1. Public Private Partnerships
IIFCL project
Fiduciary Forum
Ashish Bhateja
March 2008

2. India’s PPP agenda is expanding
Expansion of PPPs in transport (ports, airports, roads)
Pilots in power transmission
Center interested in pursuing PPPs in health and education
Experimentation by state governments:
Irrigation (UP, Maharashtra)
Urban water (Maharashtra, Karnataka)
Rural water (AP)
Bulk water transmission (Rajasthan)
Metros, urban transport (Maharashtra, AP, Karnataka)
Private sector becoming increasingly creative in packaging projects (e.g. with land) to achieve financial viability
More than 117 PPP deals closed in the last three years when compared to 104 in the previous 8 years

3. Framework for PPPs in India
In 2006, the Ministry of Finance issued Guidelines on the Formulation, Appraisal and Approval of PPP Projects
Model RFQ & RFP documents have also been issued in 2007
MCA available for roads & ports (others under preparation)
Mandated for Central PPPs and recommended for States

4. Institutional structure to support
GoI has setup Public Private Partnership Appraisal Committee (PPPAC)
Department of Economic Affairs (DEA), which has set up a special cell (PPPAC Secretariat) for servicing such proposals
MoF is the nodal Ministry responsible for examining concession agreements from the financial angle, deciding on guarantees to be extended, and assess risk allocation from the investment and banking perspectives
PPP Appraisal Unit (PPPAU, under Planning) has responsibility of preparing appraisal notes for PPPAC providing specific suggestions for improving the concession terms
Ministry of Law and Justice, Department of Legal Affairs, is represented on the PPPAC, as concession agreements require careful legal scrutiny

5. PPP process in India Line ministry identifies projects
Seeks ‘in principle’ approval of PPPAC
Inviting public entity seeks expression of interest (RFQ)
Shortlist prepared pre-qualification
RFP prepared
Approval of PPPAC
Invite financial bids

6. Role of IIFCL in PPPs
Addresses the need for providing long-term debt for financing infrastructure projects that typically involve long gestation periods
Indian markets, however, are deficient in long-term debt instruments (most of the available debt is of seven to twelve years’ maturity)
Assistance through long term debt; either by way of refinance to banks and financial institutions or by direct lending to project companies.
It will lend up to 20% of the capital costs of a project
IIFCL will raise funds from both domestic as well as external markets on the strength of government guarantees, which will be extended as necessary

7. Design of IIFCL project
Government Authority
awards contract to:
Project Development Company (SPV)
IBRD
Long-term funds through line of credit & technical assistance
(US $ 500mn)
On-lends IBRD line to eligible sub-projects (SPV)
Other Banks & FIs
Other funds

8. Challenges related to Procurement
Concessionaire must be selected using ICB acceptable to the Bank
Neither Bank nor Borrower is in picture when concessionaire selection is done
Technical inputs have been given to GoI on the selection process, but some differences remain (compared to Bank requirements)
National process cannot be changed because Bank may only finance some PPPs

9. Options under consideration
Discussions with GoI on:
Ways to incorporate Bank FCC, right to audit
Remove disclaimer stating that issuing authority does not accept its own mistakes in RFQ/RFP
Remove requirement from bidders to waive right to challenge any decision of the authority
Ring-fence Bank funded PPPs to avoid situations where:
Bids are modified after bid submission deadline
L2,L3 etc are invited to match L1 price if L1 defaults
Technical evaluation (procedure not defined in National guidelines)

10. Options under consideration
Seek Bank exception:
Limitation on number of bidders to be pre-qualified
Building capacity of IIFCL:
Review of process of concessionaire selection
Identify ‘eligible projects’ for Bank funding

11. India related PPP case studies
Learn more
India related PPP case studies
National guidelines
GoI model documents