Reliance Infra bags a road project and Maharashtra looks for an airport designer

The PPP market took a nap this last week and not many things happened in the industry. In spite of that, Reliance Infra and a new airport in Maharashtra made some noise:

Reliance bags a road project in Rajashtan

Anil Ambani group firm RELIANCE INFRASTRUCTURE said they have bagged a road project worth Rs 5.90 billion (US$128 million) from the National Highway Authority of India (NHAI). The company-led consortium will invest in design, finance, engineering, construction, operation and maintenance of the 53-km Jaipur-Reengus road stretch in Rajasthan for a period of 18 years.
* The highway stretch is expected to be operational by March 2011.
* Reliance Infra is currently executing seven road projects and has fixed a total outlay of over Rs 45 billion, the statement added.


Technical consultant to be chosen for the New Chakan international airport
The Maharashtra Airport Development Company (MADC) management is set approve by early next week the appointment of a project consultant for
the proposed New Chakan international airport' at Rajgurunagar.

Six companies have filed their bids for the consultancy work that involves planning, designing, supervision and execution of the airport project. These include independent firms as well as consortia or joint ventures.

On February 18, the Ashok Chavan-led state cabinet had given its administrative sanction to the international airport project, which is to be built on a public-private partnership (PPP) basis. The state cabinet then resolved for naming the project as New Chakan airport' and approved the MADC's appointment as a special planning authority (SPA) for land acquisition and development of the airport.

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Rail and road bids.Upcoming monorail tender

NH 12 JAIPUR TO DEOLI
IRB Infrastructure Developers has been selected as a winning bidder by National Highway Authority of India (NHAI) for the project of design, build, finance, operate and transfer of Jaipur to Deoli section of NH12 from Km 18.70 to Km 165.0 in the State of Rajasthan under NHDP Phase III on Design, build, Finance, Operate and Transfer (DBFOT) basis.

HIGH SPEED RAIL TO BANGALORE INTERNATIONAL AIRPORT
Bids for the request for qualification (RFQ) were opened and five major consortia have now been selected for financial bids, that will be evaluated in 30 days.

With this, the Bangalore Airport Rail Link Limited (BARL) will issue the letter of award (LOA) to the selected concessionaire after the process of evaluation in March 2010. Construction of the HSRL to the Bangalore International Airport (BIA) is then expected to begin in May 2010.

The five selected consortia are: Reliance, Larsen and Toubro, Siemens/Tata Pioneer Infratech, Lanco and ITD-ITD.CEM. The project will also have a contribution of Rs 1,000 crore from the Government of India through a viability gap funding (VGF) route. It may be recalled that the HSRL project was first cleared by the State cabinet in December 2007 and again in February 2009 at the Belgaum session of the legislature.

MONORAIL IN BANGALORE
Another project that has moved forward is the mono rail system for the City under the CTTP (Comprehensive Traffic and Transportation Plan), for which the Bangalore Airport Rail Link Limited (BARL) is a special purpose vehicle (SPV).

An action plan to this effect has been presented to members of the Agenda for Bengaluru Infrastructure Development (ABIDe). The project now awaits its clearance. To be implemented on a public private partnership (PPP) basis on the identified corridors, the Bangalore Airport Rail Link Limited (BARL) has already issued the letter of intent (LOI) and will appoint consultants by October 19. “The detailed project report (DPR) will then be prepared by January 31, 2010, followed by calling of global tenders through the RFQ and request for proposal (RFP). We hope to have the concessionaire in place in October 2010,” informed IDD sources.

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"Special Land Acquisition Units" and "Unified toll system"

Delay in land acquisition has been identified as one of the factors which slow the pace of highways construction in India. As per the Model Concession Agreement of the Build Operate and Transfer (BOT) projects, NHAI is required to handover 80% of the land on the date of financial closure of these projects. That precisely means that NHAI will have to acquire the land in a time bound manner so that commencement of work is not delayed.

Land acquisition is an essential component of a BOT highway project. If it goes under schedule, everything is right but if it doesn´t the concessionaires are losing money. Tolls are being received later and the project viability is being questioned.

The Special Land Acquisition Units would carry out the following functions:
i) Preparation of notification under section 3A (Intention to acquire land)
ii) Preparation of notification under section 3D (1)
iii) Preparation of award
iv Disbursement of compensation to land owners
v) Dispute maters relating to Arbitration cases be referred to Arbitrator, mutation of land acquired under the Act.

The state-wise number of SLAUs is as follows: Rajasthan (10); Bihar (13); U.P (25); Gujarat (07);Orissa (11); West Bengal(13); Tamil Nadu (26); Jharkhand ()4); Maharashtra (11); Punjab (05); Haryana (04); Himachal Pradesh (02); Assam (05); Meghalaya (01); Manipur (01); Mizoram (01); Nagaland (02); Tripura (01); Madhya Pradesh (04); Chhatisgarh (01); J & K(0); Uttrakhand (03); Goa (04); Karnataka (05); Andhra Pradesh (7);’ Kerala (25); Delhi (0).

TOLL SYSTEMS

NHAI has, as a pilot project, asked three concessionaires to install three different technologies for use of these tags by October 31. All the three systems will be tested for six months and the one that emerges the best will be installed at all plazas after that.

The three electronic tolling systems are active, passive and infrared. The active tolling system, in which the tag sends as well as receives signals, is being tested at the Gurgaon-Jaipur highway; the passive system, where the tag only sends signals, at the Panipat-Jalandhar highway; and the infrared system (it sends and receives signals on optical fibre) at the Surat-Dahisar highway.

On this video below, we can see one of the toll plazas at the Delhi-Gurgaon highway, 10 minutes is a normal waiting time:

It is obvious that tags and electronic tolls are needed. “After the test, we plan to make at least one lane at every toll plaza across India electronic and we will keep on increasing it with time, depending on the necessity,” added an official.

This tag lanes will be good for sure. Free flow tolls should be installed at urban highways. State-of-the-art technology should always be taking into account.

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The new Model concession agreement (MCA) is taking shape.

Along this last week some of the clauses of the new Model Concession agreement (MCA) under study came to light. I consider them to be very positive for private firms as they are are being restudied in order to make projects more profiteable but also because private corporations need to feel safe when they bid for infrastructure projects, there is alot of money at stake. Here you can see them in detail:


Highway developers face profit caps (September 28th)

Under the existing system, National Highways Authority of India (NHAI) has to invite bids first on a build-operate-transfer (BOT) toll basis. Only failing to attract investors for a road project under toll model, NHAI awards annuity-based projects.

So here is where the news may affect. Companies implementing highway development projects on annuity basis may not be allowed more than 18% profit on their investments as per a proposal under consideration of the ministry of shipping, road transport and highways. For developers in difficult areas, such as north-east, this ceiling will be 21%. Presently, the rate of return quoted by private players ranges between 10 and 25%.

Currently return on investment (RoI) for an annuity-based road project is a biddable item where government pays project cost plus agreed RoI to the developer for construction of a highway stretch. Payments are made to the developer in several instalments.

Reducing bidding security encashment to 5% of the total bank guarantee received
Developers failing to qualify for a road project while placing price bids—request for proposal (RFP) stage—may not have to forgo their entire bank guarantee.

In a bid to make the bidding process flexible and investor-friendly, the road transport and highways ministry is planning to reduce bidding security encashment to 5% of the total bank guarantee received for a project. At present, the entire bid security amount is forfeited in case the bid is declared non-responsive.

A bid is considered `non-responsive’ by the National Highways Authority of India (NHAI) even if a bidder fails to submit the auditor’s certificate. Other reasons of a bid considered invalid are failing to give a memorandum of understanding (MoU) between bidding parties and inadequate documentation (documents not in proper format or minor omission in letter drafting9.


Other recommendations made by a Comission formed by an empowered group of ministers:

The threshold limit in the conflict of interest clause in the model concession agreement (MCA) for highway projects has been increased from 5 per cent to 25 per cent, which was recommended by the B K Chaturvedi Committee, set up to find ways to expedite various road projects in the country. This will allow any two special purpose vehicles (SPVs) with a common partner having up to 25 per cent stake for bidding for the same project.

Earlier, any two SPVs in which any developer had more than 5 per cent shareholding each were barred from bidding for the same project. It was increased to 5 per cent in July this year from the earlier 1 per cent.

Introduction of an ‘exit clause’:

The exit clause allows the lead partner in an SPV to exit by selling its stake after the construction of the project is over. Earlier, it was mandated to stay till the completion of the concession period (ranging from 20 to 30 years).

Removal of termination clause:

The ‘termination clause’ allows NHAI to take back tolling rights from a concessionaire anytime before the concession period is over, if the concessionaire has recovered its investment on the project.

No forfeiting of security money deposited by the bidders if they are not present at the time of bid opening.

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Speeding up infra projects. Kamal Nath was not joking.

Hi! This week was quite exciting in the PPP industry in India. Many news came out and big advances are being studied for the bids of all the new highways projects. There is a clae goal: bringing out 200 projects this fscal year. Kamal Nath, the roads ministry is decided to make it true and is pushing his officials to speed up the bidding processes. In order to get this:

Government may award road projects to single bidder
Government might start awarding projects even if there is a single bidder for highway development on build, operate and transfer (BOT) basis. Sources in the ministry of road, transport and highways (North) said the modalities for this are yet to be worked out, which can fast-track project allocation as the ministry has set ambitious target of bidding 200 projects this fiscal year.
In 2008-09, while the highway regulator, National Highways Authority of India (NHAI), could award only 8 of the 60 projects floated, majority of the projects did not receive any bids.

And:
New highway bidding scheme to save time
Under a new policy, all road highway projects are to be earmarked from the beginning to one of three processes of bidding, on the basis of its financial viability. This pre-selection is estimated to save up to 18 months of time.

Earlier, every project was first put under the build operate and transfer (BOT) toll bidding process. If there was no positive response, it was put under the BOT annuity bidding process, where the contractor is paid every six months and the toll is collected by the government. A third option was an engineering procurement and construction (EPC) contract.

Under the new plan, all projects are divided into three categories — BOT-toll, BOT-annuity or EPC — even before the bidding process starts. “Preparing the project up for bid on a new scheme consumes six months every time. And if it is pre-decided, we will save those 18 months,” said a senior official of the National Highways Authority of India (NHAI).

And if financing the projects turns out to be difficult, something really likely to happen having in mind the current financial crisis, the following may help a bit:

World Bank approves $4.3-bn loan to India
The World Bank today approved four loans worth $4.3 billion (about Rs 20,631 crore) to help India finance its infrastructure programmes and further strengthen the capital base of state-run banks. The approved loan includes a a budgetary support of $2 billion for capital infusion in select public sector banks to help them maintain credit growth.

These 3 news are pretty interesting, I hope you guys enjoy the readings an keep coming over and over to this blog because it is going to be the best site to keep you update with the last PPP news in India.

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LAND ACQUISITION PROBLEMS IN HIGHWAY CONSTRUCTION

According to Kamal Nath, Road, Transport and Highways minister, there are two dominant issues that stand in the way of quickening highway construction — land acquisition being one and the need for capacity building at the National Highway Authority of India, which is the nodal authority for highway construction being the other. This article is going to deal with the land acquisition.

Other Kamal Nath´s quotes state again the problem, such as the following ones:
-“We require land to build roads and the land acquisition problem is the major factor behind project delays as multiple authorities are involved,” he said.
-“We recognise the problem and the ministry is working on a new strategy for land acquisition which we will work out soon.”

LAND ACQUISITION IN THE LAST YEARS
In the fiscal year ended March 31, there were no bidders for 38 of 60 road projects unveiled by the Ministry of Roads. More than 150 of 187 projects under way are behind schedule, according to ministry data, with difficulty in acquiring land in rural and forest areas cited as the major reason.

According to a survey, of the 190 infrastructure projects facing delays, 70 per cent were delayed due to land acquisition problems. Forty projects by NHAI, 60 being implemented by Indian Railways and 28 power projects are facing difficulties in acquiring land.

"Of the total land to be acquired for 5,200 km of roads being built under Phase II, only 10 per cent of the land has not been acquired and we plan to do it by the end of this fiscal," said a senior NHAI official. It is fait to say that NHAI´s Phase II was approved in December 2003.

Responsibility for acquiring land rests with the National Highway Authority of India under the federal roads ministry. The federal government usually approaches state governments to identify land parcels and negotiates the purchase price with the owners, who are usually far flung rural land owners.

Unclear land titles, absent or incomplete revenue records in villages and the fragmented nature of rural land holdings complicate the sale process with a large number of families having to be compensated for their land. According to Ministry of Agriculture data, 62% of Indian farmers have land holdings of less than one hectare. This last data is really alarming as the nature of the problem is historical and no solution can be provided easily.

KAMAL NATH´S SOLUTION
To deal with those challenges, the federal authority that purchases private land and awards highway projects last month announced plans to set up 150 acquisition units or so called Special land units (SLU) in various states.

These units will be headed by an additional district magistrate or sub-divisional magistrate who will report to the NHAI through project directors (NHAI officials put to look after the development of the project).

The SLUs are coming up all over the country -- 10 in Rajasthan, 13 in Bihar, 25 in Uttar Pradesh 7 in Gujarat, 11 in Orissa, 13 in West Bengal ,4 in Jharkhand, 11 in Maharashtra and 5 in Assam. Around 40 are already operational in Tamil Nadu and Karnataka and sanction has been received for Goa.

"We will... have specialized people to handle this. It's not a problem of money; what we have is mostly an administrative problem," said A Didar Singh, in charge of finance with the National Highways Authority of India. Of course, this is something that can be solved, a money problem would involve worse consequences.

CONCLUSION
Due to the fact that acquiring land for road projects is one of the major hurdles in creating infrastructure, private developers should embrace this measure as it is a great initiative to partially solve the problem. Will this measure mean that the process of dealing with so many owners will shorten? Every country has its own historical problems and land acquisition never was an easy issue to be solved. But it is good for developers that the problem has been identified and solutions are being wanted.

The government should ideally have available 70%-80% of the land required for a project before inviting bids from builders, something that in reality never happens. Kamal Nath´s plans for road construction sound great but there are some processes in construction that take some time and this is one of them.

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WELCOME! PUBLIC PRIVATE PARTNERSHIPS IN INFRASTRUCTURE-INDIA

INTRO
Today, I want to present you all this new blog. I believe its name clearly explains its future content: Public Private Partnerships in Infrastructure - India. This blog is a sister one of the blog Public Private Partnerships around the world. Due to the great amount of content that the indian market creates by itself I have decided to write about the Indian PPP industry separately.
When writing about infrastructure, I will focus more on highways,railways and airports, although other infrastructure systems will not be forgotten.

KAMAL NATH AND HIGHWAYS
In this presentation I would like to point out Kamal Nath´s entry as the Road, Transport and Highways minister. Now there is a visible change in the attitude and enthusiasm among ministry and National Highway Authority of India (NHAI) officials.
India plans to build 35,000 km of national highways over the next three to four years - or 20 km of roads a day. In 2009-10 alone, the plan is to lay down nearly 15,000 km of roads. These are huge numbers that could turn India into the first infrastructure market in the world.
Traffic on Indian roads is growing at 7 to 10 percent per year, rapidly overtaking economic growth, and the construction of new roads is part of a massive development agenda announced by the United Progressive Alliance (UPA) government.

BLOG CONTENT
So this blog is born to bring you all the latest news in the PPP industry in India. In the last years new road projects have had diffculties to come out, now Kamal Nath promises that hundreds of new projects will attract many bidders in the next years. I plan to write about all these projects, the Model Concession Agreement (MCA) and its future changes, new legislation pieces and the financing methods.
I hope you all like it, read it and participate. Please, drop a comment if you want to discuss something further.

Welcome!

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