strong need for preparation of sample model PPP documents including bid documents (RFQ, RFP), and model concession agreements. Such documents may be prepared for all sectors. Any department / corporation may use these documents to conceptualize and develop a project without any external assistance. 4. Compilation of contingent liability arising out of PPP projects at the state level There is an immediate need to compile and regularly track the impact of the PPP project on governments future liability including contingent liabilities and annuity payments. 5. Analysis and recommendation on State VGF proposals to MPIIFB A well informed team should analyze the VGF requirements sought by implementing agencies and recommend if VGF is required and the extent of such VGF, along with timing of VGF cash flows. Matching of VGF with availability of budgets for the same also needs to be analyzed. 6. Monitoring the progress of PPP projects in the state and updating information in the PPP repository A well capacitated entity monitor every PPP project after the project is contracted out to the private sector. It could also collect information on the PPP project on a periodical basis and update the same in the PPP repository.
Demand Driven Functions 1. Transaction advisory assistance There is a strong need for transaction advisory assistance to government departments / corporations / local bodies. This includes preparation of bid documents like RFQ, RFP, concession agreement etc., managing the entire bid / transaction process including appointment and negotiations with the preferred bidder. 2. Project preparatory assistance (PPA) There is an immediate need to provide project preparatory assistance / feasibility studies / preparation of PPP business case, PSC & VFM analysis, documentation assistance to government departments / corporations / local bodies. Both this and the previous function could either be carried out by a Facilitation Agency of the Government or could be outsourced through such agency to outside Consultants/ advisers. 3. Workshops / conference / investors meet PPPs in MP have not been marketed well to the outside world. There is thus a strong need to reach out and dialogue with potential investors, users of services rendered through PPP, affected employees of departments giving
out PPPs, etc. These could be done through organizing workshops / conference / investors meet to market PPP potential / investment potential in Madhya Pradesh, and through various methods of dialogue and information sharing to other stakeholders. 4. Capacity building and training workshops on PPP As already mentioned, there is an urgent need to carry out capacity building and training on PPPs for government departments / corporations / local bodies. Capacity building should also go well beyond workshops/ training plans to working closely with various employees and systems of departments/ agencies concerned, to enable them to handle the entire PPP life cycle with minimal external assistance.
The table below depicts inter-se responsibilities of various institutions in a PPP project cycle.
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Table 6: Inter-se responsibilities of various institutions in a PPP project cycle in Madhya Pradesh Role of Implementing Agency (Department / Corporation / Local Body) Role of Transaction Advisor (TA) / Technical Consultant (TC)
Activities
Role of Support Agency(ies)
Role of DLEC / SLEC
Activities related to PPP project cycle Project identification, conceptualization, prioritization & prefeasibility Preparation of project documents (DPR, financial assessment) Primary role It is responsible for all these activities Primary role It is responsible for preparation of project documents Demand driven role It may assist directly or may assist in appointing TA for the same Demand driven role It may assist directly or may assist in appointing TC for the same Regulatory / Mandatory role As technical secretariat to DLEC / SLEC, it would assist in review of project documents Regulatory / Mandatory role It is responsible for assessing impact of PPP project on debt due at state level Regulatory / Mandatory role Preparation of bid documents like RFQ, RFP, Concession Agreement Primary role It is responsible for preparation of bid documents It is responsible for preparation of sample model bid documents Demand driven role It may assist directly or may assist in appointing TA for the same None If appointed, TA is responsible for preparation of bid documents Role of an approver It is responsible for approval (in-principle approval would be given by cabinet) None None If appointed, TA is responsible for prefeasibility study and project structuring If appointed, TC is responsible for preparation of project documents
In principle Approval of DLEC / SLEC
None
None
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Activities
Role of Implementing Agency (Department / Corporation / Local Body)
Role of Support Agency(ies) Regulatory / Mandatory role As technical secretariat to DLEC / SLEC, it would assist in review of bid documents
Role of DLEC / SLEC
Role of Transaction Advisor (TA) / Technical Consultant (TC)
Role of an approver It is responsible approval after consultation with the Facilitation agency (final approval would be given by cabinet)
Final Approval of DLEC / SLEC
None
Regulatory / Mandatory role As single point PPP repository, it is responsible for recording project information in the PPP database Regulatory / Mandatory role
None
Recommend State VGF proposal
None
It is responsible for recommending the project for state VGF to MPIIFB
None
None
Primary role Running of bid process It is responsible for running the bid process including selection of the preferred bidder Primary role Signing of the contract It is responsible for negotiations and signing of the contract with the preferred bidder Primary role It is responsible for execution and monitoring the PPP project None Demand driven role It may assist directly or may assist in appointing TA for the same None
If appointed, TA is responsible for assisting the implementing agency in bid process management If appointed, TA is responsible for assisting the implementing agency with negotiations and signing of the contract with the preferred bidder
Regulatory / Mandatory role It is responsible for monitoring the progress of PPP and keeping the PPP repository updated with such information None None
Execution and monitoring of the PPP project
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Activities
Role of Implementing Agency (Department / Corporation / Local Body)
Role of Support Agency(ies)
Role of DLEC / SLEC
Role of Transaction Advisor (TA) / Technical Consultant (TC)
Activities related to PPP strengthening in the state Primary role It is responsible for taking part in capacity development and training activities on PPP conducted from time to time basis by the PPP Facilitation agency Demand driven role It is responsible for conducting capacity development and training activities on PPP. Key participants may include Line Departments / Corporations / Local Bodies. Demand driven role Organize workshops / conference / investors meet Jointly with support Agency It is may organize workshops / conference / investors meet to market PPP potential / investment potential in the state Demand driven role Jointly with Support Agency It is may organize workshops / conference / investors meet to market PPP potential / investment potential in the state None None None None
Capacity development and training on PPP
None
None
Dialogue with other key stakeholders (employees/ user groups)
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7.3 Possible Options for PPP Facilitation Agency

7.3.1 Key features of proposed institutional framework
Having understood the requirement of various functions as well as the roles to be played for PPP facilitation and promotion as above, it is now important to assess what options the Government has in terms of deciding and proceeding ahead. Many states in India have experimented with different models and there are international learning also to support some of the options. One of the key learning from experiences of other states in India and international case studies is that the PPP Institutional arrangement should have representation from highest level to highlight /portray the importance /seriousness of PPP for infrastructure development. In Madhya Pradesh, it is seen that some sectors like power and roads & highways have seen many success stories in PPP. Most stakeholders attribute its success to individuals leading these sectors and to inherent advantages of the projects but not to the institution as a whole. Therefore, it is necessary that the capacity of the institutions is strengthened to ensure more success stories in the future. The proposed institutional framework should thus significantly address institutional capacity development. A number of stakeholders have expressed a view that any facilitation agency proposed should limit its role to being a facilitator, advisor, capacity development and training institution and not be an approver/ regulator/monitoring agency or a policy maker. Also, the ownership of the projects should be solely with the implementing agency and all PPP projects should integrate cohesively with other public funded programs of the implementing agency. Key features of the proposed institutional framework are given in the diagram below:
Figure 16: Key features of the proposed institutional framework in Madhya Pradesh
Representation from highest level
Project preparatory assistance and documentation

Facilitation agency should possess technical, financial and legal expertise to assist in project preparation and documentation
Focus on institutional capacity
Ownership of PPP projects
Robust Institutional Framework
The state level approval committee for PPP should be headed by Chief Minister / Chief Secretary
The focus should be given on institutional capacity rather than individual capacity.
Implementing agency must have the ownership of projects. Facilitation agency should not own the projects
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With this background, three options for PPP institutional framework were considered and discussed with stakeholder departments as also Finance department: Option 1 DIF assumes the role of PPP Facilitation agency (to carry out demand driven functions) with a larger mandate than at present ( present role covering regulatory/ mandatory functions as described above) Option 2 A separate PPP Facilitation agency is created overseen by Finance Department whereas DIF is primarily responsible for only appraisal and assisting the approval committees (i.e.. no change in DIF functions) Option 3 A separate agency is created outside Finance Department whereas DIF will continue to be primarily responsible for appraisal and assisting the approval committees (no change in DIF functions)
7.3.2 Option 1
In this option, DIF becomes the Facilitation Agency for PPP in the state. It is the easiest option to implement. DIF already performs some of the functions envisaged for such an agency. They only need to expand their mandate and enhance capacities to perform additional roles and responsibilities of a PPP Facilitation agency. In short term, DIF may hire Program Management Consultant to assist them with all the activities of the agency. In the long term, they may enhance their in-house capacity. PPP cell would continue to be housed under DIF. It is envisaged that PPP cell would act as technical secretariat to both Approval Committees. Approval committees would continue to get in-principle and final approvals from line ministry / cabinet. For an implementing agency, getting approval from DLEC / SLEC is mandatory. However it may or may not seek PPA assistance or transaction advisory assistance from the DIF depending on its confidence to manage and implement a PPP transaction process without any external assistance. This is represented by the dotted arrow in the diagram below.
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Figure 17: Proposed Institutional Framework Option 1: DIF becomes PPP Facilitation Agency
OPTION 1 Dept. of Finance becomes Facilitation Agency for PPP

Approval Committees
Implementing Agency DLEC
Projects < Rs. 10 crore and with no requirement of VGF
Line Ministry
SLEC
Projects > Rs. 10 crore and/ or requiring VGF
Cabinet
Technical Secretariat to SLEC. May be DLEC also ?
Directorate of Institutional Finance becomes Facilitation Agency for PPP

Finance Department
PPP Cell Project Management Consultant OR Create sufficient In house capacity
Regulatory / Mandatory Function Act as technical secretariat to DLEC / SLEC One point repository of all PPP projects in the state Prepare sample model PPP documents like bid documents, model concession agreement for all sectors Compilation of debt due arising out of PPP projects Recommend state VGF to MPIIFB Coordinate with implementing agencies in monitoring progress of PPP projects in the state Demand Driven Function Project preparatory assistance (PPA) Transaction assistance Market PPP potential / investment potential in MP Organize capacity building and training workshops
In this option, the implementing agency, which could be a line department / corporation / local body, conceptualizes a potential PPP project in line with the PPP Policy and submits a feasibility report for In-principle Approval to DLEC / SLEC and line ministry / cabinet. The implementing agency may also seek project preparatory assistance from DIF for preparation of initial project documents including feasibility report. The approval committees may seek assistance from PPP Cell, DIF for appraisal of PPP project. If the proposal does not meet objectives of PPP Policy, it may be sent back to the implementing agency for modifications. After proposal is approved in-principle, the implementing agency may initiate preparation of bid documents. It may seek assistance from DIF or may do it on its own. The bid documents are sent for Final Approval from DLEC / SLEC and line ministry / cabinet. For Final Approval any material deviation in the project concept and structure would be checked. The approval committees may again seek assistance from PPP Cell, DIF for appraisal of the documents. After Final Approval, the implementing agency may invite bids for the PPP project. Advantages and disadvantages of this option are presented in the table below:
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Advantages In this option, appraisal & approval for PPP projects is centralized under Finance Department, It also ensures easy and faster flow of funds since the suitability of PPP is established directly by the Finance dept. It is relatively easy to implement because there is not much deviation from the as-is scenario. The DIF may hire PMCs in short term and build capacities over time to undertake all regulatory / mandatory and demand driven functions of the facilitation agency. Due to its ease of implementation, the cost and time involved in implementation is lesser.
Disadvantages There is potential conflict of interest since the role of PPA (Project Preparatory Assistance) and appraisal of PPP projects for approval is performed by the same agency (DIF) DIF already has a major role of finance in existing governance system so PPP role may remain secondary.
7.3.3 Option 2
In this option, a separate independent agency is created under Finance Department which becomes the Facilitation Agency for PPP in the state. DIF would continue to perform its existing functions of appraisal and assistance in approval of projects (hence no change in DIF mandate). PPP cell would continue to be housed under DIF. It is envisaged that PPP cell would act as technical secretariat to both Approval Committees. The newly created agency would need to quickly enhance its capacities to perform roles and responsibilities of a PPP Facilitation Agency. In short term, they may hire Program Management Consultant to assist them with all the activities of the Facilitation Agency. In long term, they may enhance their in-house capacities and capabilities. This option has been described in the diagram below:
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Figure 18: Proposed Institutional Framework Option 2: A separate agency under Finance becomes Facilitation Agency for PPP
OPTION 2 A separate agency under Finance becomes Facilitation Agency for PPP
Approval Committees
Line Ministry
SLEC
Cabinet
PPP Cell Regulatory / Mandatory Function Act as technical secretariat to DLEC / SLEC Compilation of contingent liability arising out of PPP projects Recommend state VGF to MPIIFB Finance Department
Directorate of Institutional Finance
Separate Facilitation Agency for PPP (under Finance)

Regulatory / Mandatory Function One point repository of all PPP projects in the state Coordinate with implementing agencies in monitoring progress of PPP projects in the state Prepare sample model PPP documents like bid documents, model concession agreement for all sectors Demand Driven Function Project preparatory assistance (PPA) Transaction assistance Market PPP potential / investment potential in MP Organize capacity building and training workshops Project Management Consultant OR Create sufficient In house capacity
In this option, an implementing agency conceptualizes a potential PPP project in line with the PPP Policy and submits a feasibility report for In-principle Approval to DLEC / SLEC and line ministry / cabinet. The implementing agency may also seek project preparatory assistance from a Separate Facilitation Agency for PPP under Finance Department for preparation of initial project documents including feasibility report. The approval committees may seek assistance from PPP Cell, DIF for appraisal of PPP project. If the proposal does not meet objectives of PPP Policy, it may be sent back to the implementing agency for modifications. After proposal is approved in-principle, the implementing agency may initiate preparation of bid documents. It may seek assistance from the Separate Facilitation Agency for PPP setup under Finance or may do it on its own.
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The bid documents are sent for Final Approval from DLEC / SLEC and line ministry / cabinet. For Final Approval any material deviation in the project concept and structure would be checked. The approval committees may again seek assistance from PPP Cell, DIF for appraisal of the documents. After Final Approval, the implementing agency may invite bids for the PPP project. Advantages and disadvantages of this option are presented in the table below: Advantages In this option, appraisal & approval for PPP projects is centralized under Finance Department, It also ensures easy and faster flow of funds since the suitability of PPP is established directly by the Finance Department. In this option, there is better coordination between project preparatory and appraisal agency due to internal linkages and synergies. This leads to successful procurement and implementation of PPP projects. There is no conflict of interest, the role of PPA and appraisal of PPP projects for approval is performed by different agencies. Disadvantages It is relatively difficult to implement since it envisages creating a separate new agency which may be time consuming. Strengthening the capacities and capabilities of newly created agency may pose a challenge on its own. Initially, there may be role clarity issues between DIF and the new Facilitation Agency under Finance.
7.3.4 Option 3
In this option, an agency is created outside Finance Department which becomes the Facilitation Agency for PPP in the state. DIF and PPP cell would continue to perform its existing functions of appraisal and assistance in approval of projects. This option has been described in the diagram below:
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Figure 19: Proposed Institutional Framework Option 3: A separate agency outside Finance becomes Facilitation Agency for PPP
OPTION 3 A separate agency outside Finance becomes Facilitation Agency for PPP
Approval Committees
Line Ministry
SLEC
Cabinet
PPP Cell Regulatory / Mandatory Function Act as technical secretariat to DLEC / SLEC Compilation of contingent liability arising out of PPP projects Recommend state VGF to MPIIFB
Finance Department
Directorate of Institutional Finance
Separate Facilitation Agency for PPP (outside Finance)

Regulatory / Mandatory Function One point repository of all PPP projects in the state Coordinate with implementing agencies in monitoring progress of PPP projects in the state Prepare sample model PPP documents like bid documents, model concession agreement for all sectors Demand Driven Function Project preparatory assistance (PPA) Transaction assistance Market PPP potential / investment potential in MP Organize capacity building and training workshops Industries / Planning Department Project Management Consultant OR Create sufficient In house capacity
In this option, an implementing agency conceptualizes a potential PPP project in line with the PPP Policy and submits a feasibility report for In-principle Approval to DLEC / SLEC and line ministry / cabinet. The line department / corporation / local body may also seek project preparatory assistance from a Separate Facilitation Agency for PPP (outside Finance Department) for preparation of initial project documents including feasibility report. The approval committees may seek assistance from PPP Cell, DIF for appraisal of PPP project. If the proposal does not meet objectives of PPP Policy, it may be sent back to the implementing agency for modifications. After proposal is approved in-principle, the implementing agency may initiate preparation of bid documents. It may seek assistance from the Separate Facilitation Agency for PPP setup outside Finance or may do it on its own.
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The bid documents are sent for Final Approval from DLEC / SLEC and line ministry / cabinet. For Final Approval any material deviation in the project concept and structure would be checked. The approval committees may again seek assistance from PPP Cell, DIF for appraisal of the documents. After Final Approval, the implementing agency may invite bids for the PPP project. Advantages and disadvantages of this option are presented in the table below: Advantages There is no conflict of interest, the role of PPA and appraisal of PPP projects for approval is performed by different agencies One of the identified features of a robust institutional framework is ownership of the line ministries / departments on a project. In this option, since facilitation agency is outside the ownership of line ministries / departments may be higher Disadvantages It is relatively difficult to implement since it envisages creating a separate new agency which may be time consuming. Strengthening the capacities and capabilities of that agency may pose a challenge on its own. Sharing of knowledge of knowledge and coordination between two agencies (DIF and the new Facilitation Agency outside Finance) may be an issue.
7.3.5 Our Recommendation

After considering views of various stakeholders, merits & demerits of various options and with a bias for action, it is recommended to institutionalize the new PPP Facilitation Agency presented in Option 2 (i.e. Separate Facilitation Agency under Finance) in a phased manner as below. In short term (immediate 12 months), DIF (supported by PMC, if need be) should be made responsible for all the functions of the Facilitation agency apart from continuing its existing role. Mandate of DIF should therefore be expanded immediately. PPP cell may act as the technical secretariat to DLEC / SLEC whereas DIF may assume rest of the functions as PPP Facilitation agency. Simultaneously, the process of creating an independent agency for PPP must be initiated. The same PMC may be given the mandate to build capacity and conduct trainings for that agency. In long term (after 12 months), it is recommended that a new agency be created to assume the role of PPP Facilitation. It should be housed under Finance Department (Option 2 described above). PPP Cell under DIF would continue to function as technical secretariat to DLEC / SLEC. The remaining core functions of the facilitation and capacity development should be given to the Facilitation agency. The newly created Facilitation agency may seek assistance from PMC in short term till it builds sufficient capacity to perform all its functions.
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SHORT TERM (First 1 year) Option 1 can be implemented with DIF / PPP Cell also being the facilitation agency. It can be supported by a PMC for technical assistance and strengthening the capacities of line departments. Simultaneously, the process of creating a new Facilitation agency for PPP can be initiated and capacity of such agency should start to be built.
LONG TERM (After 1 year) Option 2 can be implemented with formation of a separate Facilitation Agency under Finance. It should have inhouse capacity to perform its function.
7.3.6 Functions of Proposed Facilitation Agency for PPP

In long term, it is envisaged that PPP Cell, DIF would continue to act as a technical secretariat to the approval committees and would advise the approval committees in giving in-principle and final approvals. On the other hand, the Proposed Facilitation Agency for PPP would assume the role of one stop shop for all the implementing agencies. It would assist implementing agencies in undertaking PPP projects across the entire project life cycle from project conceptualization project procurement project financial closure project monitoring and evaluation after award of contract. It is recommended that some functions may be mandatory in nature and other functions may be demand driven. As the name suggests, mandatory functions will be compulsorily carried out by the Facilitation Agency as its prime mandate and demand driven functions will be carried out on request of the other government agencies and line departments. Functions are described below. Mandatory Functions (i.e. assigned by the Government to the Agency) 1. Information repository / knowledge bank for all PPP projects in the state Facilitation Agency would be responsible creating a databank for PPP including case studies, best practices, guidelines and Acts, reports and studies. It will record PPP project information by creating and maintaining an MIS database which would contain detailed information for all PPP projects in the state across the entire project cycle. For example detailed information on project specifications, updated current status, VFM assessment, assessment of contingent liability, assessment of usage based fee & affordability, risk sharing framework, procurement process, assessment of monitoring & evaluation etc.. The Facilitation agency would coordinate with PPP Cell, DIF and implementing agencies for gathering such information. 2. Coordinate with implementing agencies in monitoring the progress of PPP projects in the state and updating information in the PPP repository A well capacitated Facilitation Agency would record the progress of every PPP project after the project is contracted out to
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the private sector. They would be responsible for coordinating with implementing agencies to collect information on every PPP project on a periodical basis and update the same in the PPP repository. 3. Preparation of sample model PPP documents A strong need for preparation of sample model PPP documents including bid documents (RFQ, RFP), and model concession agreements is felt for all hard and soft infrastructure sectors. Facilitation Agency would prepare model PPP documents in lines with the proposed PPP policy. Any implementing agency may use these documents to conceptualize and develop a project without any external assistance.
Demand Driven Functions 1. Transaction advisory assistance Most government departments / corporations / local bodies lack capacity to implement a PPP transaction process. This includes preparation of bid documents, managing the entire bid / transaction process including appointment and negotiations with the preferred bidder. Facilitation Agency could assist these implementing agencies in preparation of such documents and assisting them in procurement processes. 2. Project preparatory assistance (PPA) From time to time basis the Facilitation Agency could provide project preparatory assistance to any of the implementing agencies. This includes project conceptualization, feasibility studies / preparation of PPP business case, PSC & VFM analysis etc. They could also provide assistance to them in hiring services of transaction advisors, DPR consultants, architects, independent engineers etc. 3. Workshops / conference / investors meet Facilitation agency could organize workshops / conference / investors meet in order to reach out and dialogue with potential investors, users of services rendered through PPP, affected employees of departments giving out PPPs, etc. This would help in marketing PPP potential / investment potential in Madhya Pradesh. 4. Capacity building and training workshops on PPP There is an urgent need to carry out capacity building and training on PPPs for government departments / corporations / local bodies. Facilitation agency could develop a PPP manual to document the entire PPP process clearly. They could also organize capacity building and training workshops for these implementing agencies. Capacity building should also go well beyond workshops/ training plans to working closely with various employees and systems of departments/ agencies concerned, to enable them to handle the entire PPP life cycle with minimal external assistance.
An appropriate organizational structure for the Proposed Facilitation Agency is essential to perform these functions. The proposed organizational structure is presented in the next section.
7.3.7 Organisational Structure of the Proposed Facilitation Agency

The Facilitation agency should have as its Chairperson either Chief Minister or Chief Secretary and should be managed by a Managing Director. The Facilitation agency should consist of an Advisory Committee and a core team.
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The Advisory Committee should consist of Principal Secretary/Secretary from Finance, Planning and Environment and it can coopt Principal Secretaries of other economic or social infrastructure ministries in whose sectors a significant PPPs are being proposed (such as Urban Development / Water, Housing, Roads, Education, Health, etc.). The core team of the Facilitation Agency should consist of General Manager (Technical), General Manager (Finance), General Manager (Legal), Procurement Experts, Capacity Building Experts, Marketing & Promotion Experts and Civil Society Experts. The core team should be assisted by 10-12 Project Officers.
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8. WAY FORWARD
Immediate action to be taken after the preparation of Draft PPP Policy and the Institutional Mechanism for PPP in Madhya Pradesh is to implement the recommendations supporting the PPP Policy. To begin with, following should be done. The Draft PPP Policy should be put up for the Cabinets approval after being widely consulted amongst line departments and other government agencies. After seeking Cabinet approval it may be put for public notification. After the approval and notification of the Draft PPP Policy by the cabinet, a PPP manual may be developed. The PPP Manual should contain detailed description of PPP processes and approval mechanisms in the state. If the institutional arrangement for PPP, proposed in the report is acceptable then the process of establishing the Facilitation and Development Agency for PPP should be rolled out. It may include legal formulation of the agency and recruitment of officers. A detailed roll-out plan for the Proposed Facilitation and development Agency for PPP may be developed. The plan should contain assessment of roles and responsibilities, identification of skill gaps and suggesting measures to plug those gaps by selecting appropriate personnel for the agency. A comprehensive MIS database containing detailed information on all PPP projects in the state may be developed. The MIS database would contain detailed information on project specifications, updated current status, VFM assessment, assessment of contingent liability, assessment of usage based fee & affordability, risk sharing framework, procurement process, assessment of monitoring & evaluation etc.. Such information could be collated and analyzed at the state level / department level. This would not only facilitate approval of the PPP projects and but also facilitate decision making at policy levels and operational levels.
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9. ANNEXURES
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9.1 Annexure 1: List of stakeholder interactions
List of stakeholder interactions 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. Principle Secretary, Finance Department, Govt of Madhya Pradesh Additional Secretary, Finance Department, Govt of Madhya Pradesh Joint Director, Directorate of Institutional Finance, Govt of Madhya Pradesh PPP expert, PPP Cell, Directorate of Institutional Finance, Govt of Madhya Pradesh MIS expert, PPP Cell, Directorate of Institutional Finance, Govt of Madhya Pradesh Managing Director, TRIFAC, Govt of Madhya Pradesh Managing Director, MPRDC & Secretary GoMP, Public Works Department, , Govt of Madhya Pradesh Commissioner, Food, Civil supplies & consumer protection, Govt of Madhya Pradesh Secretary, Energy Department, Govt of Madhya Pradesh Principal Secretary, Housing and Environment, Govt of Madhya Pradesh Principal Secretary, Urban Administration and Development, Govt of Madhya Pradesh Secretary, Public Health and Family Welfare, Govt of Madhya Pradesh Principal Secretary, Medical Education, Govt of Madhya Pradesh Commissioner, UADD, Govt of Madhya Pradesh Secretary, Technical Education, Govt of Madhya Pradesh Marketing Head, MP State Tourism Development Corporation Other officials at MP State Tourism Development Corporation PPP expert (PPP Cell, Finance Department, Government of Andhra Pradesh) General Manager, GIDB, , Govt of Gujarat PPP Expert, Maharashtra PPP Cell, Govt. of Maharashtra Joint Director, PPP cell, Govt. of Orissa
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9.2 Annexure 2: Details of Experience Of GoI in PPP

Development and use of PPPs for delivering infrastructure services has now at least 11 years of precedence in India, with the majority of projects coming in line in the last 5 years. Policies in favor of attracting private participation as well as innovation with different structures have met with varying degrees of success. Some sectors like telecommunications, power, and ports and roads, have done very good progress compared to limited success in other sectors. Some states have undertaken far more PPPs than others, and a much heavier use of PPPs in some sectors than others. As far as current status of projects in place as per our database, there have been at least 450 PPP projects in our main sectors of focus where a contract has been awarded and projects are underway in the sense that they are either operational, have reached construction stage, or at least construction/implementation is imminent. The total project cost is estimated to be about Rs. 2,24,176 Crores. Most of the information on PPP at Central level is available on web and can be studied through the following web links Reference for Sector wise and State wise break up of projects Total value of projects in each sector at central level Search for any particular project at Central level Details of various sectors at Central level - Highways, Railways, Airports, Ports, Telecom, Power Reference web link http://www.pppinindia.com/database.php http://www.pppindiadatabase.com/Screens/frmReportView.aspx
http://www.pppindiadatabase.com/Screens/frmSpclSearch.aspx? AUTHORISEDUSER=N&ACTIONTAG=VIEW http://www.pppinindia.com/ppp-sectors.php
Toolkit for five infrastructure sectors http://toolkit.pppinindia.com/ State Highways, Ports, Urban transport, Solid waste management, Water and sanitation PPP Policies & Documents http://www.pppinindia.com/reports-policy-documents.php
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9.3 Annexure 3: Details of PPP in Other Indian states

This annexure covers details on PPP experience in Gujarat, Tamil Nadu, Maharashtra, Andhra Pradesh and Orissa.
9.3.1 Gujarat
Gujarat Infrastructure Development Board (GIDB) GIDB was established under the Gujarat Infrastructure Development Act, 1999 (GID Act) to promote private sector participation in Infrastructure Projects. GIDB focuses on overall planning, coordination between various sector specific departments, concession agreements, selection of developers etc. rather than developing infrastructure facilities on their own. GIDB is an over-arching body for infrastructure development in Gujarat (hard as well as soft infrastructure sectors). GIDB itself does not develop infrastructure services but acts as a catalyst for their development. GIDB is mandated with the following functions: To promote private sector participation in financing, construction, operation and maintenance of the Infrastructure projects. To develop the projects through pre-feasibility/ feasibility studies of the project. To advise the state government and its agencies on the matter of Policy. To lay down priority of the projects. To consider proposal and proposed concession agreement to be entered into between the state government/agency and the private sector developer. To monitor the projects undertaken in the state.
GIDB has been quite successful in promoting PPP projects in the state and more than 43 projects have achieved financial closure. Some of the important PPP projects in Gujarat are the Pipavav Port (Phase 1), Dahej LNG project, Mundra (Green field) Port, Ahmedabad-Mehsana Road, VadodaraHalol Road etc. The regulatory support framework for PPP in infrastructure in the state of Gujarat comprises of a Gujarat Infrastructure Development Act, 1999 (amended in 2006) and several sector specific policies. GIDB had prepared a Gujarat Infrastructure Agenda-Vision 2010, which formed the basis for several structural and policy changes in the state. Gujarat Infrastructure Development Act, 1999 The act is a legal framework for private sector participation in financing, construction, operation and maintenance of the project. The key features of Gujarat Infrastructure Development Act, 1999 (BOT Law) are: Provides a framework for private sector participation in financing, construction, operation and maintenance of infrastructure projects for the developer. This law is based upon clear-cut enunciation of the project cycle required for timely and effective completion of infrastructure projects.
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Provides a fair, transparent and clear-cut mechanism for selection of developers, either through international competitive bidding, or through direct negotiations, with the very strong element of transparency and competitive arrangement. Provides for levying user charges for the facilities provided by the developer. Provides for 12 types of concession agreement (including BOOM, BT, BLT, BTO, Lease Management, Management Contract, ROT, ROM, Service contract, SOT and Joint Venture agreement) in the schedule of the Act, which provides sufficient scope and flexibility to the State Government and the private sector.
This act has been amended (The Gujarat Infrastructure Development (Amendment) Act, 2006) to update select provisions and clauses, but the overall character of the act remains unchanged. Table: Details of PPP projects at various stages in PPP cycle for different infrastructure sectors in Gujarat
Sr No. Sector Completed/ Operational EOI Stage Bidding Stage:RFQ/R FP Nos. Inv. (Cr.) 5479 2269 250 Construction: Project Awarded (LOI Issued No Inv. s. (Cr.) 8 4 2 11701 2620 250 Pipeline: Study/ Planed / announced No Inv. s. (Cr.) 6 12 5 1 2 3 2 1 700 3 0 0 3 0 17 1 500 1 3 3525 24245 150 200 312 150 0 2500 500 Total Projects
No s. 1 2 3 4 5 6 7 8 9 Port* Power Road Road & Transport Railways Water IT & ITES Aviation Urban Development ** ULB-urban development Other-Metro rail, Regional Rail system, Six Logistic Parks 16 4 18 0 0 0 4 0 0
Inv. (Cr.) 15542 7600 2081 0 0 0 0 0 0
N os . 5 0 1 3 1 0
Inv. (Cr.) 2900 0 1020 400 499 0
No s. 42 16 30 9 3 4 4 1 7
Inv. (Cr.) 39147 31845 8140 1100 811 850 0 2500 1017
10 11
1 0
485 0
1 0
50 0 0 0 0 0
9 8
242 13800
11 8
777 13800
Total 43 25708 14 4886 14 8698 15 15071 49 45624 135 99987 Based on the discussions with GIDB officials and ADB personnel located in Gujarat it is observed that *Out of the 16 port projects, 3-4 port projects may get changed because of change in location of the projects. **In addition to these there are 10-15 projects of ULBs which may be added
Reference: www.gidb.org
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9.3.2 Tamil Nadu

To encourage private sector participation in infrastructure projects on a PPP format, Government of Tamil Nadu proposes to enact an Infrastructure Development Enabling Act along with the setting up of an Infrastructure Development Board. An Infrastructure Fund has been set up in order to facilitate public-private partnerships. The fund has been endowed with an initial corpus of USD 4.1 million to finance a number of infrastructure development initiatives in the state. In addition to that state government has taken several new initiatives to promote private sector participation in different infrastructure sector. 1. Roads Policy The Draft New Road Policy is under formulation and is expected to be finalized shortly. It will cover all aspects of Road design, construction, maintenance and management of Highway resources. It will include engineering, economic, environmental and social impacts due to land acquisition, resettlement and rehabilitation of project affected persons (PAPs), tree planting, wayside amenities, bus bays and truck terminals, Road safety, training, research and development. It will also focus on institutional strengthening of the department, and capacity building for various stakeholders. 2. Urban Infrastructure The key initiatives in this aspect include:
To encourage private sector to set up effluent treatment plants / Waste disposal sites, the Government provides a critical infrastructure subsidy of 25% of capital cost upto a maximum of Rs.2.5 million Tamil Nadu Urban Infrastructure Financial Services Ltd promotes urban projects and funding of Urban Infrastructure projects by Urban local bodies through a pooled financing arrangement.
Reference: www.pppinindia.com/ppp-initiatives-tamil-nadu.php
9.3.3 Maharashtra
The Maharashtra government has several infrastructure departments such as the Public Works Department, Urban Development Department, and Water Supply and Sanitation Department which in turn has organizations (authorities and corporations) working under them which coordinate the PPP projects in their respective sectors. The key agency responsible for PPP in Ports is the Maharashtra Maritime Board (which is the nodal agency for development of minor Ports in Maharashtra). The PPP projects in the Road sector are under the purview of the Public Works Department (PWD) and the Maharashtra State Road Development Corporation Limited (MSRDC). Planning authorities such as MMRDA, CIDCO, Nagpur Improvement Trust and Pimpri Chinchwad Development Authority under the Urban Development
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Department have also generated PPP projects such as the Mumbai Metro and other Urban Infrastructure Projects. The functions of various Government departments and the key organisations constituted under them for promotion of PPP projects and relevant to our engagement are discussed below. Public Works Department The Public Works Department in Government of Maharashtra undertakes construction of Roads and bridges in the state, including improvements and repairs of Roads, other than National Highway. The Roads under their jurisdiction include the State Highways and the major district Roads. PWD undertakes some of the important Road projects through Private Sector Participation. For projects costing more than Rs.50 crores, approval of the State Cabinet committee is necessary. Maharashtra Road Development Corporation Limited (MSRDC) The "Maharashtra Road Development Corporation (Limited)" has been established to execute certain larger projects through private sector participation. The work to be taken up through private sector participation is envisaged to be implemented through this corporation. The main objectives of the Corporation include the following: a) To implement through private sector participation development programme for bridges, Road and other related facilities. b) To generate funds through private sector participation for development of Roads and bridges. c) To commercially exploit Government lands in possession of the Public Works Department. The corporation also on a need basis appoints consultants for preparing plans and estimates of the projects, feasibility reports, environmental impact studies, surveys, supervision, etc. and to obtain equity financial participation from different financial institutions or other corporations, etc. The corporation has been vested with the rights to collect toll / service charges and also to commercially exploit the available land. The projects that MSRDC takes up either come from the Government side (after Cabinet approval) or are conceptualised by MSRDC itself. MSRDC has greater flexibility in comparison to PWD, as it only needs to seek the permission of its Board to undertake projects. In comparison, PWD needs to seek Cabinet approvals for all its projects. Some of the major projects executed/being executed by with MSRDC are - 55 Flyovers (Mumbai traffic improvement Mega Project) constructed through EPC, the Worli Bandra Link, 29 ROBs through IRCON and the Mumbai Pune Expressway. MSRDC has had some success with PPP projects. The Mumbai Pune Expressway was awarded as a BOT project for 30 years to the MSRDC. It was the first toll Road project in the State of Maharashtra and required more than Rs. 2100 crores (approximately US $483 Million) for construction. After successfully constructing the project, MSRDC has now given it out as a long term O&M and Tolling Concession to a private operator. Substantial upfront money was also obtained by MSRDC during the bidding process. The MSRDC is also presently coordinating the bidding process of the Mumbai transharbour Road link.
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Urban Development Department Under the Urban Development Department, the Government have constituted the Planning Authorities for major towns and cities of the State. These organisations have been envisaged to help in achieving special objectives of orderly growth, preparing master plan, enforcing zoning regulations and integrated planning. These include organizations such as: the Mumbai Metropolitan Region Development Authority (MMRDA), the City and Industrial Development Corporation of Maharashtra Ltd. which is responsible for development of new Urban areas, the Nagpur Improvement Trust, and the Pimpri Chinchwad Development Authority. In addition, there are Municipal Corporations such as the Bombay Municipal Corporation, (MHADA), Municipal Corporation of Greater Mumbai (MCGM), which are also involved in infrastructure projects. Mumbai Metropolitan Region Development Authority (MMRDA) This Authority is responsible for the development of Mumbai Metropolitan Region (MMR) which comprises the city of Mumbai and its hinterland. It was established in 1975 under the Mumbai Metropolitan Region Development Authority Act, 1974 as an apex body for planning and co-ordination of development activities in the region. The MMRDA is mandated to prepare plans, formulate policies and programmes and help in directing investments in the region. It is envisaged to conceive, promote and monitor the key projects in sectors like transport, housing, Water Supply and environment in the region. The MMRDA also sometimes takes up the responsibility for implementation of important projects. The key projects conceptualised/implemented by MMRDA include the World Bank funded MUTP focusing mainly on strengthening of mass transport particularly improvements in suburban railway services in terms of efficiency and capacity, wand some Road improvement projects. To supplement the MUTP, MMRDA has initiated a project known as the Mumbai Urban Infrastructure Project (MUIP) whose main objectives are the Road network improvements and efficient traffic dispersal system in Greater Mumbai. Another project promoted by the MMRDA is the Mumbai Metro Rail Project (Phase I to III). The first phase of the Mumbai Metro the first phase the Versova-Andheri-Ghatkopar corridor, is proposed to be developed through PPP. The fully-elevated Versova-Andheri-Ghatkopar corridor would be executed by a special purpose vehicle formed by MMRDA and REL. It would be operated on a build-own-operate-transfer basis for 35 years. The construction for the first phase is likely to commence by October and it is likely to be completed by 2009-10. Though the project has not achieved financial closure as yet. It has been awarded to a successful concessionaire consortium (led by Reliance group) through a competitive bidding process. City Industrial Development Corporation of Maharashtra The City and Industrial Development Corporation of Maharashtra Limited (CIDCO) has been designated the New Town Development Authority for Navi Mumbai. It was entrusted with developing necessary social and physical infrastructure and was also entitled to recover all cost of development from sale of land and constructed properties. CIDCO has besides Navi Mumbai also commissioned projects in New Aurangabad, Waluj, New Nashik, New Nanded, Sindhudurg (Oros), Vasai-Virar and New Nagpur. Special Planning Authority.
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The Navi Mumbai Airport is proposed to be developed by CIDCO developed through public-private participation and may be executed through the SPV route having a structure similar to the Delhi and Mumbai Airports. Regulatory and Policy Framework 1. Roads In order to undertake Road sector development through private sector participation, the Government of Maharashtra had come out with a Policy on implementation of Road & Bridge Projects through private sector participation in 1996. The key provisions of the policy include the following:
Certain concessions been granted to the private sector developer to make the project financially attractive. The entrepreneur is envisaged to meet the project cost and recover the same through tolls. In some cases, based on the financial feasibility of the project, the government may decide to contribute towards the project upto 40% of the project cost. The Power to decide whether the project can be taken up through private sector participation are as follows: o For works/projects with estimated cost less than Rs. 50 crores, the Public Works Department may take decision and the tender should be approved by the Public Works Department on consultation with the Finance Department and after approval of the Minister for Public Works Department. For works with estimated cost more than Rs. 50 crores, the proposal should be placed before the Cabinet for approval. The tender for such works should also be placed before the Cabinet for approval.
Maharashtra has also developed a Toll Policy, which provides for the tolls to be levied depending upon the project cost for different categories of vehicles. Although the government does not give any traffic guarantee, in cases where tolls cannot be charged for 15 days or more, there is a provision that the government would compensate the concessionaire. 2. Ports In order to allow MoU for Port sector development and signing of agreements with the private developers, Maharashtra has undertaken three government resolutions. These resolutions also provide a broad sector-specific framework for PPP. One of these resolutions provides for the formation of a High Power Committee for implementation of policy of Ports Development and Water Passenger Transportation. The powers and responsibilities of the High Power Committee include reviewing various projects, granting approvals to changes in various agreements, sanctioning of approval of various schemes in Port development etc.
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Table 7: Sector wise details of PPP projects in Maharashtra Less than 100 Cr. 8 6 0 0 8 0 1 100 0 1 0 0 4 From 100 to 250 Cr. 23 0 0 0 4 0 1 4 0 0 2 0 1 From 250 to 500 Cr. 12 0 0 4 1 1 0 3 0 0 1 0 0 More than 500 Cr. 14 2 6 1 0 0 0 11 4 0 0 5 0 Total Projects 57 8 6 5 13 1 2 118 4 1 3 5 5 Total Project Cost (Rs. in Cr.) 31435.42 4044.04 8499.83 8216.95 1162 275 292 19113.6 28092 13 520.22 3748 467
Name Road Power Port Airport Tourism Medical & Health Education Municipal Infrastructure Metro Railway Information Technology Industry Irrigation Agriculture Marketing
Table 8: No. of PPP projects at various stages of PPP cycle in Maharashtra Less than 100 Cr. 33 56 11 20 8 From 100 to 250 Cr. 4 13 3 12 3 From 250 to 500 Cr. 0 7 3 12 0 More than 500 Cr. 2 15 7 15 4 Total Projects 39 91 24 59 15 Total Project Cost (Rs. in Cr.) 3562.265 34847.36 15932.6 48196.83 3340
Sector Name Completed Under Implementation Under Bidding Concept Stage/Pipeline Cancelled
Reference: www.muinfra.com www.pppinmaharashtra.com www.maharashtra.gov.in
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9.3.4 Andhra Pradesh

Infrastructure and Investment Department In May 2005 the Government of Andhra Pradesh (GoAP) established a new department called the Infrastructure and Investment Department for achieving the infrastructure goals in select sectors `through a holistic approach'. It was envisaged to create an environment for the upcoming projects through single window facility. The Government of Andhra Pradesh enacted the Andhra Pradesh Infrastructure Development Enabling Act (IDEA-2001) and two organizations have been set up - the Infrastructure Authority and Infrastructure Corporation of Andhra Pradesh. Infrastructure Authority (IA) IDEA provided for the establishment of the Infrastructure authority (IA) under the Infrastructure and Investment department of the GoAP. The Authority has the Chief Secretary as the Chairman, and other members include the Managing Director of APIIC, Director of National Academy of Construction and Secretaries of Departments of Finance & Planning, Transport, Roads & Bridges, IT, Municipal Administration & Urban Development of GoAP. The specific functions of the Infrastructure Authority include: To conceptualize and identify projects, as well as to consider projects under the Act from the Government or a Government Agency or local authority and ensure their conformance to the objectives of the State. To co-ordinate between concerned department of the Government and Government Agency for a project. To monitor the competitive bidding processes for projects To provide an enabling environment for projects including resolving issues relating to project approval process, prescribing time limit for clearances for any project, facilitating financial support and the approve allocation of contingent liabilities for projects. To review periodically the status of clearances and ensure that clearances are accorded within specified time frames and grant clearances if not granted within time frames or if denied, as may be specified. To decide issues pertaining to user levies including but not limiting to prescribing mechanism and procedure for setting, revising, collecting and /or regulating user levies and to decide and settle disputes relating to user levies. To approve sectoral policies and model contract principles. To supervise or otherwise ensure adequate supervision over the execution, management and operation of project.
Infrastructure Corporation of Andhra Pradesh (INCAP) The GoAP created the Infrastructure Corporation of Andhra Pradesh (INCAP) on 31st May, 2005 as a part of the Department of Infrastructure and Investment working directly under the supervision of the Honble Chief Minister. INCAP was envisaged to facilitate infrastructure development by assisting the setting up and development of PPP projects in the state. INCAP is also envisaged to enable the creation of Special Purpose Vehicles that will provide impetus to infrastructure investment in the State.
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It is designated to play the roles of a developer, advisor, financier and manager and render a full range of services in every phase of project development, from inception to completion in the following focus sectors of Roads, Energy, Ports, Power, Airports, Railways, Telecommunication, Water, Industrial Parks and Transport. The Infrastructure Corporation aims to facilitate project preparation, project financing mechanism, the government role as sponsor / developer , access to long term funds and enhanced administrative support for Investors, including mobilizing and leveraging finances from government, public, private bilateral and multilateral entities including Viability Gap Funding from the Government of India where needed. The current projects being undertaken by INCAP include the Greater Hyderabad Growth Corridor which is being executed in the form of an SPV with equity participation from INCAP (26%) and HUDA (74%). INCAP is responsible for the Detailed Project Report (DPR), project development, and statutory clearances. The procurement for the works of phase-I (EPC basis) had commenced in January' 2006 and subsequently bids have been received for the Phase-II A to be done on BOT (annuity). Roads & Building Department Govt. of AP The Roads and Buildings Department (R&BD) is entrusted with the responsibility of the construction and maintenance of a Road network of 68,282 km, comprising of state Highways and major district Roads, some rural Roads4 and only maintenance of select National Highways. Within the Roads and Buildings Departments there are 7 wings. One of them, the Andhra Pradesh Road Development Corporation (APRDC) Established in 1997 is responsible for conceptualizing, packaging and developing PPP Road projects. The GoAP also extends funding support to APRDC through budgetary provisions. It is entrusted with the development, maintenance and management of 10,231 kms of State Highways. They have currently appointed consultants for preparation of pre-feasibility report for the conceptualization and packaging of PPP projects and no projects have been so far given on PPP. Andhra Pradesh Industrial Infrastructure Corporation Ltd It is the premier organization under the Industries Department, in Andhra Pradesh. It has the objective of providing industrial infrastructure through development of industrial areas and is also the nodal agency for Government Sponsored schemes like Growth Centres, Export Promotion, Industrial Parks and Integrated Infrastructure Development Centres. The Corporation is also developing sector-focused parks such as an apparel park, food processing parks and leather parks in the state. The Corporation has ventured into developing a Hi-Tech City with a private promoter. It is the principal facilitator in mega-projects like Special Economic Zone; for example the SEZ projects in the Growth Corridor shall be under the responsibility of the APIIC. GoAP had also assigned APIIC to undertake the Gangavaram Port project development. For the same it has entered into project development promotion partnership with Infrastructure Leasing & Financial Services of India Limited (IL&FS) and subsequently an international bidding process has been completed. Gangavaram Port Limited (GPL) has been incorporated as the Special Purpose Company
4
The important rural Roads are maintained by the Panchayat Raj department of the state government.
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for the purpose of development and operation of Gangavaram Port. The Port is expected to be operational by the end of 2007. Department of Municipal Administration and Urban Development The Government have constituted Urban Development Authorities for major towns and cities of the State as well as Special Urban Development Authorities in priority areas which need special planning controls and a high level of infrastructural input. These organizations are involved in preparing master plans, enforcing zoning regulations and integrated planning. These include organizations such as the Hyderabad Urban Development Authority (HUDA), Hyderabad Metropolitan Water Supply & Sewerage Board (HMWSSB), Tirupathi Urban Development Authority, and special authorities such as the Hyderabad Airport Development Authority (HADA), Cyberabad Development Authority (CDA) etc. These organizations are responsible for generating projects at the Urban level in the Road, Water Supply, sanitation and Waste management, mass transport systems within the Urban limits (including PPP projects). For example, the Hyderabad Urban Development Authority (HUDA) has an equity participation of 74% with INCAP (26%) in the SPV-" Hyderabad Growth Corridor Limited" incorporated under the Companies Act 1956. The SPV is responsible for the development of the Phase-II A of the Outer Ring Road Project on a PPP BOT (Annuity) model.
Reference: www.ppp.ap.gov.in
9.3.5 Orissa
Role of PPP Cell in Orissa

To assist, guide PPP Cells of Line Departments in carrying forward their PPP initiatives. To interact with Central Govt./ various Agencies for Viability Gap Funding (VGF) and other assistances. To provide a research unit-cum-data bank by analyzing all National & International PPP initiatives, their structuring, experiences, strength & weaknesses, sharing their domain knowledge, provide subject matter expertise, facilitate capacity building and training of officials. Serve as Nodal Department/ Secretariat for deliberating and obtaining Empowered Committee on Infrastructure (ECI) & High Level Clearance Authority (HLCA) approval.
Implementation Details and Way Forward
Each Department is to prepare a PPP Plan as a Plan outside Plan wherein the projects and sectors it envisages would be amenable to PPP structuring and the amount of additional private sector resources it would try to attract. Each Department has to set up a PPP Cell with a Nodal Officer to look after the PPP projects including co-ordination with State PPP Cell.
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Each Department has to identify, conceptualize probable PPP projects and prepare a preliminary report/ concept note wherein the need for the project, the benefits of doing under PPP mode, the responsibilities of the State and the concessionaires, outlines of the project and its structure, its main features, value for money test etc. may be indicated. This would be done by the department along with the State PPP Cell. All projects should normally be tested for PPP amenability strong reasons {Economic Rate of Return (ERR) if not Internal Rate of Return (IRR)} for fully state funded projects. The above shelf of probable PPP projects is to be placed before the ECI through the State PPP Cell for prioritization and taking approval to go ahead. After in-principle approval of ECI/ HLCA as the case may be on the basis of concept note, the Departments will have to get prepared an Initial Screening Report (ISR) of projects either inhouse or through suitably hired consultants. After ascertaining the feasibility of the projects through the ISR, the same shall again be put up to ECI/ HLCA as the case may be through the State PPP Cell for approval and for the further modalities including preparation of Detailed Project Report (DPR), going for Design Build Finance Operate (DBFO), other structuring details, concessions required, details of land requirement of VGF, types of State support, value for money analysis, proper risk allocation etc. Proposal for VGF, if any, is to be processed through the State PPP Cell, at all stages. The Departments have to go for preparation of bid documents and also adoption & modification of Model Concession Agreement (MCA)s. The bid & concession documents and the outcome of bid process is to be got approved from ECI/ HLCA as the case may be before award of the project to the Developer. Appropriate structure to manage, run and supervise the project both in its construction and Operation & Maintenance stage. Provision for contingency of failure & abandoning should be made at the conceptualization, Project report state.
Modalities For Operationalization Of PPP Initiatives In Orissa
Departments should garner additional resources and increase their investment size through a PPP Plan which is a Plan outside Plan. State Government should consider incentivizing departments for their success in raising additional resources through PPP. Departments should make a PPP Plan, vision and a shelf of probable PPP projects in line with their Plan proposals and additionally each Department has to identify, conceptualize, structure individual PPP projects in association with the State PPP Cell. Each Department has to own its PPP projects and initiatives. All projects should normally be tested for PPP amenability strong reasons {Economic Rate of Return (ERR) if not Internal Rate of Return (IRR)} for fully state funded projects. Evaluation on VFM (Value for money)
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Provision for risk allocations to the party best suited to manage the risk as the success of the project is of prime importance. A win-win situation for all as shortchanging would be disastrous and lead to abandoning of the project. Provision for contingency of failure & abandoning should be made at the conceptualization, Project report state. Provision for a strong mechanism for overseeing the project & continuance of relationship due to long gestation period. Hence, there is a need for proper standard documents.
Reference: www.orissagov.nic.in www.ppporissa.gov.in www.orissa.gov.in/PPP_Policy%20_2007.pdf
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9.4 Annexure 4: Details of International Experience in PPP

This annexure covers details on PPP experience in South Africa and South Korea.
9.4.1 South Africa

History of PPP Unit In April 1997, the South African Cabinet approved the appointment of an inter-departmental task team to develop a package of policy, legislative and institutional reforms to create an enabling environment for PPPs. Pioneering PPP projects were undertaken between 1997 to 2000 by the SA National Roads Agency for the N3 and N4 toll roads; by the Departments of Public Works and Correctional Services for two maximum security prisons; by two municipalities for water services; and by SA National Parks for tourism concessions. Drawing early lessons from these projects and from international experience, a Strategic Framework for PPPs was endorsed by Cabinet in December 1999, and in April 2000, Treasury Regulations for PPPs were first issued in terms of the Public Finance Management Act (Act 1 of 1999). By mid-2000, with technical assistance funding from USAID, GTZ and DIFID, the PPP Unit was established in National Treasury with five professional staff drawn from both the public and private sectors. Roles and Responsibilities of PPP Unit National Treasury has a dedicated PPP Unit which has the following core functions: provides quality technical assistance to institutions embarking on PPPs, throughout the PPP project cycle, to help them achieve a quality PPP project and comply with Treasury Regulation 16 to the PFMA recommends to National Treasury whether treasury approvals should be granted or not develops and disseminates PPP policy, manuals, standardization and sectoral toolkits disseminates accurate and up-to-date information on PPP projects builds PPP capacity and builds confidence and integrity in South Africas PPP market
National Treasurys PPP Manual and Standardised PPP Provisions, as updated by National Treasury from time to time, apply through the provincial treasuries to all PPPs undertaken in terms of the PFMA. Composition of PPP Unit PPP Unit is housed at National Treasury level as well as all the nine Provincial Treasuries. National Treasury's PPP Unit is headed by Chief Director. National Treasury's PPP Unit comprises five crossfunctional desks: Financial, Legal, Business Development, Project Evaluation, and Municipal desks. The PPP unit possesses sector-specific expertise as well as expertise related to financial, legal, BEE (Black Economic Empowerment) aspects of any PPP project. For every PPP project, the relevant treasury (national / provincial) assigns a project advisor and a project officer. Project Advisor The PPP Unit of the relevant treasury (national / provincial) assigns a project advisor to every PPP project as per Treasury Regulation 16. The purpose of the project advisor is to provide hands-on technical assistance from the date of registration to the signing of the PPP agreement, and in the development and delivery phases of the project cycle. He is also responsible for recommendation for the PDF to the project.
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Project Officer The project officer is responsible for making the project work for the institution, on time, on budget and to the standards set by National Treasury. All the institutional tasks and obligations detailed in Treasury Regulation 16, National Treasurys PPP Manual and Standardised PPP Provisions are placed on the desk of the project officer. In effect, the content of these substantial documents constitutes the project officers job. The project officers roles and responsibilities span the whole PPP project cycle.
Project Development Facility (PDF) The costs of procuring PPPs, and particularly the costs of transaction advisors, are significant, and often put a burden on the budget of the institution. But quality advisory services are fundamental to procuring affordable, value-for-money PPPs, and adherence to the PPP procurement requirements set out in Treasury Regulation 16 to the PFMA is essential. Due to the increasing number of PPP projects requiring assistance, National Treasury's PPP Unit has established the PDF as a vehicle for institutions to source funding for a portion of the transaction advisor costs and reduce the impact of procurement costs on institutions' budgets. PPP Process PPP project cycle enables the three regulatory tests of affordability, value for money, and risk transfer to be applied for preparing, procuring and managing a PPP agreement. The sponsoring authority is responsible for registering the PPP project with the relevant PPP Unit, appointing project officer and transaction advisor. All four treasury approvals are given after conducting the three regulatory tests at various points in the project cycle. Accounting officer / authority is responsible for getting all the treasury approvals. PPP Project Cycle and the activities performed by accounting officer / authority of sponsoring agency and assistance provided by the relevant PPP unit is given in the PPP Manual. Reference: For more details, a few web-links are suggested: PPP Manual Legal framework including PFMA and MFMA acts and Regulation 16 Standardised PPP provisions PPP quarterly which includes current status of PPP projects in South Africa PPP Case studies http://www.ppp.gov.za/PPPManual.htm http://www.ppp.gov.za/PPPLegislation.html http://www.ppp.gov.za/StandPPPProv.htm http://www.ppp.gov.za/PPPQ.htm http://www.ppp.gov.za/casestudies.htm
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9.4.2 South Korea

Public and Private Infrastructure Investment Management Center (PIMAC) Private Infrastructure Investment Center of Korea (PICKO) at Korea Research Institute for Human Settlement (KRIHS) was established in 1999 in order to initiate private investments in infrastructure sectors. The main role of PICKO was to promote private investment in the Republic of Koreas infrastructure projects, evaluate the feasibility of these projects and provide training and expert services to the government. PIMAC, KDI (Public and Private Infrastructure Investment Management Center, Korea Development Institute) was established as a merger of PICKO and PIMA (Public Investment Management Center) with the amendment of "The Act on Private Participation in Infrastructure" in January 2005. As PPP nodal agency, PIMAC performs multiple roles as pre-feasibility assessor, approver, advisor and transaction advisor. Primary functions performed by PIMAC are summarized below: Conducting Pre-Feasibility Study and Reassessment Study of Feasibility for large-scale publicly-financed projects Providing policy advise on public investments in Korea Developing plans for PPP and implementing PPP projects Assisting the Finance Ministry and the PPP Review Committee with Value for Money assessment prior to the issuance of the request for proposals Assisting competent authorities in project preparation Assisting in PPP transactions formulating requests for proposal, review of concession agreement evaluation of project proposal, and contract negotiation with potential concessionaire.
Apart from PIMAC which is an independent agency, Government of South Korea has modified various regulatory parameters to attract private investments in infrastructure sector. PIMAC has developed PPI Guidelines to deliver transparency and objectivity in PPI project implementation. Guidelines for VfM test Guidelines for RFP preparation Standard output specification by facility (school, military housing, integrated school facility) Guidelines for tender evaluation Standard PPI concession agreements Guidelines for BTL project management
PIMAC is headed by the Director who is advised by an Advisory Committee. There are three divisions in PIMAC which are responsible for investment evaluation, investment planning and program evaluation respectively. The organizational chart along with responsibilities of each of these three divisions is given below:
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PPI Act The PPI Act defines the role of the private sector in the development of infrastructure assets and seeks to promote transparency in the competitive tender process for projects. Sectors eligible for private investments under the PPI Act include toll roads, railroads, urban railways, subways, ports, airports, water and wastewater plants, power plants. The amendments to PPI Act offer a wide range of economic incentives and take various other measures in order to reduce the risks and uncertainties that may be associated with a PPP project. The incentives are offered in a way that can significantly improve the financial viability of projects and reduce their implementation risks to make them attractive for the private sector. A potential project identified for development is implemented on either solicited or non-solicited basis. Some incentives provided to encourage private investments are given below: Land acquisition The acquisition of land could be a major source of risk to any investor in greenfield infrastructure projects, particularly road and rail projects. In order to reduce the problems of land acquisition, the Government has given priority to the use of public lands for infrastructure projects. Minimum Revenue Guarantee For high-risk projects, the Government can provide revenue guarantees. Under the PPI Act, the Government can guarantee up to 90 per cent of the projected revenues for solicited projects and 80 per cent of the projected revenues for unsolicited projects. Tax incentives PPI projects may also qualify for various tax incentives offered by the Government. Foreign exchange risk Loss due to foreign exchange fluctuations may be offset through modifications of tariff rates, government subsidies, adjustment of the concession period or other provisions.
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Force majeure risk The PPI law provides for government buyout of a project in cases of prolonged force majeure. Infrastructure Credit Guarantee Fund The establishment of a fund to guarantee the credit of the concessionaire who intends to obtain a loan from a financial institution for a private investment project.
Other forms of government support includes The grant of a subsidy or long term loan by the state or local government to a concessionaire The equity participation up to 50% of the total investment amount A discount or an exemption of certain charges
Reference: For more details, a few web-links are suggested: Details on process followed for BTO and BTL projects Legal framework including PPI Act Technical guidelines on implementation of PPP projects Current status of PPP in South Korea http://pimac.kdi.re.kr/eng/delivery/ppp.jsp#link_4 http://pimac.kdi.re.kr/eng/delivery/ppp.jsp#link_1 http://pimac.kdi.re.kr/eng/delivery/ppp.jsp#link_8 http://pimac.kdi.re.kr/eng/perform/ppp.jsp
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9.5 Annexure 5: Value for Money

VFM is extensively established in PPP projects in UK. Some of the drivers of VFM as taken from VFM assessment guide of UK are: The optimum allocation of risks between the various parties requires that risks are allocated to the party, or parties, which are best placed to manage and minimize these risks over the relevant period; Focusing on the whole life costs of the asset rather than only the upfront costs involved; Integrated planning and design of the facilities-related services through an early assessment of whether the possible integration of asset and non-asset services (e.g. soft services) should deliver VfM benefits; The use of an outputs specification approach to describe the Authoritys requirements which, amongst other things, allows potential bidders to develop innovative approaches to satisfying the service needs of the procuring authorities; A rigorously executed transfer of risks to the parties which are responsible for them, ensuring that the allocation of risks can be enforced and that the costs associated with these risk are actually borne by the parties in the manner originally allocated and agreed; Sufficient flexibility to ensure that any changes to the original specification or requirements of the procuring authority and the effects of changing technology or delivery methods, can be accommodated during the life of the project at reasonable cost to ensure overall VfM; Ensuring sufficient incentives within the procurement structure and the project contracts to ensure that assets and services are developed and delivered in a timely, efficient and effective manner, including both rewards and deductions as may be appropriate; The term of the contract should be determined with reference to the period over which the procuring authority can reasonably predict the requirement of the services being procured. This will require careful considerations of factors including: potential changes in end-use requirements; policy changes; design life of the asset; the number of major asset upgrades or refurbishments during the period of the contract; potential changes in the way services could be delivered (e.g. technical advancements); and the arrangements for the asset at expiry of the contract; There are sufficient skills and expertise in both the public and private sectors, and these are utilized effectively during the procurement process and subsequent delivery of the project; and Managing the scale and complexity of the procurement to ensure that procurement costs are not disproportionate to the underlying project(s).
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9.6 Annexure 6: Typical PPP Models

The PPP models can be classified into five broad categories with different levels of private sector involvement and role performed. The five broad categorizations of participation are: 1. Supply and management contracts 2. Lease 3. Concessions 4. Private ownership of assets.
1. Supply and Management Contracts: A management contract is a contractual arrangement for the management of a part or whole of a public enterprise by the private sector. Management contracts allow private sector skills to be brought into service design and delivery, operational control, labour management and equipment procurement. However, the public sector retains the ownership of facility and equipment. The private sector is provided specified responsibilities concerning a service and is generally not asked to assume commercial risk. The private contractor is paid a fee to manage and operate services. Normally, payment of such fees is performance-based. Usually, the contract period is short, typically two to five years. But longer period may be used for large and complex operational facilities such as a port or airport. There are several variants under the management contract including: Supply or service contract Maintenance management Operational management
Supply or service contract: Supply of equipment, raw materials, energy and power, and labour are typical examples of supply or service contract. A private concessionaire can itself enter into a number of supply or service contracts with other entities/ providers for the supply of equipment, materials, power and energy, and labour. Non-core activities of an organization (public or private) such as catering, cleaning, medical, luggage handling, security, and transport services for staff can be undertaken by private sector service providers. Such an arrangement is also known as outsourcing. Some form of licensing or operating agreement is used if the private sector is to provide services directly to users of the infrastructure facility. Examples of such an arrangement include door to door collection of solid waste. The main purpose of such licensing is to ensure the supply of the relevant service at the desired level of quantity and quality.
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Maintenance management Assets maintenance contracts are very popular with transport operators. Sometimes equipment vendors/suppliers can also be engaged for the maintenance of assets procured from them. Operational management Management contracts of major transport facilities such as a port or airport may be useful when local manpower or expertise in running the facility is limited or when inaugurating a new operation. Management contracts are also quite common in the transport sector for providing some of the nontransport elements of transport operations such as the ticketing system of public transport and reservation systems. Operational management of urban transport services can also be contracted out to the private sector. In the simplest type of contract, the private operator is paid a fixed fee for performing managerial tasks. More complex contracts may offer greater incentives for efficiency improvement by defining performance targets and the fee is based in part on their fulfillment.
2. Lease In this category of arrangement an operator (the leaseholder) is responsible for operating and maintaining the infrastructure facility and services, but generally the operator is not required to make any large investment. However, often this model is applied in combination with other models such as build-rehabilitate-operate-transfer. In such a case, the contract period is generally much longer and the private sector is required to make a significant level of investment. The arrangements in an affermage and a lease are very similar. The difference between them is technical. Under a lease, the operator retains revenue collected from customers/users of the facility and makes a specified lease fee payment to the contracting authority. Under an affermage, the operator and the contracting authority share revenue from customers/users. In the affermage / lease types of arrangements, the operator takes lease of both infrastructure and equipment from the Government for an agreed period of time. Generally, the Government maintains the responsibility for investment and thus bears investment risks. The operational risks are transferred to the operator. However, as part of lease, some assets may be transferred on a permanent basis for a period which extends over the economic life of assets. Fixed facilities and land are leased out for a longer period than for mobile assets. Land to be developed by the leaseholder is usually transferred for a period of 15-30 years. It may be noted here that if the assets transferred to the private sector under a lease agreement are constrained in their use to a specific function or service, the value of assets is dependent upon the revenue potential of that function or service. If assets are transferred to the private sector without restrictions of use, the asset value is associated with the optimum use of the assets and the revenues that they can generate.
3. Concessions In this form of PPP, the Government defines and grants specific rights to an entity (usually a private company) to build and operate a facility for a fixed period of time. The Government may retain the
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ultimate ownership of the facility and/or right to supply the services. In concessions, payments can take place both ways: concessionaire pays to government for the concession rights and the Government may also pay the concessionaire, which it provides under the agreement to meet certain specific conditions. Usually such payments by government may be necessary to make projects commercially viable and/or reduce the level of commercial risk taken by the private sector, particularly in the initial years of a PPP programme in a particular state or sector, when the private sector may not have enough confidence in undertaking such a commercial venture. Typical concession periods range between 5 to 50 years. It may be noted that in a concession model of PPP, an SPV may not always be necessary. Concessions may be awarded to a concessionaire broadly in two types of contractual arrangements: Franchise Under a franchise arrangement the concessionaire provide services that are fully specified by the franchising authority. The private sector carries commercial risks and may be required to make investments. This form of private sector participation is historically popular in providing metro or bus services. Franchise can be used for routes or groups of routes over a contiguous area. Build-Operate-Transfer In a Build-Operate-Transfer or BOT (and its other variants namely Build-Transfer-Operate (BTO), Build-Rehabilitate-Operate-Transfer (BROT), Build-Lease-Transfer (BLT)) type of arrangement, the concessionaire undertakes investments and operates the facility for a fixed period of time after which the ownership reverts back to the public sector. In this type of arrangement, operating and investment risks can be substantially transferred to the concessionaire. However, in a BOT type of model the Government has explicit and implicit contingent liabilities that may arise due to loan guarantees provided and default of a sub-sovereign government and public or private entity on non-guaranteed loans. By retaining ultimate ownership, the Government controls policy and can allocate risks to those parties best suited to bear them or remove them. In a BOT concession, often the concessionaire may be required to establish a special purpose vehicle (SPV) for implementing and operating the project. The SPV may be formed as a joint venture company with equity participation from multiple private sector parties and the public sector. In addition to equity participation, the Government may also provide capital grants or other financial incentives to a BOT project. BOT toll is a common form of PPP nowadays, especially in road sector. Under the Build-Rehabilitate-Operate-Transfer arrangement, a private developer builds an add-on to an existing facility or completes a partially built facility and rehabilitates existing assets, then operates and maintains the facility at its own risk for the contract period. BROT is a popular form of PPP in the water sector. A key distinction between a franchise and BOT type of concession is that, in a franchise the authority is in the lead in specifying the level of service and is prepared to make payments for doing so, whilst in the BOT type the authority imposes a few basic requirements and may have no direct financial responsibility. Franchise BOT type of contracts
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4. Private ownership of assets In this form of participation, the private sector remains responsible for design, construction and operation of an infrastructure facility and in some cases the public sector may relinquish the right of ownership of assets to the private sector. It is argued that by aggregating design, construction and operation of infrastructure services into one contract, important benefits could be achieved through creation of synergies. As the same entity builds and operates the services, and is only paid for the successful supply of services at a pre-defined standard, it has no incentive to reduce the quality or quantity of services. Compared with the traditional public sector procurement model, where design, construction and operation aspects are usually separated, this form of contractual agreement reduces the risks of cost overruns during the design and construction phases or of choosing an inefficient technology, since the operators future earnings depend on controlling costs. The public sectors main advantages lie in the relief from bearing the costs of design and construction, the transfer of certain risks to the private sector and the promise of better project design, construction and operation. It is typically represented as the following arrangement Build-Own-Operate In the Build-Own-Operate (BOO) type and its other variants such as Design-Build-Finance-Operate, the private sector builds, owns and operates a facility, and sells the product/service to its users or beneficiaries. This is the most common form of private participation in the power sector in many countries. For a BOO power project, the Government (or a power distribution company) may or may not have a long-term power purchase agreement (commonly known as off-take agreement) at an agreed price from the project operator. In many respects, licensing may be considered as a variant of the BOO model of private participation. The Government grants licenses to private undertakings to provide services such as fixed line and mobile telephony, internet service, television and radio broadcast, public transport, and catering services on the railways. However, licensing may also be considered as a form of concession with private ownership of assets. Licensing allows competitive pressure in the market by allowing multiple operators, such as in mobile telephony, to provide competing services. There are two types of licensing: quantity licensing and quality licensing. By setting limits through quantity licensing, the Government is able to moderate competition between service providers and adjust supply between one area and other. Quality licensing however, does not place any restriction on number of providers or the amount of service produced but specifies the quality of service that needs to be provided. The Government may get a fee and a small share of the revenue earned by the private sector under the licensing arrangement.
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9.7 Annexure 7: Process of Appointment of Transaction Advisors

The process for undertaking any PPP project in Madhya Pradesh has been given in detail in Guidelines for PPP, which has been implemented vide Circular 18, GoMP. Such guidelines can be referred to for seeking any clarification in the process. For appointment of consultants for preparation of feasibility studies, DPR or any other project report, implementing agency can use single or two-stage bidding process. Agency can also establish its own group of empanelled consultants and may invite price bid from them, when required, to expedite the process of hiring for the job. A consultant typically performs the following functions. Similarly, for appointment of Transaction Advisors (TA), apart from single or two stage bidding, unsolicited proposal in the form of Swiss Challenge, direct negotiation or any other can be adopted. GoMP has also empanelled the 11 TAs as empanelled by the GoI. However, it is suggested that more TAs can be added to the empanelled group based on regional and sectoral expertise. A transaction advisor typically performs the following roles. Role of Transaction Advisors are as follows: Interaction with the market, or conduct of formal market soundings, to confirm decisions on scope, timing and packaging of the transaction Preparation of bid documents including but not limited to the Request for Qualification , Request for Proposal, and the Contract for Services Preparation of supporting information to assist bidders in preparation of their bids, and where relevant creation of a data room and management of access to the data room Support to communication with the market and interaction with the market, including managing and responding to requests for clarification Preparation of an evaluation plan, assistance with evaluation and preparation of evaluation reports Monitoring and advice on bidder performance against any conditions precedent to financial close, and Management of other advisory inputs, and overall management of the transaction team, to ensure a successful conclusion
Key elements of some of the popular modes of procurement have been discussed in the table below. Direct Contract Procurement of services from the private part is done on nomination basis It is preferred where service does not have any major impact and not of high importance It is preferred where the service sought is not complex and does not require high technical capability It is preferred where value of services is low; use of other methods like tendering not Competitive negotiation It is an extension of direct negotiation whereby a select group of parties invited for negotiations It is a common practice of empanelling parties with specific skill set It is preferred when there is repeated requirement of a particular skill set It is preferred when procurement for support service
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justified It is the fastest but least efficient method as price discovery mechanism not present It lack of transparency may lead to fraud practices & biased procurement process Single stage bidding It is an open competitive bidding which involves inviting parties to render a specific service through a tendering process It is [referred mode of procurement as it ensures transparency, fairness and best price discovery It is least efficient in terms of time and cost It is single stage bidding process where there is no pre-qualification based on credentials of the bidder Swiss challenge It is a suo-moto process in which private partner comes to public agency with a proposal Public agency may buy the rights to the proposal and call for an open bid based on the proposal or ask other parties to submit a better proposal, in absence of which project is awarded to initiator Project development cost is passed on to the initiator This procurement method has greater scope of leveraging private efficiency and innovation There is no formal price discover mechanism and there is a scope fraud & corruption
It is preferred when fast procurement is required with price discover mechanism There is limited transparency in the process There is biasness towards select parties Two stage bidding It is an open competitive bidding which involves inviting parties to render a specific service through a tendering process It is [referred mode of procurement as it ensures transparency, fairness and best price discovery It is least efficient in terms of time and cost It is two stage bidding process where only pre-qualified bidders are invited for submitting detailed technical and financial proposals Joint venture It involves formation of Joint Venture (JV) company between public agency and private party JV takes up the responsibility of project development including business case analysis, feasibility study etc. Project concession can further be awarded to the JV company Sharing of benefits based on the agreed participation in JV company Driving factor is the business requirement of the private participant
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9.8 Annexure 8: Terms of Reference for the Study

OBJECTIVE Recommend an overall policy framework and institutional roadmap for public private partnership in the state for social and physical infrastructure.
BACKGROUND 1. Despite its status as the worlds 4th largest and second fastest growing economy, India continues to experience significant gaps in the supply of essential social and economic infrastructure. This gap often referred to as infrastructure deficit is widely regarded as a major constraint in Indias attempts to sustain, deepen and expand its economic growth and competitiveness. Madhya Pradesh is no exception to this. The recently concluded growth diagnostic study has identified the lack of connectivity infrastructure, lack of support infrastructure and lack of human capital as the major constraints to higher economic growth of Madhya Pradesh. 2. Recognizing the urgency of the need for ongoing infrastructural investment, the GoI and the state government has over the past decade increased spending through series of schemes and programs. However, due to the cap on government borrowing as a result of the FRBM Act, Governments direct participation for infrastructure financing has been limited and has largely shifted its role to a facilitator rather than a provider through innovative public private partnership (PPP) approach. 3. Despite the pressing need, PPP continues to remain a relatively new phenomenon in India and more so in Madhya Pradesh. Of the total investments requirement of US $320 billion estimated for the 11th five year plan period, India has a cumulative US $ 60 billion of PPP projects in pipeline and completed. The central agencies like the National Highways Authority of India, Ministry of Road Transport and Highways have tended to initiate the vast majority of the PPP projects brought to successful financial closure. Madhya Pradesh accounts for a meager share of less than 3% of the PPP projects in India with a total value of US $1.75. Major success in Madhya Pradesh has been in the roads sector which accounted for a three- quarter of the total value of PPP projects in the state. 4. Madhya Pradesh is amongst Department of International Developments (DFID), Government of UK, five partner states. DFID supports programme in governance reform, urban and rural development and health & nutrition sectors.
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OBJECTIVE 3. The study will: A. Develop an overarching PPP policy framework focusing on both social and physical infrastructure, encompassing all the sectors. B. Prepare an institutional roadmap for the implementation of the provisions of the PPP Policy including infrastructure development fund, project development fund, appraisal authority, approving authority etc.
SCOPE OF WORK
1. Critically examine the existing policy and institutional mechanisms for implementing PPPs in Madhya Pradesh 2. The study should look in greater detail of not having an overarching legal framework at the GoI level and discuss the functioning of various institutions (to fast pace implementation of PPP projects) like Committee on Infrastructure, Committee on Viability Gap Funding (VGF), India Infrastructure Finance Company Limited (IIFCL), India Infrastructure Project Development Fund (IIPDF), PPP Cell within the DEA, inter-ministerial PPP appraisal committee (PPPAC) etc. 3. Discuss and analyse the experiences of selected states (Orissa, Gujarat, Tamil Nadu, Maharashtra and Andhra Pradesh) on PPP policy and related institutions. The analysis should consider the extent to which different approaches have helped
Tackle the financing gaps for infrastructure Accelerate the delivery of infrastructure Deliver direct and indirect benefits to poor people, during and post implementation of PPP projects. Support public financial management objectives such as long-term management of assets. .
4. The study should:
Develop a draft PPP Policy, noting the different drivers of PPPs in economic and social infrastructure Identify infrastructure sectors that the policy is supposed to cover Propose appropriate institutional arrangement for effective implementation of the policy prescriptions, including project design, project appraisal, project development, credit enhancement, viability gap funding, partial lending etc. Particular attention should be given towards enabling inter-departmental coordination. Suggest modalities for capacitating the institutions concerned and key line departments
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5.
Identify sample of projects (not more than 2 each) in (1) a successful sector like roads and (2) a not so successful sector in Madhya Pradesh to understand the roles, responsibilities, risk sharing (covering the range of key PPP risks, but particularly capital risk) among key stakeholders.
METHODOLOGY a. It would be more appropriate for the consultants to draw down on the major national and international best practices. The consultant should indicate the set of countries from which s/he will draw international best practice. b. It is suggested that the consultants have one-to-one meetings with the representatives of the departments of roads, industries, PWD and Finance to understand the government perspective on PPP and Director, Institutional Finance, who also heads the PPP Cell. c. It is recommended that the consultants have discussions with selected private investors to understand the investors perspective in terms of MP as an investment destination. d. It is recommended that for practical lesson learning purposes, the consultants may make visits to some of the states to capture the experience from various states.
REPORTING 5. The consultants will report to Soumen Bagchi, Economic Advisor on technical matters and to Sudha Menon, Project Officer, MP SPMG Program DFID on contractual and financial matters. The Director, Directorate of Institutional Finance (DIF) will be the nodal officer in GoMP.
DELIVERABLES 6. The consultants will deliver the following FINAL deliverables at the end of the study. a. INCEPTION REPORT: Discussion of the proposed methodology of the study and the states identified from where lessons are to be learnt for a PPP framework- legal, regulatory & institutional (not to exceed 15 pages).
b. DETAILED REPORT: This report will present the comprehensive and detailed findings from the study in the suggested format: i. Executive Summary ii. Chapter 1: PPP Experience in Madhya Pradesh iii. Chapter 2: Functioning of PPP Institutions - The Experience of GoI iv. Chapter 3: Learning from International Best Practices - Suitability in Indian Context v. Chapter 4: Experiences of other states in India & Key Lessons vi. Chapter 5: Model PPP Policy Framework vii. Chapter 6: Model Institutional Arrangement
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viii. Chapter 7: Making the Policy & Institutions work practical recommendations
TIMELINES AND PAYMENT TERMS 7. The study will be completed within 6 weeks from the date of signing of contract. The consultants will adhere to the following:
Sl No. 1. 2. 3.
Milestone Submission of Inception Report Submission of draft report Submission of final report
Timelines Week 1 Week 6 Week 8
Payment Terms 30% 30% 40%
CONSULTANT EXPERTISE 8. The consultant firm is expected to bring the following technical & managerial expertise. Team Leader with extensive knowledge on legal, policy, regulatory and institutional aspects of public private partnership in infrastructure financing at the level of Government of India and/ or at the state level. 2 experts (Infrastructure/ Institutional/ PPP) with experience of working across different states in India
Knowledge (and experience) of team members on Madhya Pradesh economy and policy environment in different infrastructure sectors would be an added advantage.
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Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. This material and the information contained herein prepared by Deloitte Touche Tohmatsu India Private Limited (DTTIPL) is intended to provide general information on a particular subject or subjects and is not an exhaustive treatment of such subject(s) and accordingly is not intended to constitute professional advice or services. The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business. Before making any decision or taking any action that might affect your personal finances or business, you should consult a qualified professional adviser. None of DTTIPL, Deloitte Touche Tohmatsu Limited, its member firms, or its and their affiliates shall be responsible for any loss whatsoever sustained by any person who relies on this material.
2011 Deloitte Touche Tohmatsu India Private Limited. Member of Deloitte Touche Tohmatsu Limited

MP Draft PPP Policy

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Final Report

Policy Framework and Institutional Roadmap for PPP in Madhya Pradesh

Submitted by Deloitte Touche Tohmatsu India Private Limited

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Policy Framework and Institutional Roadmap for PPP in Madhya Pradesh

2011 Deloitte Touche Tohmatsu India Pvt. Ltd.

Policy Framework and Institutional Roadmap for PPP in Madhya Pradesh

2011 Deloitte Touche Tohmatsu India Pvt. Ltd.

Policy Framework and Institutional Roadmap for PPP in Madhya Pradesh

2011 Deloitte Touche Tohmatsu India Pvt. Ltd.

Policy Framework and Institutional Roadmap for PPP in Madhya Pradesh

2011 Deloitte Touche Tohmatsu India Pvt. Ltd.

Policy Framework and Institutional Roadmap for PPP in Madhya Pradesh

2011 Deloitte Touche Tohmatsu India Pvt. Ltd.

Policy Framework and Institutional Roadmap for PPP in Madhya Pradesh

2011 Deloitte Touche Tohmatsu India Pvt. Ltd.

Policy Framework and Institutional Roadmap for PPP in Madhya Pradesh

1.2 Objectives of the Assignment

2011 Deloitte Touche Tohmatsu India Pvt. Ltd.

Policy Framework and Institutional Roadmap for PPP in Madhya Pradesh

2. PPP IN MADHYA PRADESH

2.1.2 Sector policies

2011 Deloitte Touche Tohmatsu India Pvt. Ltd.

Policy Framework and Institutional Roadmap for PPP in Madhya Pradesh

2011 Deloitte Touche Tohmatsu India Pvt. Ltd.

Policy Framework and Institutional Roadmap for PPP in Madhya Pradesh

2011 Deloitte Touche Tohmatsu India Pvt. Ltd.

Policy Framework and Institutional Roadmap for PPP in Madhya Pradesh

2.2.1 Status of PPP Projects in MP

2011 Deloitte Touche Tohmatsu India Pvt. Ltd.

Policy Framework and Institutional Roadmap for PPP in Madhya Pradesh

2011 Deloitte Touche Tohmatsu India Pvt. Ltd.

Policy Framework and Institutional Roadmap for PPP in Madhya Pradesh

2.2.2 Status of PPP projects in Road Sector

2.2.3 Status of PPP projects in Urban Sector

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Policy Framework and Institutional Roadmap for PPP in Madhya Pradesh

2.2.4 Status of PPP projects in Water Sector

Policy Framework and Institutional Roadmap for PPP in Madhya Pradesh

2.2.5 PPP targets has been identified for next 3 years

2.2.6 PPP Process Map

2011 Deloitte Touche Tohmatsu India Pvt. Ltd.

Policy Framework and Institutional Roadmap for PPP in Madhya Pradesh

Figure 6: PPP process map for Madhya Pradesh

Preparatory / In-principle Approval Stage

Final Approval / Tendering Stage

Appointment of transaction advisor / project development

YES Preparation Memorandum of Consideration (MFC) Preparation of project proposal

Disbursement of IIPDF funds

Disbursement of MPPDF funds

Approval of application for MPPDF funds after scrutiny and analysis

PPP Cell, DIF, GoMP

Verify and forward State VGF Proposal

Vetting of RfQ and Project Proposal with suggested modifications

Vetting of Project documents including RfP, CA with suggested modifications

Approval for State VGF

Approval Committees (DLEC/ SLEC)

Approval from DLEC / SLEC depending on project value

Approval from DLEC / SLEC depending on project value

Approval of MFC application and disbursement of funds if approved

In principle approval given by Empowered Comm./Insti. Depending upon project size

GoI LEVEL PPP Cell, DEA, GoI