Public Private Partnerships Initiatives of Madhya Pradesh Government in Infrastructure Development

Structure of Presentation Madhya Pradesh – Economic Indicators PPP Framework of Madhya Pradesh Govt. About Madhya Pradesh Road Development Corporation Evolution of MPRDC MPRDC project portfolio Financial Models for Project Financing Innovative PPP Projects Innovative PPP Projects undertaken by MPRDC Value for Money – Significance Innovative PPP projects undertaken by other departments Swiss Challenge Policy Venture Capital Fund

Madhya Pradesh – Economic Indicators

Madhya Pradesh – ‘The heart of India’ India – An emerging economy… Major Cities Delhi Chennai Pune Kolkata Mumbai Bangalore Madhya Pradesh Bhopal Gwalior Jabalpur Indore 200 KM 300KM 400KM 500 KM GSDP- INR 2488 billion for FY14 Second largest state in India - 308,252 sq. Km. Current Population – 75 million Road connectivity between major & distance in kilometers GSDP is at constant prices, base year FY05

Consistently strong Financial fundamentals 18% average growth rate in Tax Revenues during FY09-FY14 Consistently revenue surplus since 2004-05 6 times the growth in Capital Expenditure during FY 04- FY 14 Expected reduction on Interest payment burden from 22% in FY04 to 7% in FY14 22% expected outstanding debt* in FY14 (limit under FRBM Act- 34%) *(as % of GSDP)

PPP Framework of GoMP

PPP Framework of MP Government Cabinet Committee on PPP under Chairmanship of Hon’ble Chief Minister State Level empowered Committee on PPP under Chairmanship of Chief Secretary PPP Cell in Directorate of Institutional Finance VGF as well as non VGF models followed for various sectors. DBFOT Model of PPP and MCA are adopted Two stage bidding RFQ and RFP MP Infrastructure Investment Fund Board Estabished for support of unviable infra projects VGF contributon of GoMP released through MPIIFB

About MPRDC & Its Evolution

Transition to New Regime Background 1. MP was known for bad roads 2. Improper design based on traditional approach. 3. Budget driven construction methodology in place of demand driven. 4. Poor fund flow for projects – low budget outlay. 5. Result - Poor Connectivity, low industrial investment, sluggish business growth New Regime 1. Government-embarked on program to revamp road sector. 2. M.P. Bridge Corporation Ltd. 3. Revived in December 2000 and 4. Given mandate to upgrade highways on PPP 5. Considering poor traffic, grant was made bidding parameter. 6. Madhya Pradesh Infrastructure Investment Fund Board (MPIIFB) created to arrange funds for grant. 7. Rs. 500 Crore outlined for the purpose. 8. Approx. 2000 km. Road length identified to be developed in phases.

About Madhya Pradesh Roads Development Corporation Incorporated as wholly owned State Govt. Company under Companies Act 1956, in July 2004. State Highway Authority under the State Highway Act 2004. Mandated to develop, regulate and maintain highways with focus on PPP. The Chief Minister of MP is the Chairman, Minister of Public Works Department & the Chief Secretary are the Vice Chairmen, the Secretaries of the PWD, Finance , Forest, Urban Affairs and Mining Dept. are members on the Board. MD, MPRDC is also a Director.

Shift in Strategy Takeover of entire state highway network including maintenance. To overcome the limitations of existing PPP model new financial models introduced. All remaining state highways were taken for development in different stages. Important Major District Roads also taken up to complete the network under PPP. Performance based maintenance introduced through OMT. MOU signed with MORTH for reconstruction of National Highways.

MPRDC Project Portfolio

Road Portfolio MPRDC Category Total Length (In Kms) MPRDC (In Kms) National Highways 4709 1443 State Highways 10297 Major District Roads 19574 5032 TOTAL 34580 16772

Project Portfolio MODEL NH SH MDR OTHERS TOTAL In INR Crores BOT (TOLL) 6744 11227 96.73 ROB/RUBs - 1330 Border Check posts - 1094 Singrauli Airport - 250 OMT - 90 20832 BOT (TOLL+ANNUITY) - 2005 970.16 2975 BOT (ANNUITY) 101.04 2321.11 Medical Colleges - 760 ARS - 12.50 3195 ADB FUNDED PROJECTS 4707 (ADB-I,II,III) 3000 (ADB-IV) 7707 REGULAR CONTRACT/ EPC 3484 1821 5305 3000 (JICA ODA Loan) Building Works - 1053 4053 GRAND TOTAL 10228 19861 9388 4590 44067 In INR Crores

OUR PROJECT COST SHARE

EXTERNALLY AIDED PROJECTS Loan No. Length(In km) Project Cost (US $) Status 1959-IND MPSRDP 1602.59 190 Million Completed 2330-IND MPSRSP-II 1701.52 400 Million 2736-IND MPSRP-III 1080.37 375 Million Nearing completion ADB-IV 1500 of MDR 500 Million Loan Activated J.I.C.A ODA Loan Proposed 16

Financial Models for PPP

PPP- Financing Models Public Private Partnership Models Invite private investment by providing grant/ annuity to/ premium by the concessionaire on competitive bidding Public Private Partnership Models Build- Operate Transfer BOT (Toll) BOT (Toll + Annuity) BOT (Annuity) Deemed Shadow Fee Model OMT

Engineering Procurement & Construction PPP- Financing Models Engineering Procurement & Construction Engineering Procurement & Construction External Funding Agencies (Asian Development Bank) State Budget

Initiatives of MPRDC – BOT MODEL Pioneer in the field of road sector development through Public Private Partnership in India Adopted DBFOT Model of Tendering based on Model Concession Agreement of Planning Commission of GOI. First agency in the country to get VGF from GoI. Under VGF scheme of GOI 40 % of project cost is sanctioned to make projects viable. 20% is given by GoI. 20% is given by the State Government. GoI has sanctioned INR 684.2 Crores as VGF for 24 BOT projects of MPRDC. In several Projects MPRDC receives Premium. VGF/Premium is the bidding criteria. Distance based user fee (Toll) B o T

Initiatives of MPRDC - BOT (Toll + Annuity) Model Hybrid Model of BOT (Toll) & BOT(Annuity). Formulated to increase Viability of the projects which are not viable on pure toll. Toll as a sweetener. Concession Period is kept 15 years including 2 years of construction. Six Monthly Annuity is quoted by the bidders. Annuity is the bidding criteria. Annuity is the deferred payment over a period of 13 years as per payment schedule defined in Concession Agreement. Incentive for early completion as a bonus along with first annuity. Penalty for delay as a reduction of annuity. B o T + Annuity

Initiatives of MPRDC - BOT (Annuity) Model Formulated to implement the projects which are not viable on pure toll or Toll+ Annuity Models. Concession Period is kept 15 years including of 2 years of construction. Six Monthly Annuity is quoted by the bidders. Annuity is the bidding criteria. Annuity is the deferred payment over a period of 13 years as per payment schedule defined in Concession Agreement. Incentive for early completion as a bonus along with first annuity. Penalty for delay as a reduction of annuity.

BOT(OMT) Model O M T OPERATE MAINTAIN Roads build under Asian Development Bank assistance and state budget taken for maintenance and tolling under this mode Concession Period – Project specific, normally 9-12 years Concessionaire to undertake management, operation & maintenance of Highways Augmentation of facility to be done Construction, monitoring and inspection by Independent Engineer. Tolling only on commercial vehicles. Passenger vehicles exempt including buses. O OPERATE M MAINTAIN T

Deemed Shadow Fee Model Deemed shadow Toll is given in lieu of exempted vehicles. Acts as sweetener to increase the viability of project with maximum permissible VGF of 40%. It is given in addition to maximum VGF of 40% with maximum limit of 10%. This will be contributed by State Government. Proposal of deemed shadow fee model is pending with DEA GOI. OPERATE MAINTAIN

Innovative PPP Projects

Innovative Projects under PPP Projects Under Implementation Border Check Post Accident Response System Projects Under Development Railway Over/Under Bridge Medical Colleges Singrauli Airport

Innovative PPP Projects – Border Check Post Up-gradation and integration of 24 Border Check Posts in MP covering all State border crossings An integrated, real time system for Transport, Commercial Tax, Forest, Mandi & Mining departments Purpose of the project To increase the revenue of State Government. To control overloading & damage to state roads. To reduce leakage & corruption. To use technology for reduction in transaction time and ensuring complete transparency. Check posts to serve as facilitation centres

AUTOMATION SYSTEM CENTRAL CONTROL FACILITY SURVEILLANCE CAMERA ALL TRANSACTIONS, VEHICLE PICTURES DIMENSIONS MEASUREMENT EQUIPEMENTS Operator Booth Barrier & Traffic Lights Control License Plate Reader Camera RFID Reader Lane Traffic Controller WEIGHING CONTROLLER WEIGHBRIDGE Lane Computer Automatic Vehicle Classification System

CCF GWALIOR BUILDING CCF Gwalior Conference Room Side view

Border Check-post e-Data Capture Components Automatic Vehicle Classifier Automatic Number Plate Reader Electronic Weigh Bridge Automatic Boom Barrier and Traffic Light 30

Innovative PPP Projects – Under Development Railway Over/Under Bridge Development of ROB’s with more than 1 lakh T.U.V traffic in the state on PPP. Total 34 ROB’s in two parts are being taken up costing INR 1349.74 Crores . First Phase includes 16 ROB’s/14 LHS’s cleared by DEA with grant of 40%. Bids invited but no Bids received. Second phase 18 ROB’s/ 9 LHS’s is submitted to DEA. Railway will provide 50% share upfront & Balance 50% will be met through Toll collection plus viability gap funding by state government.

Innovative PPP Projects – Under Development BUILDING CONSTRUCTION & MAINTENANCE OF MEDICAL COLLEGES ON BOT (ANNUITY) Location of Project: Vidisha, Ratlam & Shahdol Construction period – 2 years Concession Period – 10 years from the date of completion 40% project cost to be paid during construction in 5 installments on the basis of project milestones Remaining cost to be paid after completion in six monthly Annuities during 10 years First annuity to be paid six months after COD Interest @ bank rate plus 2% with annuity payments during O&M period O&M expenses to be paid with annuity at the fix rate of 1% of project cost during first three years, 2% during 4-6 years and 3% during remaining years.

Innovative PPP Projects – Under Development Accident Response System Implementation of ARS system on PPP mode . Technical Assistance through ADB for capacity building in road safety. Accident Response System & Traffic Management Centre including operation & maintenance for 5 years with estimated cost of Rs.12.50 Crore is being set up. ARS includes centralized call center, GIS based automatic vehicle tracking system (AVTS), Computer aided dispatch system, Traffic Management Centre. Trial run started from 24th Dec 2014. State wide number 1099 and Citizen portal available for assistance.

Our Strengths - MPRDC Transparency in bidding process. Lender’s faith in MPRDC ensuring Financial Closure of BOT Projects. Strict Quality Control Guidelines. Adequate Budget provision for Annuity & VGF payments by the State Government. Onboard Panel of Experts for Superior delivery Political commitment & support. Land Acquisition and Environmental Clearances are planned and executed well in advance. Chief General Manager at Head Office & Divisional Manager coordinate with District Administration.

Ensuring Quality - MPRDC 3-tier system of checking: PMC of Concessionaire > Independent Quality Control Engineer > Officers of MPRDC Quarry approval after thorough testing. Field & lab testing is mandatory as per the norms of MORTH. Use of Graders for maintaining the camber at sub grade/GSB level. Crushed GSB Layer -1 (drainage) Coarse graded. Layer -2 Close graded. WMM in place of WBM with pavers. Use of Sensor Paver in place of mechanical paver for BT works. Use of RMC plant in place of normal concrete mixers.

State Highway Fund Sources of Fund Application of Fund State Highway fund established under an Act for investment in highways & infrastructure projects. Executive Committee under the Chairmanship of Chief Secretary to administer the fund. Sources of Fund Application of Fund All payments of Premium For Maintenance and Repair of Highways Proceeds towards encashment of Performance Security or Bid Security For Meeting any Development Cost of Highway or Infrastructure Project All returns on investments made out of the Fund For Project Preparation, Pre Tender Activities, Cost towards Utility Shifting, Land Acquisition

Value For Money – Significance in MPRDC

Value for Money: Applications at MPRDC During VFM analysis of MDRs, 22% Annuity for BOT (Annuity) Projects was envisaged. After bidding, the projects awarded on Annuity of 18.30% under BOT(Annuity) projects & 12.88% as on average under BOT (Toll+Annuity) projects. 10 lakh; 100 lakh;12 lakh Parameter EPC BOT-Annuity NPV calculated 2838.8 2495.65 Value for Money ( NPV of EPC –NPV of Annuity) 343.16 Figure in INR Crores

Value For Money Analysis Project Details Total Project Cost : INR 2964.83 Crores Total Length of the Projects : 1520.03 Km Average Annuity (actual) : 18.30% of Project Cost Parameters EPC BOT -Annuity Construction Cost INR 3705.88 Crores (Escalation by 25%) INR 2964.83 Crores (Including 25% of TPC for financing cost, contingency & other charges) Construction Period 2& ½ Years 1 & ½ yrs O & M Exp Routine Maintenance 0.004M$/km/p.a. - Periodic Maintenance 0.02M$//km/p.a.. Electricity & Patrolling 0.002M$/km/p.a.

Value For Money Analysis Parameters EPC BOT -Annuity Interest 9.00% 13% Debt: Equity Ratio 100 70:30 Funds Requirement Immediately 6 months after COD Discount Rate for NPV Calculation 15% Loan Repayment Period( in years) 10 Quality of Roads Average Excellent Efficiency of private sector Not availed Availed Technology Traditionally applied Latest available Setting up of full infrastructure & staff Required Not required

Innovative PPP Projects in Other Sectors

Innovative Projects under PPP Projects Under Implementation Logistic Hub at Pawar Kheda Construction of Steel Silos for Storage of agricultural commodities Power Transmission Urban Transport – City Bus Service Projects Under Development Solid waste management Rural Water Supply Air Taxi

Innovative PPP Projects - Under Implementation Setting up Composite Logistics Hub at Pawar kheda, Madhya Pradesh Integrating the value chain from Procurement to Logistics under one umbrella Implementing Agency- Agricultural Marketing Board Land - 115 acres land Concession Period -33 years, extendable by 15 years PPP Mode- DBFOT Project Cost – INR 136.84 Crores Bidding parameter- Highest Upfront Premium Facilities Planned Rail Terminal Warehousing Container Freight Station Cold Storage Grain & Horticulture Procurement Agro & Horticulture Services Market Information Systems Trading & Collective Marketing Negotiable Warehouse Receipts

Innovative PPP Projects - Under Implementation Considerations For Determining PIA for logistic hub Cargo originating and consumption clusters Consolidation and distribution centers Location of competing facilities Potential of attracting transshipment cargo Key Findings Major cargo consumption centre in Madhya Pradesh are outside 200 kms of project site except Bhopal Originating clusters within PIA include locations like Mandideep, Budhni, Itarsi, Piparia etc. All are within 100 km from proposed Logistics Hub All consumption centers outside 100 Km radius have presence of competing facilities Service demand and supply gap within these facilities Conclusions PIA area considered restricted to radius of 100 km, though for certain commodities PIA might extent beyond considered radius

PROJECT TRANSACTION STRUCTURE The Project was successfully closed with Kesar Terminals Ltd. offering approx 14 crore premium to GoMP.

Innovative PPP Projects - Under Implementation Setting up of Steel Silo’s at ten locations 50,000 Metric Tonnes capacity of Steel Silo at each site. GOI to support the Project through Viability Gap Funding (VGF) up to 20% of Total Project Cost. Government of Madhya Pradesh to support the Project through: State portion of VGF up to 20% of Total Project Cost to support O&M if required. Providing 7 acres of land. Guaranteed Storage Charges to be paid to the private developer for first 10 years (in Concession Period of 30 years) at 100% utilization of the proposed project capacity. Average cost of each Project facility is around INR 38.56 Crores

Innovative PPP Projects - Under Implementation Power Transmission – On DBFOT Construction of 400 KV (DCDS) Transmission Line between Satpura and Astha Evacuation of Power from 2 x 250 MW extension unit at Satpura Thermal Power Station) Grant: Rs. 60.75 Cr. (Rs. 56.54 Cr as Equity Support from VGF and Rs 4.21 Cr as O&M Support) Completion period: 15 months Revenue Stream: Monthly Fee (“Unitary Charge") 20% of actual wheeling charges (additional revenue) for transmission for other parties, on spare capacity availability (80% of additional revenue for Authority) 75% Revenue from Advertisement on poles Unitary Charge for 1st year: INR. 3.15 crore / month

Innovative PPP Projects – Under Implementation Urban Transport – City Bus Service Indore Objective: To create a specialized and effective agency to monitor and provide intra-city public transport system Self-financing and revenue generating model for bus stops. Fully computerized ‘Ticket Vending system’ & Vehicle Tracking System Concession Period: 5 years Estimated Cost: Rs. 59.75 crore Financing: 60% : AICTSL & 40% : Operator Revenue Stream: Per bus monthly income: 50% : Fare 30% : Advertisement 20% : Passes Status: Project under operation. 111 buses operational on 15 routes

Innovative PPP Projects Regional Integrated Solid Waste Management Project on DBFOT Implementing SWM in smaller ULBs is neither operationally nor financially viable. Door to door collection, transportation, segregation, scientific treatment and disposal of waste The processing technology will be decided by the private operator. Revenue for concessionaire for Tipping fee from ULBs and Sale of by-products or any useful components of Waste. Full guarantee by GoMP for tipping fee payment to Private Operator User Fee: 60 Rs for APL and 30 Rs for BPL in Municipal corporations and Councils; Rs 40 for APL and Rs 20 for BPL in Nagar Parishads Large ULB has been chosen as a lead member and smaller ULBs within a distance of 50-80 kms as consortium members. The landfill site shall be at the headquarters of the lead member

Innovative PPP Projects – Under Development Multi Village Rural Water Supply Schemes (MVRWSS) in Madhya Pradesh on DBFOT Sourcing from Intake well up to house service connection Operation & Maintenance for 20 years concession period. State Govt. to state predetermined water charges. Capital grant of 40% to be provided to meet viability gap. Bidding parameter: V.G.F. Water charges for Bulk Supply to be paid by GoMP

Innovative PPP Projects – Under Development Air Taxi Services India’s first dedicated state level air connectivity between Bhopal, Indore, Gwalior and Jabalpur. 3-4 seats underwritten on sectors within MP operations at pre-determined rates. Tariff other than underwritten seats to be fixed by operator 100% re-imbursement of VAT on ATF uplifted in the State.

Innovative PPP Projects – Under Development Air Taxi Policy: Salient Features Subsidy per flying hour shall be applicable Minimum 100 flying hours flying per month to be eligible for subsidy Subsidy shall also be available in case of interstate operations (max 40%). Subsidy shall not be available if the aircraft connects two cities of another state. Minimum of 4 cities to be connected with in Madhya Pradesh VAT reimbursements shall be made on the ATF uplifted from within the state for approved flight schedule The government shall reimburse the ambulance and fire brigade charges. Security shall be provided free of charge for airports owned and controlled by the state government The maximum amount of subsidy per month shall not to exceed Rs.1 Cr no subsidy would be paid in case of zero load flights (to & fro) MOU period will be of 3 years and extendable up to 2 years Atleast 2 aircraft of minimum 9 seating capacity to be operated. In case, if the operations are started with one aircraft initially, then, the second aircraft should be inducted with in period of 2 months.

Swiss Challenge Policy

Swiss Challenge Policy Under open and transparent process of Swiss Challenge, long-term financial solution will be provided by inviting expertise and capital from private and public sectors. The sectors and projects not covered by existing PPP framework will also be augmented through this. Initiative can also be taken to identify and implement projects for providing social and basic facilities. The right of first refusal will be given to the proposer

Innovative PPP Projects Under Swiss Challenge Rural BPO Establishing 15 Rural BPOs across M.P to create jobs in IT/ITES sector by provision of training for skill  development. Project Commitment: INR 130.62 Crores required from Investor with government to underwrite business for 18 month Restructuring  of Industrial Water Supply in Dewas With total mandate to deliver 23MLD, currently project is delivering 3-5 MLD Project Restructured under Swiss challenge scheme to be implemented under PPP Total Project Cost of INR 485.16 Crores and 80% of debt due of previous project. Benefits of Swiss Challenge Concessionaire (existing or new) shall not be paid for any Debt Due and the existing Debt will be serviced by him from the same revenue stream. In Swiss challenge mode, the maximum water charges payable shall be obtained through the open bid and the existing Concessionaire will be asked to match the bid. Consumers continue to get water supply at the same rate as per the current Agreement

Venture Capital in Madhya Pradesh

Venture Capital Fund of GoMP GoMP is creating a INR 101.14 Crores Venture Capital Fund (VCF) for MSME sector. The fund aims to help new and talented entrepreneurs, who cannot set up innovation-based new enterprises due to lack of adequate share capital GoMP will contribute INR 20.22 Crores as promoter and balance amount of INR 80.86 Crores would be raised from financial market. Inviting to contribute to the Fund as Investors (Limited Partners) Domestic investors - Insurance Companies, Banks, Corporates etc. Overseas Investors – VC Funds, Private Equity, Sovereign Funds, Pensions Funds, Financial Institutes, DFIs etc.

Structure of Asset Management Company (Share Capital) Government of Madhya Pradesh Maximum 49% Financial Institutions, Banks, International Financial Agencies & Corporates etc. Minimum 51% GoMP shareholding will be capped at 49% in the company. The minimum shareholding of the Investors/Financial Institutions will be kept at 51% The proposed structure will lead to enriched operational and managerial flexibility. VC Investors may be offered Directorship in the AMC in proportion to investment AMC managed by Expert Venture Capitalist and Professionals from the Industry

Thank you Vivek Aggarwal IAS Secretary to Government of Madhya Pradesh, Chief Minister’s Office, Managing Director, Madhya Pradesh Road Development Corporation Commissioner, Institutional Finance, Government of Madhya Pradesh Office: +91-755 2765217; 2441062 | Fax: +91-755 2765192; 2441101 | email: mdmprdc@mp.nic.in ; vivagg_2005@yahoo.ccom Website: http://mprdc.nic.in/