How Metro Projects can be made Successful under

PPP

By,

Ramakrishna Reddy,

MD,

Amaravati Metro Rail Corporation Limited

Vijayawada, AP.

What is PPP???

• Public Private Partnership ( PPP)

• It is not Public(GOI) Public(State Govt) Partnership (

PPP) ?

Following Metro projects in India are Privatised

1) Delhi Airport Metro Express Line (DAMEL)

2) Rapid Metro Gurgaon Phase-I

3) Mumbai Mono Rail

4) Mumbai Metro Line-1… This is only PPP project

5) Hyderabad Metro Rail Project

In reality there is no Public (Govt.) partnership (shareholding) inprojects 1,2,3 & 5. Hence these metro projects are privatisedprojects by respective State Govts. Mumbai Metro Line-1 can becalled as PPP project as there is MMRDA share of 26%

Cont…..

In a Public Private Partnership project, there has to be a share holding of GoI, State Govt. and Developer in the SPV

There has to be Directors representing from both Govt’s. in the SPV

Shareholding of GoI/State Govt. can be to any extent which can be decided in the policy

My previous Experience

ShamshabadInternational

Airportunviable

Project was made viable Under PPP

Mainly because of 3 stake holders

in the SPV

GoIGoAP

Concessionaire

Shamshabad International

Airportunviable Project

was made viable

Under PPP

Mainly because of 3 stake holders

in the SPV

Share Holding Pattern in HIAL and HML

HIAL

GMR63%

MAHB11%

GoT13%

(2 Directors)

GoI13%

(2 Directors)

HML

L&T100%

GoTNo share

No Directors

GoINo share

No DirectorsVGF=Rs 1458 crs

3 Share holders Single Share holder

Share Holding of SPV with both Govt’s is most important for Mega Projects to make it successful

under PPP

Concessionaire74%

Comparison of METRO withGovt. Funding Model & Proposed PPP Model

METRO- SPVTwo share Holders

GoI16%

4 Directors

JICA49%

GoAP35%

4 Directors

METRO- SPVwith 3 share

holders

State Govt.30% Share2 Directors

GOI20% VGF

Share2 Directors

Concessionaire 50% Share5 Directors

• It would take 30 to 40 years for repayment of the loans to funding agencies. • Concession period 50 years (or mutually agreed)

• Ticket rate fixation should rest with the SPV• which will be notified by the Govt.• 3 share holders.• BOUND to be SUCCESSFUL

PROJECT COST BREAK UP

42kmProject costRs 13488 crs

Civil componentsCost Rs 3793 crs

28%

E&M components

Cost Rs 2570 crs19%

Escalation Cost Rs 2613 crs

19.5%

State Taxes + Land +R&R

Cost Rs 2452 crs18.5%

Central taxesCost Rs 1349 crs

10%

General charges Rs665 crs 5%

DEVELOPERINVEST

60% (E+D)

GOI=20%GOAP=20%

D1 D2 G1

G2G3

D3

TYPICAL EXAMPLE OF FUNDING PATTERN

Sr. No Organization Type of FundingAmount

(Rs/ Crore)

% of contribution

excluding State Taxes and

Acquisition Cost

1 GoI Equity 829.50 14.26%

2 GoAP Equity 829.50 14.26%

3 GoI SD for Central Taxes 333.50 5.74%

4 GoAP SD for Central Taxes 333.50 5.74%

5JICA / Bilateral/ Multilateral

/MarketLoan 3489.00 60.00%

6Total Project Completion Cost excluding Land and State

Taxes5815.00 100%

7 GoAP Land including R&R cost 954.00

8Total Project Completion Cost including Land

acquisition, R&R but excluding State Taxes6769.00 GOI = Rs 1163 crs (16%)

9 IDC (PTA) 54 GOAP=1163+954+389

=Rs 2506 crs (35%)10 GoAP State Taxes 389.00

11Total Project Completion Cost including Land

acquisition, R&R and State Taxes7212.00 JICA= Rs 3543 crs (49%)

10

Way ForwardNo specific Policy on Implementation of Metros under PPP

model is available, except for contributing maximum 20% VGF

The present policy of MoUD for Govt. funding models is,on50:50 equity in the jointly owned SPV.

Same recommendation is avaiable in MoUD Policy for PPPmodel, but GOI is not implementing such share holdingsystem…?

GOI, State Govt and Concessionaire should be the shareholders in the PPP-SPV

If both Central and State Govt’s. contribution is 45-55% of theproject cost in the form of interest free loan/ sub-ordinatedebt/ Grant, the concessionaire can easily contribute theremaining 50% in the form of debt and equity

IFL/SD can be paid back after main debt is cleared or after 25years from COD.. Which wver is later

Thus, Metro Projects can be made Success under PPP