Thursday, July 24, 2008

Electricity for the poor still a dream

This link gives an update on the rural infrastructure scheme launched in 2005 with a target completion in 2009. We are far behind the targeted figure of 125000 villages out of which only around 47000 villages have been electrified till April 2008 and 18000 more can be expected to be electrified by the end of 2009. This statistics can be viewed here which also gives the number of households below poverty line connected and targeted.

Saturday, July 19, 2008

Fuel efficiency law need of the hour, says Greenpeace

Greenpeace also launched a nationwide "Let's Drive Change" consumer campaign to support the Bureau of Energy Efficiency in creating strong mandatory fuel efficiency norms for the car industry in India.

Greenpeace demands:

• Mandatory "CO2 emissions labelling" on all new cars in the Indian market, to enable consumers to make informed and responsible car buying choices
• Mandatory CO2 emission standards for the industry, which will require car manufacturers to progressively reduce CO2 emissions from new cars to achieve a fleet efficiency of 80 gm CO2/km by 2020

If you also think that it is a good effort in working towards saving the environment, Please sign in here.

Fuel-efficiency norms coming for 4-wheelers

The road transport and highways ministry estimates there were about 100 million vehicles on Indian roads at the end of 2007, of which about 17% are passenger vehicles.

There is a proposal to make fuel efficiency norms mandatory by 2010. That means we might come to see more cars giving an average on 12-16 Km per litre.

“Yes, there is a proposal and we will discuss it with the industry representatives on the 21st (of July),” said Ajay Mathur, director general, Bureau of Energy Efficiency, or BEE, the body mandated to notify energy efficiency norms under the Energy Conservation Act of 2001.

More details are here.

Miscellaneous Links

  1. Centre to rebuild 11,500 km road network in northeast.
  2. MMRDA to raise funds, metro rail corridor planned
  3. Underground expressway to connect Sikkim and WB. This link is 53 Kms long at the cost of Rs 1550 Crores.

Wednesday, July 16, 2008

Road projects may get more co-drivers

This news item in ET says tht NHAI is in the process of revising the guidelines for bidding in RFQ statge. Developers went to the court asking for that change since NHAI asks for vast experiences in road sector which only large developers are experts in.

In addition, the government is considering to limit the number of projects that a single player can undertake in one year to 5-6. In order to prevent monopoly, there is also a proposal to limit the number of bids that a single company can make in a month.

I hope this will end up the monopoly of big firms like E & Y/ RITES/ IL&FS etc to name a few.

Monday, July 14, 2008

Miscellaneous Links

  1. HP announces more bus terminals across the state with private sector participation.Details are here.
  2. HCC to develop Badarpur expressway: Leading infrastructure development company Hindustan Construction Company Ltd has won a Rs 340-crore order for the 4.4-km elevated highway at Badarpur on NH-2 near Delhi. The project will be developed on BOT basis under a 20-year concession (including construction time of 20 months) from National Highways Authority of India.
  3. Private participation in education.
  4. Sad state of affairs in schools.
  5. Infrastructure sector growth slips to 3.5% in May
  6. Rail cargo charges to pinch more; set for big hike from 1 August.

Monday, July 7, 2008

Determinants of PPP

There is an IMF working paper prepared by Mona Hammami, Jean-Francois Ruhashyankiko, and Etienne B. Yehoue (Mona Hammami is a Ph.D. candidate at Oxford University. Jean-Francois Ruhashyankiko and Etienne Yehoue are Economists at the IMF. This paper was initiated while Mona Hammami was a summer intern at the IMF Institute.) In this paper they have put forward some basic questions like :
“Why are public-private partnerships (PPPs) increasingly widespread? Why are some
countries able to attract more investments in the form of public-private partnerships than
others? Why are certain types of PPPs found in some industries but not in others? What
determines the extent of private sector participation in such ventures with the public sector?”

This paper has made some hypothesis about the determinants of PPP in various countries. It says that there are factors related to:
1. Government constraints assumes two hypothesis:
H1: Governments with large deficits and a heavy debt burden are more likely to have PPPs.
H2: Rentier countries with large sources of exogenous revenue have soft budget constraints and are therefore less motivated to engage in PPP projects.
2. Political Environment assumes three hypothesis:
H3: PPP arrangements are likely to be positively correlated with ethnic fractionalization.
H4: Governments friendly to market-oriented policies are more likely to engage in PPPs.
H5: PPPs are more prevalent in politically stable countries with accountable governments.
3. Market Conditions and Macroeconomic Policies assumes two hypothesis:
H6: PPPs tend to be more common in larger markets where demand and purchasing power are greater.
H7: PPPs are more prevalent in countries with credible, predictable, and stable macroeconomic conditions. In particular, countries with lower inflation and stable exchange rates are more attractive candidates for PPPs.
4. Institutional Quality and Legal System assumes three hypothesis:
H8: Countries with weak institutions and low-quality bureaucracies are more likely to
display high country risk and are therefore less likely to foster PPPs.
H9: PPPs will be more common in countries with strong and effective legal institutions.
H10: PPPs will be more prevalent in environments where the legal code (laws on books)
better protects investors’ rights.
5. Past Experience with PPPs assumes this hypothesis:
H11: PPP arrangements are likely to be higher in countries with previous PPP experiences.
6. Private Participation in PPPs assumes one hypothesis:
H12: The extent of private participation in PPP arrangements is likely to be positively correlated with the degree of impurity of the goods or services to be provided and the technology structure required to provide them.
They have used the data from World Bank Private Participation in Infrastructure (PPI) database to prove their hypothesis set above. They have used econometric tools to analyze their data collected on PPP projects in various sectors. The research has indicated that “PPPs are at the heart of governments’ attempts to revive infrastructure investments in advanced as well as developing and emerging market economies.”

The results indicate that the market conditions channel is the most important channel of determinants of PPPs. The evidence suggests that larger market size and higher customers’ purchasing power are crucial determinants of PPPs. The evidence from the macroeconomic stability channel suggests that inflation or lack of price stability limit the number of PPPs. At the same time, the evidence does not show any significant difference of private participation in PPP arrangements across all regions except for sub-Saharan Africa. These regional disparities occur while holding constant all seven channels—government constraints, political environment, market conditions, macroeconomic stability, institutional quality, legal systems, and past experience with PPP.

If we see logically, then all the points mentioned above play an important role in attracting PPPs in a country.

VGF for metros to be increased to 50 per cent

Project Monitor reports "A high-level sub-committee on infrastructure has proposed an increase in viability gap funding (VGF) for metro projects by 30 per cent (from 20 per cent now to 50 per cent). A proposal to this effect is already under consideration with the finance ministry for metro projects.

The private players will only be allowed to enjoy the benefits of higher VGF only if they follow stricter guidelines. The urban development ministry is working on stricter guidelines the companies will have to follow at the time of preparing detailed project reports.

Moreover, projects will be scrutinised by government departments. All city authorities will have to mandatorily set up unified metro transport authorities that will ensure seamless disbursal of funds provided under the VGF policy. At present, the Centre provides 20 per cent loan to such projects as soft loans and the remaining 80 per cent cost is shared by the state government and the private partners."

Saturday, July 5, 2008

Finding the Missing Link

The Rs 6,000-crore Mumbai Trans Harbour Link project, a vital infrastructure aiming to connect Mumbai to Navi Mumbai, is at a dead-end. MSRDC had called for bidding and it took four years for the process. The nodal agency had to call for bidding again. The 22-km has been frustrated by all sorts of delays—environmental, bureaucratic, corporate and legal. This is India's longest link and it turnes out to be a fight between—Mukesh and Anil Ambani—the only two contenders.
MSRDC had kept the crieteria for selecting the developer having the lowest concession period. An intersting finding came forward. Mukesh Ambani's consortium had quoted 75 years concession period and Anil Ambani's consortium quoted less than 10 years- What a Mismatch.
If developers cannot be finalised, the state government may be left with little choice having to do projects on its own. It is a grim proposition considering the huge finances involved. Private participation is inevitable, and so is the imperative of taking tough business-like decisions says Project Monitor

Friday, July 4, 2008

Understanding PPP

The definition and types of PPP can be seen here in my earlier post.

A paper by B. Raganelli, G. Fidone, Public Private Partnerships and public works, 2007 explains the relationship between the Public and the Private partner in PPP set up .It says that the public and the private partner shares Principal– Agent Relationship. They share a bilateral relation and they have to depend on each other for their functions. They end up having Information Asymmetries. The public entity looks after the public interest and good quality public work whereas the private entity is more concerned about the corporate profit.

A decision has to be taken while selecting the private party for the proposed project. There has to be clear rules and regulations which help the private party to understand the project in a better way so that it doesn’t result in Information Asymmetry. These clauses should be in line of the Public as well as Private party’s interest.

After selecting the private party, public party is unable to monitor the private party because of high monitoring costs so another problem arises of Moral Hazard. The private party indulges in practices which are contrary to the policies of the concession maker. This results in non performance of the private party leading to delay in completion of the project. That is why Penalty clause is always there in the concession agreement. The moral hazard problem could be solved by providing some incentives to the private operators for early completion of the projects or giving quality results.

All three problems namely Principal-Agent relationship, Information Asymmetry and Moral Hazard can arise in any of the project where two parties are involved and responsibilities are shared. A solution to these problems can be derived by making the concession agreement include all the possible clauses which could cause these problems to occur

Thursday, July 3, 2008

DLF plans eight shopping malls by 2009

DLF will develop eight shopping malls under leasing format in the metros by March 2009, besides commencing operation in four malls by end 2008. The company will also open four shopping malls in the, of which three will be in Delhi NCR and one in Chandigarh.

Eight consortiums shows interest to revive airports

Eight consortiums have responded to the EoIs inviting consultants for or conducting pre-feasibility study on which of the 326 non-operational airports and airstrips around the country. Those in the fray include International Air Transport Association, KPMG and Deloitte Touche Tohmatsu India. KPMG has tied up with Mott MacDonald while Deloitte Touche Tohmatsu has joined hands with Zabir 2005 of Spain for carrying out the study. The study is to be conducted on airports and airstrips that are either privately owned or with state governments, the Army or Indian Air Force. The consultants report is expected to list out the investment needed in terms of land and other assets, apart from suggesting a road-map for development and methodology to be adopted for providing air connectivity in a phased manner.

Wednesday, July 2, 2008

Miscellaneous Links

  1. Eleven trains to be introduced by Southern Railway. News clip is here.
  2. Airlines cut flights to beat fuel woes. Kingfisher's Malaya in talks with RIL to import ATF(aviation turbine fuel) through oil companies.
  3. NMMC submits reports for metro rail project in Navi Mumbai.
  4. Ludhiana based Impact Projects signs JV for township projects in Amritsar.

Monday, June 30, 2008

Orissa to build four major roads through PPP route

Project Monitor News Bureau says "The Orissa government plans to construct four major roads in the state on public-private partnership basis at a cost of over Rs 2,100 crore.The project involves four laning of a 165-km long road between Sambalpur and Rourkela at an estimated cost of Rs 1,340 crore; constructing a 70-km road from Khuntuni to Kuradmal at a cost of Rs 400 crore; building an 18-km road between Joda and Bamberi at a cost of Rs 188 crore; and constructing a 42-km Koira-Lahunipada road with an expenditure of Rs 217 crore."

"The state government has started the preliminary works on the project and will soon appoint two private agencies for consultancy. The World Bank has agreed to bear the consultancy expenditure.
The funds for the project will be arranged after completing detail survey of about 900 acres of land required for all the four roads."

Friday, June 27, 2008

Hard and Soft Infrastructure

I came across this publication which defines Hard and Soft Infrastructure by Deepak Kumar who is an Associate consultant of ICFAI journal of Infrastructure.
He says" Infrastructure sector is divided into hard and soft infrastructure. The hard infrastructure includes roads and bridges, ports, airlines, railway, power,telecom while the soft infrastructure includes education, health, tourism,etc." It also lists out Initiatives of UPA Government- (2004-05) in the field of Infrastructure. This paper gives details about both hard and soft Infrastructure initiatives taken by the govenment.
I wonder how much of this is a true achievement as NHDP, NSEW coridoor are already in a fix cos of increasing cost of the projects and railway projects are also at halt as mentioned in my earlier post.

Bangaluru Airport In a mess

The new Bangalore airport is located some 40 kms away from the city in Devenhalli. The congested roads and the increasing traffic on the roads is making it the least preferred option for the people to travel. although the Airport had all world class facilities, capacity of handling 10 million passenger in a year. It has 50 ckeck in counters and there are no x-ray machines to screen the bags but the public is suffering because of the distance they have to cover on the road to catch a flight.

Passenger end up spending 3-4 hours travelling to and fro to the airport to catch a 1 hour flight. I wonder the land for the proposed airport was decided long back and it dint strike anybody's mind that distance could be a problem. More details are here.

Thursday, June 26, 2008

Infrastructure deficit can derail India's growth: Rangarajan

Sluggish infrastructure development could derail India's growth rate and pose serious challenges to development, says C. Rangarajan, chairman of the Prime Minister's Economic Advisory Council. The main points which he made are:
  1. "If we are to sustain the present growth rate and accelerate it to higher levels, we have to not only invest heavily in infrastructure projects through public-private partnerships but also ensure their timely execution."
  2. "Efficient and speedy implementation of projects is critical in the infrastructure area.".
  3. Yet, time and cost overruns, poor execution and bureaucratic hurdles have put a severe pressure on existing infrastructure, especially in urban areas. "As a result, our infrastructure facilities and urban amenities are groaning as they are stretched out," Rangarajan said.
  4. "We need to invest equally in social infrastructure. The spending in health and education should be efficient as they are a function determining the quality of expenditure than quantum.
  5. "The way out is to modernise and diversify the farm sector by improving the forward and backward linkages,"
This is what Rangarajan said. Here is another effort by the government to develop infrastructure by means of developing Inland waterways for transporting goods in wake of the rising fuel prices.

I had pointed earlier here a similar news item wherein they talked about putting the inland waterways in the forefront. Lets see when will it happen.

Wednesday, June 25, 2008

Bandra skywalk project inaugurated

On 24 June 2008, Maharashtra Chief Minister, Mr Vilasrao Deshmukh inaugurated Mumbai Metropolitan Regional Development Authority's Bandra skywalk project.

The project built at a cost of Rs.13.63 crore will cover a distance of 1.3 km having five entry/exit points. The skywalk will connect the railway foot over bridges to Kalanagar, passing through Annat Kanekar Marg, DP Road and Nandadeep Garden. It also provides crossing of Western Express Highway, Sio-Dharavi link road.Here is the news clip.

Tuesday, June 24, 2008

Miscellaneous Links

  1. A man from India Blog points out to A Billion Dollar Home and A Billion Dollar Slum.
  2. Gammon-Dragados begins work on Mumbai offshore container terminal after the acceptance of Pre Feasibility Report.
  3. Railways to invite bids for Pune-Ahmedabad high-speed corridor.
  4. Kochi cruise terminal to be developed on BOT basis.

Road projects face further delays on rising input cost

Rising steel and crude oil prices may again delay awarding of road projects under the National Highway Development Programme (NHDP). It explains that rising input costs make the projects unviable for the developers who are then reluctant to take off with the projects. To make it viable if the developer starts charging higher toll rates then the project might not be able to attract the expected traffic which will lead to further delays in the concession period awarded thereby again making it all the more unviable.

I had earlier also hinted at slowing down of the railway projects because of rising steel prices here.

Monday, June 23, 2008

BMC and Monsoons

A man from India Blog lists out the possible reasons for the failure of BMC every year to manage the monsoons and the result is Mumbai drowns. He blames it on Politics, Basic resources not being available to the traffic cops, Subway flooding, Corruption last but not the least Lifestyle of the Mumbai Indians.

Put railways, inland waterways in the driving seat

Dipankar Bose reports in Business Line two crucial issues that India faces, the soaring crude price and urban congestion and the transport sector may have an answer to the problems. He talks about the NESW corridor being developed at huge cost of rs 60000 crores. He argues to say tht roadways should be complemetary and not supplementary to Railways. In practice, however, the opposite is the case. He further says,

"A detailed study by the Planning Commission found that barges of 1,500 tonnes with a load of 75 per cent moved on inland waterways consume 46 per cent of the energy consumed by diesel rail traction and only 7.4 per cent of the energy consumed by diesel trucks.The state of the waterways is certainly better than earlier, but it is still far from satisfactory."

He concludes by saying "Thus, a shift in emphasis away from national highways to the railways and inland waterways for long haul of bulk goods and to the State highways and the district roads for short haul can reduce the nation’s oil import bill and urban congestion. (The author was formerly Senior Economist Assocham, New Delhi and M.N. Dastur & Co. Ltd, Kolkata.)

Saturday, June 21, 2008

Government considering various options to start Mumbai trans-harbour link

After Reliance Infrastructure failed to extend the validity of bids for the sea link project between Sewri and Nhava-Sheva, the Maharashtra government is now considering various options like forming an SPV with financial support from the state-run institutions, to go ahead with the project. The state government may form SPV with funding from City & Industrial Development Corporation, Mumbai Metropolitan Region Development Authority and probably a Japanese bank.

The project will be awarded to Maharashtra State road Development Corporation. The government is also likely to consider the options like inviting fresh bids, close bidding or re-bidding from qualifiers in the final round of bidding - Relaince Infrastructure and Sea King Infrastructure.

Reliance Energy Now Reliance Infrastructure had bagged Mumbai Trans Harbour Link project. Financial bids were opened today for the 25 kilometer six-lane project of Maharashtra State Road Development Corporation (MSRDC). The company has quoted a concession period of 9 years, 11 months, as compared to 75 years quoted by the only other bidder, a consortium led by IL& FS.

Friday, June 20, 2008

Miscellaneous Links

  1. Here is the website where you can book your Bus tickets online. The service has been started by three engineers from Bangalore.
  2. Punjab government plans Rs.1,225 crore for upgrading link roads. The Punjab government is planning an ambitious Rs.1,225 crore investment for expanding and upgrading link roads network in Punjab and modernizing its agricultural marketing infrastructure in the state.Details are here.
  3. Here is an updated map showing completion of Golden Quadilateral and NESW corridor under implementation and the NHDP routes yet to be awarded.

How viable is public transport?

Here is an editorial by L Venkatachalam who argues on the pros and cons of Public Transport. Vs Private Transport. He says to reduce the negative impact of increasing fuel prices, Finance Minister P. Chidambaram has
advised the public to utilise public transportation system (PTS) as an alternative means of transportation. The author further argues to day that Public transport ia not a perfect substitute for Private tranaport. He explains the current condition of public transport in Chennai.

MSRDC to invite fresh bids for water transport project

Maharashtra State Road Development Corporation is in the process of inviting fresh bids on BOOT basis for the Rs.450 crore passenger water transport system (PWTS) between Borivali and Nariman Point. MSRDC is the nodal agency implementing the PWTS project along the western coast of Greater Mumbai.

MSRDC had earlier entrusted the responsibility with Maharashtra Maritime Board (MMB) to develop the project, but however following a series of setbacks, the state government cancelled the tenders.

The passenger water transport system project involves construction of passenger water-transport terminals at six designated locations that include Borivali, Marve, Versova, Juhu, Bandra and Nariman Point.

Thursday, June 19, 2008

Miscellaneous Links

  1. Work on Gurgaon-Jaipur highway to start by year end. Details are here.
  2. Centre to get strict over Delhi’s groundwater use. The Central Ground Water Authority wants a ban on use for domestic purposes in all the nine districts. This news clip says that Delhi will be a desert in the next 10 years if the depleted water table in Mehrauli is not maintained or replenished.
  3. In rural Punjab, drinking water is becoming a silent killer: study.
  4. Reliance Infrastructure to Invest $7 Billion, Expand Overseas.The company, formerly called Reliance Energy Ltd., will borrow as much as 80 percent of the funds.

Wednesday, June 18, 2008

DMRC plans multi-level parking at metro stations

Delhi Metro Rail Corporation (DMRC) is now planning to construct multi-level parking lots at its stations.

The parking lot building, to come up across a 9,000 sq.m area, will have two underground levels - the lower basement will have the platforms, while the concourse, check in facilities and airline counters will be housed in the upper basement. The entry/exit for commuters using the Metro line along with a drop off point for those coming in private vehicles will be created at the ground level. The top seven floors, according to the plan, will be parking lots.

The elevated lots will have parking capacity of about 350 cars and will be constructed by DMRC. The operation and maintenance will be contracted to a private body. The other major metro station on the Airport Express line - at Shivaji Stadium, will also have space for about 70 vehicles.

MMRDA extends monorail financial bidding date

Mumbai Metropolitan Region Development Authority (MMRDA) has extended the financial bidding date for the monorail project because the interested firms said that they needed more time. Earlier the date of finalisation for the financial bids was 15 June 2008, which has now been postponed to 15 July 2008.

The three consortiums in the race are Bombardier Transportation India; Reliance Energy along with Hitachi; and Larsen and Toubro in a joint venture with the Scomi Group of Malaysia says Projects today.

MMRDA is planning to complete work on its Rs.1800 crore monorail project by 2010 to be implemented on four separate routes. MMRDA had invited the bids on April 12, 2008.

Here are some links from where the need of Monorail in Mumbai started.

Tuesday, June 17, 2008

Delhi Cabinet nod for storm-water drain project

On 16 June 2008, the Delhi Cabinet gave its nod for the construction of a Rs.152 crore storm-water drain project from Mahipalpur Chowk to Najafgarh drain.

Five villages will be covered under the project which includes - Mahipalpur, Rangpuri, Rajokari, Samalkha, Kapashera and Dwarka sub-city. Besides, the Airport Colony will also be covered and benefit from it.

The project will be implemented two phases. Work on the project is scheduled for completion within 12 months from the date of award of contract.

It will be a boon to people staying in Dwarka as real estate market will boom more and people staying on rent will have to spare a few more bucks from their pocket as improvement is infrastructue will increase land value.

Monday, June 16, 2008

Miscellaneous Links

  1. NHAI signs pact for six laning of NH-5 stretch. Details are here.
  2. Centre approves Kolkata east-west metro corridor here.
  3. IL&FS emerges lowest bidder for JNPT's SEZ project with Rs.72 lakh whereas E & Y quoted Rs. 2.5 crore.
  4. Mumbai Metro One achieves financial closure here.

Mumbai dominates Centre's Viability Gap Funding Scheme

Infrastructure projects in Mumbai dominate the Centre's viability gap funding scheme, government statistics indicate says M.S.Kapadia. Mumbai has sought viability gap financing of Rs 3,415 crore together for Charkop-Bandra-Mankhurd line (Rs 5,527 crore) and Versova-Andheri-Ghatkopar line (Rs 2,356 crore) - and the Rs 5,535-crore Western Freeway Sea Link. He further says Hyderabad, however, gets the credit for having the highest approved amount under VGF. For the proposed Rs 8,760 crore-metro rail project in the city, the Centre has given in-principle approval for Rs 1,692 crore.

He also explains that
The Empowered Committee sanctions VGF up to Rs 200 crore. Amounts exceeding Rs 200 crore are sanctioned by the Empowered Committee with the approval of the Union finance minister.

Friday, June 13, 2008

Govt’s slow pace hinders development at JN Port

The project is key to the port’s plan to develop a new container terminal, its fourth, to overcome capacity constraints in handling more container cargo. But, the slow decision-making, political and bureaucratic interference, and the lack of autonomy have delayed implementation of projects and purchase of equipment to replace old and insufficient cargo handling systems. The news clip is here.

And the bill to convert 11 of the 12 Indian ports into corporate entities has been stuck in Parliament for more than a decade as lawmakers are divided over the issue. “Corporatization of major ports could be a viable option to improve the operational efficiency of these ports,” said Priya Safaya Fotedar, director in charge of policy at the Federation of Indian Export Organizations, a body of export organizations.

Of regulators, tariffs and ports in India

Since 1997, after the Tariff Authority for Major Ports (TAMP) came into existence the Cargo-handling terminals run by government-owned ports as well as private operators have to take clearance from the tariff regulator before fixing and revising tariffs says P. Manoj.

He says" The cargo-handling capacity of India’s ports (both major ports and those owned by the state governments, but given to private firms for development and operations) has to be doubled to at least 1,500 million tonnes (mt) a year by 2012 from about 756mt now.

The article further says that the shipping ministry has been resisting demands from private investors to dismantle TAMP and leave tariff setting to market forces, arguing that competition for cargo handling at major ports has not reached the desired level for this. The shipping ministry’s definition of competition is an excess capacity of 30-40%.

P. Manoj is Mint’s resident shipping expert and will write on issues related to shipping and logistics every other Friday.

Thursday, June 12, 2008

Miscellaneous Links

  1. G.R. Madan, Director (MRTS), Mumbai Metropolitan Region Development Authority, talks to Dilip Phansalkar on the Mumbai Metro project here.
  2. Chinese trains for first route of Mumbai Metro.
  3. Swiss challenge route for Punjab expressway says Venugopal Pillai.
  4. SREI to invest in rural IT kiosks.

Wednesday, June 11, 2008

Costlier steel halts railway projects

Soaring steel prices are now threatening to derail India Railway’s projects. Port connectivity links in Paradeep, Orissa, and Krishnapatnam in Andhra Pradesh are likely to be delayed as cost of projects has gone up by over 70% on account of high steel prices. It is likely that the projects would be modified to bring down the cost.

Usually 5 % inflation is considered every year for assessing the financial feasibility of the projects.
The original cost for the 82-km broad gauge Haridaspur-Paradeep line was Rs 444 crore. This has now gone up to Rs 748 crore which is 68% higher than the estimated cost.The news clipping is here.

PPP fades off from Metro Rail Projects

PPP fading out of metro rail thts wht research bureau of Project Monitor says. According to them, PPP route cosumes more time to decide the developers. MMRDA is doing away with PPP route for Line 2 of Phase 1 of Mumbai Metro. Likely possibility is that MMRDA will follow Engineering Procurement Construction(EPC explained here) on lines of DMRC. Moreover they further go on saying that Line 3 from Colaba to Bandra(17 Km) fully underground line involves huge cost around 10000 crores for which PPP was not forthcoming.
According to MMRDA official "Thirty per cent of the cost will come from the Centre's viability gap funding mechanism and the state government while 70 per cent will come from Japan Bank for International Cooperation. There is no scope for PPP here."

More details are here.

Tuesday, June 10, 2008

Miscellaneous Links

  1. The Committee on Infrastructure (CoI), under the Chairmanship of the Prime Minister formed with an objective of ensuring world class infrastructure.
  2. This report gives the Projections of Investment in Infrastructure during the Eleventh Plan
    (2007-08 to 2011-12) for all the sectors i.e. Roads, Railways, Electricity,Irrigation,Ports, Airports sector etc.
  3. New metro project for Kolkata approved.
  4. Pipavav Shipyard ready to make vessels for Indian Navy.
  5. This Map draws Golden Quadilateral, NSEW corridor, Major Ports and Major Airports.

India Infrastructure Finance Company Limited (IIFC)

IIFC is expected to provide long-term debt for financing infrastructure projects for a longer duration. It lends upto 20% of the capital costs of a project. Special preference is given to PPP projects.
Similar initiative for PPP is India Infrastructure Project Development Fund. Details are in my earlier post.
Some differences between the two can be spotted out from their guidelines.
  1. The IIPDF will be available to finance an appropriate portion of the cost of consultants and transaction advisors on a PPP project and IIFC provides Long term debt for infrastructure projects.
  2. The IIPDF would assist ordinarily up to 75% of the project development expenses and IIFC will lend upto 20% of the capital costs of a project
  3. The assistance from IIPDF is in the form of interest free loan which will be recovered on successful completion of bidding process and for IIFC the rate of interest charged shall cover the funding costs including administrative costs and guarantee fees .
  4. Proposals without Viability Gap Funding can also be submitted for funding under IIPDF and under IIFC only commercially viable projects can avail this facility or the projects which become viable after the viability gap funding. This presentation (slide 9) gives details on VGF and IIFC.
  5. Eligibility:Proposals for funding under IIPDF would cover the entire gamut of PPPprojects, i.e. Build Operate Transfer (Toll), BOT (Annuity), long term management contracts etc. whereas under IIFC a project shall meet the following crieteria:The project shall be implemented (i.e. developed, financed and operated for the Project Term) by:
    (i) A Public Sector Company;
    (ii) A Private Sector Company selected under a PPP initiative; or
    (iii) A Private Sector Company.

More details about IIFC are here and on IIFC website .

Monday, June 9, 2008

"Civil Engineering Monument of the Millennium"

Kansai International Airport is an international airport located on an artificial island in the middle of Osaka Bay, off the shore of the cities of Sennan and Izumisano and the town of Tajiri in Osaka Prefecture, Japan. (It should not be confused with Osaka International Airport, which is closer to the city and now handles only domestic flights.) It was ranked 4th overall in the Airport of the Year 2006 awards named by Skytrax, next to Singapore Changi Airport, Hong Kong International Airport and Munich International Airport. More details are here.

Maharashtra toll rates fixed upto 2052 in 2000

Maharashtra State Road Development Corporation (MSRDC), the road infrastructure developer of the most industrialised state in the country, has toll rates for its newly constructed roads fixed and notified till the year 2052. The toll rates are revised after every three years. The details can be seen from todays Economic times. Table A shows tool rates of the Projects within 20 crores and Table B shows toll rates of the Projects within 20-75 crores.

Classification of vehicles
1-Two wheelers, Rickshaws- No toll
2A-Car, jeep, Tata Sumo, mini bus(less than 12 passengers) etc
2B-Mini Bus (Passengers between 12-20 only)
3-Truck and Bus
4-Tractor, Trailer , Multi Axle Vehicles etc.

Table A- Projects within 20 crores
Year 2A 2B 3 4
1/4/1998- 30/6/2001 8 12 25 40
1/7/2001- 31/3/2004 10 15 30 50
1/4/2004-31/3/2007 10 20 40 60
1/4/2007-31/3/2010 15 20 45 70
1/4/2010-31/3/2013 15 25 55 85
1/4/2013-31/3/2016 20 30 65 100
1/4/2016-31/3/2019 25 35 75 120
1/4/2019-31/3/2022 30 45 90 145
1/4/2022-31/3/2025 35 50 105 170
1/4/2025-31/3/2028 40 60 130 200
1/4/2028-31/3/2031 50 70 150 240
1/4/2031-31/3/2034 60 90 180 290
1/4/2034-31/3/2037 70 100 220 350
1/4/2037-31/3/2040 80 120 260 410
1/4/2040-31/3/2043 100 150 310 490
1/4/2043-31/3/2046 120 180 360 580
1/4/2046-31/3/2049 140 210 430 700
1/4/2049-31/3/2052 170 250 520 830

Saturday, June 7, 2008

Expression of Interest invited for Equity by Railways

Rlys invites EoI for equity engine in freight links: These include Reliance Industries’ (RIL) Hamrapur-Rewas, Balaji Infrastructure’s Dighi-Indapur and Angul-Sukhinda stretches. The investment involved in the projects is Rs 2,000 crore. The railway lines will cater to coal, petroleum, fertilisers, iron ore and containers. The News clipping gives further details.
I was personally involved in preparing the estimates of operation and maintenance cost of Dighi Indapur Rail Link which was for the distance of 42 Kms. O & M includes both fixed and variable cost and in this case O & M was estimated by Fully Recovered cost methd. Both these costs have different components. By estimating the cost of staff establishment, cost of material etc, we arrived at the final figure of Rs. 1425 per train Km for 2004-05.
It was a very interesting exercise to do as I learned a lot.

Friday, June 6, 2008

Insight on ‘India Infrastructure Project Development Fund’

The Union Finance Minister in his Budget Speech for 2007-08 announced in the Parliament the setting up of a Revolving Fund with a corpus Rs. 100 crore to accelerate the process of project preparation.

Ministry of Finance has made the scheme and guidelines for India Infrastructure Project Development Fund.

The India Infrastructure Project Development Fund provides financial support for quality project development activities to the States and the Central Ministries with initial contribution of Rs. 100 crore. Although it is envisaged as a revolving fund and would get replenished by the reimbursement of ‘investment’ through success fee earned from successfully bid projects, should there be a need, it can be supplemented in subsequent years through budget support. The IIPDF would assist ordinarily up to 75% of the project development expenses. The assistance from IIPDF would ordinarily be in the form of interest free loan. On successful completion of the bidding process, the project development expenditure would be recovered from the successful bidder.

The memorandum for consideration is also attached which asks for the details of the project to be funded, technical information, legal, social and environmental aspects, Financial Analysis details etc.

The IIPDF Scheme aims to put in place a mechanism to fund potential Public Private Partnership projects’ project development expenses including cost of engaging consultants and transaction advisor, thus increasing the quality and quantity of successful PPPs and allowing informed decision making by the Government based on good quality feasibility reports. The IIPDF Scheme will assist projects that closely support the best practices in PPP project identification and preparation

The Guidelines are here.

Thursday, June 5, 2008

Links to intersting News Items

Dear Readers,

I have been little slow in blogging cos of busy schedule. Will try to catch soon.

  1. Building India`s highest dam in the heart of Arunachal.
  2. Cheers for Public sector on success of Delhi Metro."The Delhi Metro is a stunning example of how a government project can be done properly," says Delhi Metro Rail Corporation managing director Elattuvalapil Sreedharan, a 74-year-old, yoga-practicing civil engineer.
  3. The engineering-procurement-construction (EPC) contract route is currently most preferred for implementing metro rail projects. Venugopal Pillai eplains here.
  4. The wikipedia version of EPC is here. (The author is Senior Engineer - Civil, TCE Consulting Engineers Ltd, and has worked on EPC contracts from the owner's/EPC contractor's side)

Wednesday, June 4, 2008

Miscellaneous Links

  1. New Bangalore airport is a dream going sour.
  2. Centre plans a give-and-take in Goa, may scrap 12 SEZs.
  3. PPP in Clinical Research in Gujarat.
  4. Railways to give Rs10,000 cr order to firm that builds loco factory.
  5. This link gives an update about the PPP projects in Punjab. It is a presentation made by Punjab Infrastructure Development Board. It gives an overview of the completed and ongoing PPP initiatives.

Tuesday, June 3, 2008

Introduction to NHDP

National Highways Authority of India (NHAI) is mandated to implement National Highways Development Project (NHDP) which is:

  • India 's Largest ever highways project
  • World class roads with uninterrupted traffic flow

The National Highways have a total length of 66,590 km to serve as the arterial network of the country. The development of National Highways is the responsibility of the Government of India. The Government of India has launched major initiatives to upgrade and strengthen National Highways through various phases of National Highways Development project (NHDP), which are briefly as under:

NHDP Phase I : NHDP Phase I was approved by Cabinet Committee on Economic Affairs (CCEA) in December 2000 at an estimated cost of Rs.30,000 crore comprises mostly of Golden Quadilateral (5,846 km) and North South-East West Corridor (981km), port connectivity (356 km) and others (315 km). The progress of this stretch can be viewed here.

NHDP Phase II : NHDP Phase II was approved by CCEA in December 2003 at an estimated cost of Rs.34,339 crore (2002 prices) comprises mostly NS-EW Corridor (6,161 km) and other National Highways of 486 km length, the total length being 6,647 km. The total length of Phase II is 6,647 km. Phase II details are here.

NHDP Phase-III: Government approved on 5.3.2005 upgradation and 4 laning of 4,035 km of National Highways on BOT basis at an estimated cost of Rs. 22,207 crores (2004 prices). Government approved in April 2007 upgradation and 4 laning at 8074 km at an estimated cost of Rs. 54,339 crore. Phase III progress is here.

NHDP Phase V: CCEA has approved on 5.10.2006 six laning of 6,500 km of existing 4 lane highways under NHDP Phase V (on Design Build Finance Operate basis). Six laning of 6,500 km includes 5,700 km of GQ and other stretches. Phase V can be seen here.

NHDP Phase VI: CCEA has approved on November 2006 for 1000 km of expressways at an estimated cost of Rs. 16680 crs .

This link gives the details of the completed projects on the Golden Quadilateral stretch.

Miscellaneous Links

  1. JNNURM City-wise Status of Implementation of Reforms (as on 20th December,2007) can be viewed here.
  2. NHDP in a Fix.
  3. VII Phase of NHDP was approved by the government for the development of road projects including construction of ring roads, bypasses and tunnels under Phase VII of National Highways Development Programme at a cost of Rs 16,680 crore on Build Operate and Transfer(BOT) basis. NHAI website has no mention of phase VII.
  4. Greenfield Hyderabad airport lands green tag.

Monday, June 2, 2008

JNNURM Status with respect to Bangalore and Andhra Pradesh.

JNNURM Progress in BANGALORE: Karnataka has sought funds for 19 JNNURM projects to be implemented in Bangalore and Mysore in the union budget 2008-09.

The funding for the JNNURM has gone up from Rs. 5,482 crore in 2007-08. “We have placed for approval projects that require big capital expenditure,” said Jawaid Akhtar, Managing Director, Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC), which is the nodal agency for JNNURM projects in the State.

Nineteen projects in the two cities are to be implemented at an estimated cost of Rs. 3,658.64 crore, with the Centre providing 35 per cent for projects in Bangalore and 50 per cent for projects in Mysore. These 19 projects include water supply, sewerage, roads and basic services for the urban poor.

The JNNURM is the only centrally assisted scheme for the renewal of 63 urban conglomerates, including Bangalore and Mysore, and will be implemented up to 2012.In the coming year, the State Government is likely to place for approval 47 projects for infrastructure services such as water, drainage, roads and improvement of basic facilities in slums.

The total investment for these 47 projects is Rs. 7,535.32 crore. Forty-seven projects (41 in Bangalore and six in Mysore) with an investment of Rs. 3,254.39 crore are in various stages of implementation. Out of this investment, Rs. 1,692 crore has been allocated for the water, sewerage and drainage sector, Rs. 1,030 crore for roads and road-related infrastructure and Rs. 510 crore for basic services to the urban poor in 130 slums in the two cities. The Centre has, however, released only Rs. 315.62 crore for the projects, and the State Government has contributed Rs. 135.86 crore.
ANDHRA PRADESH: Six JNNURM works come to a grinding halt in city. Poor pace of works have badly hit projects worth Rs. 40 crores. Vijaywada Municipal Corporation had invited tenders for these projects about six times but the contractors are not convinced because of cost escalation. The status of another five projects is no better. Increase in steel prices, political interference and poor pace of works have badly hit projects of a value of nearly Rs. 40 crores.
Here is a presentation which gives an overview of JNNURM concepts, policies, Implementation status and achievements.

Saturday, May 31, 2008

Miscellaneous Links

  1. L&T eyes JVs with Railways : Mr Nayak (President L & T) said: “The Railways has decided to set up new manufacturing capabilities through the public-private-partnership (PPP) route, and we are interested in floating a JV with them.” The news clip is here.

  2. Mumbai Metro to be operational through PPP :Urban Development Minister Jaipal Reddy said.

  3. IFC to advise Maharashtra on PPP infra projects: Maharashtra has roped in International Finance Corp, an arm of the World Bank, to advise it on developing infrastructure projects through public-private partnerships (PPP) route in the state. This news clip confirms that.

Friday, May 30, 2008

JNNURM- Government's Initiative

JNNURM refers to Jawaharlal Nehru National Urban Renewal Mission which was established in lieu of the increasing urban population and the need for infrastructure required by them including the basic services to the urban poor .

The Mission statement is "The aim is to encourage reforms and fast track planned development of identified cities. Focus is to be on efficiency in urban infrastructure and service delivery mechanisms, community participation, and accountability of Urban Local Bodies (ULBs) / Parastatal agencies towards citizens".The duration of the Mission would be seven years beginning from the year 2005-06. Evaluation of implementation of the Mission would be undertaken before the commencement of Eleventh Five Year Plan and if necessary, the program can be calibrated suitably.

Financial Assistance: Under JNNURM financial assistance will be available to the ULBs and parastatal agencies which could deploy these funds for implementing the projects themselves or through the special purpose vehicles (SPVs) that may be expected to be set up.
Areas of Assistance: Assistance for Capacity Building, City Development Plan (CDP), Detailed Project Reports (DPRs), Community Participation, Information, Education and Communication (IEC), Investment Support on a project-specific basis for eligible sectors and projects, Ensuring Bankability of Projects etc. The Details are in the toolkit.

Eligible Cities: At present 63 cities have been identified under the Mission. The cities have been selected under following criteria:
A Cities/ UAs with 4 million plus population as per 2001 census (7 Cities)
B Cities/ UAs with 1 million plus but less than 4 million population as per 2001 census (28 Cities)
C Selected Cities/ UAs (State Capitals and other cities/ UA of religious/ historic and tourist importance) (28 Cities)

JNNURM is the single largest urban initiative taken by Govt. of India and it is believed that by the end of 7th year there will be a big boost in the urban renewal and it was the endeavor of the Govt. of India to give “big push” in terms of both financial and physical achievements. Last but not the least these 63 cities selected under JNNURM is on the basis of Census 2001 figures and comprise 70% of the urban population of the country.

Introduction to the Blog

This blog will primarily focus on the issues related to infrastructural services varying from Physical (transport) to social (basic services for urban poor) infrastructure. The emphsis will be on the recent developments in this sector.

Need of PPP

To begin with, PPP refers to public private partnership which specifically means that the government and the private sector will join hands for specific projects according to the pre agreed conditions given in a document called Concession Agreement. This document gives the terms and conditions regarding the cost and revenue sharing model, upfront payment if any, etc. between the two. The next stage is the invitation of bids for the project. The selection crieteria may be the concession period or maximum upfront payment whichever is applicable.

There are many types of PPP. The details are here.

The need of PPP arose because of growing needs of the economy and decresing reserves of the government. By inviting private parties, Government can access their financial resources,
knowledge of technologies, managerial efficiency. This paper explains all.