PPP MODEL IN DRY BULK & LIQUID: SUCCESS OR FAILURE ?? BY: HIREN SHAH ADANI GROUP DT.: 8TH Jan.2016 GUJARAT JUNCTION 2016

PPP – THE BEGINNING  In October 1996, the Government published the port privatization policy named as ‘Guidelines to be followed by the Major Port Trusts for Private Sector Participation in the Major Ports’, under Section 42 of the Major Port Trusts Act 1963. The policy guidelines required that private participation should be by tender on a build, operate and transfer (BOT) basis. The successful bidder would be decided on the basis of the maximum royalty/revenue share offered on the minimum guaranteed cargo handling/turnover. Subsequently, a bill was introduced in the Parliament to replace the Port Laws Amendments Ordinance 1997 promulgated by the President of India and the Major Port Trust Act 1963 was amended in April 1996 to enable the Central Government to set up the Tariff Authority for Major Ports (TAMP).

PPP PROJECTS APPROVED & THEIR STATUS COST IN RS CRORE PROJECTS APPROVED PROJECTS AWARDED PROJECTS COMPLETED PROJECT UNDER IMPLEMENTATION NO COST CAPACITY IN MTPA 86 42000 605 56 23000 364 30 9000 208 26 14000 156 SOURCE: http://www.pppshipping.nic.in/. Almost 65% of the approved projects have been awarded Out of the awarded projects more than 50% of the projects are completed and commercial operations have started.

PPP – ADVANTAGES PPP Model was devised by Central & various State Governments to attract Investments in Infrastructure based sectors. Below Advantages of PPP Model were envisaged Quick Mobilization of Private Capital Competitive Project Cost Quick Execution Achieving Operational Efficiency by Expertise of Private Operators Saving Government Funds for Social causes

NATION’S MOST SUCCESFULL PPP PORT In line with Port Policy 1995 and the BOOT guidelines 1997 of Government of Gujarat (GOG), Adani Ports & Special Economic Zone Ltd. (APSEZ) has been granted the “Concession Rights” for the Mundra Port development for a period of 30 years thorough a Concession Agreement (CA) executed between APSEZ, GoG and Gujarat Maritime Board (GMB) on 17th February 2001. It has been 15 years & today Adani Group operated Mundra Port is India’s Highest Cargo Handling Commercial Port, handling more than 100 MMTPA Cargo.

PPP MODEL – SECRET TO SUCCESS “PPP Model & the relevant Policies there off are primarily to be implemented by Concessioning Authority (Major Port) & thus they are the key drivers for success of a PPP Project.” Assisting Concessionaire during Construction as well as Operation Phase Treating Concessionaire as a Partner generating profits for both Quick resolution to the Commercial Issues as delay may result into Revenue loss. Relentless support of the Concessioning Authority through the period of the Concession.

PPP – THE STORY SO FAR INITIAL PHASE CURRENT MARKET SCENARIO RELUCTUNCY TO PARTICIPATE IN PPP PROJECTS TOO LOW PRICE BIDDING RESULTING IN SCRAPPING THE PROJECT BY GOVERNMENT POST IMPLEMENTATION OF SOME PPP PROJECTS DIFFICULTY IN RESOLVING INITIAL TEETHING ISSUES COMMERCIAL VAIBILITY OF THE PROJECT QUESTIONABLE INITIAL PHASE QUEING UP OF INVESTORS AGGRESSIVE BIDDING

PPP – WHERE ARE WE GETTING STUCK? CONCESSIONAIRE’S PERSPECTIVE

1.ISSUES WITH MODEL CONCESSION AGREEMENT Water tight CA with limited Scope for Amendments Lack of flexibility considering a long tenure of 30 years Acts as a roadblock towards advancement & enhancement of the project. With the result, Concessionaire as well as Concessioning Authority, both feel helpless.

2. DENIAL OF LEVEL PLAYING FIELD Different structure, policy & regulation on PPP model of State Government compared to Central Government Anomalies in Tariff Fixation System by TAMP Different Tariff Guidelines for different Projects. No Scope for rectifying the tariff anomalies in post bid scenario

3. FAILURE IN ASSESSMENT OF THE PROJECT PPPPP RULE FOR SUCCESS OF PPP Quality of Project Feasibility Study compromised in hurry to meet the deadlines of floating tenders of Project Sharing limited information with the Prospective bidder at the bidding stage Limited homework on the Commercial Viability of the Project & market trends thereof

4. Delay in Govt. Clearance & Fulfilment of Obligations by Concessioning Authority Delay in procuring statutory clearances(Like EC, CRZ etc) Delay in fulfilling obligation of Port allied services like Railway/Road Connectivity, Channel Draught as per CA, Power & Water supply arrangements etc. Lack of Major Ports initiative to timely coordinate & involve other project related Govt Bodies like Railways, cusotms, Power & Transmission authorities, National Highways etc.

WE STILL HAVE A LONG WAY TO GO AND LOT OF WORK TO DO

Thank you