Mainstreaming Public-Private Partnerships in Urban Infrastructure

So back to back with the JNNURM mission secretariat and their TA.

We have a new TA for $2mn and all this is to set up many PPP projects to pilot and then mainstream PPP in Urban Infra.

Approval in a couple of Months.


This PID says they have talked to many city corps But in Bangalore there is no council in place since Nov 2006.
Vinay Baindur
==============================================================

http://www.adb.org/Documents/PIDs/41006012.asp
Promoting Public-Private Partnerships in Urban Infrastructure in India : India

Timetable
Project Number 41006-01
TA Name Promoting Public-Private Partnerships in Urban Infrastructure in India
Type/Modality of Assistance [Proposed]
Technical Assistance Special Fund US$2.0 million
Thematic Classification Sustainable Economic Growth
Private Sector Development
Capacity Development
Description Background. Urban areas in India are growing, and have been the key drivers of the manufacturing- and services-led economic growth. However, inadequate urban infrastructure is becoming an important constraint on faster economic growth. The urban infrastructure investments have to be accelerated to address the existing gaps and meet the growing urban basic service demand of the burgeoning urban population. The Government of India has launched the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) in 2005 with Rs 50,000 crores ($12 billion) outlay over sever year duration. Both the JNNURM reforms and financing needs are likely to encourage urban infrastructure PPPs in JNNURM cities.

The Government's efforts to encourage PPPs. The Government of India has initiated a number of steps to promote PPPs for infrastructure development. These steps include: (i) establishment of a PPP cell in the Department of Economic Affairs in the Ministry of Finance; (ii) setting up the India Infrastructure Finance Company Limited; (iii) creating a viability gap fund; (iv) forming an inter-ministerial group to determine pre-qualification of bidders under PPP; and (v) preparing PPP toolkits and model concession agreements. A number of mandatory and optional reforms of JNNURM will create enabling governance and institutional framework, leading to greater interest and investments by private sector in urban infrastructure development.

Constraints for urban infrastructure PPPs. Review of the relevant literature indicates a number of reasons for reluctance on part of private sector to assume commercial risks in majority of the urban infrastructure sub-sectors. Urban sector, by and large, has to deal with third-tier governments, which bring additional elements of legal, policy, regulatory and implementation challenges. The urban sector also has to confront with a challenging legacy of very low tariffs, poor efficiencies in urban basic service delivery, poor capacities in the urban local bodies (ULBs), and inertia to reform laws, regulations and policies to encourage and enable urban infrastructure PPPs.

The commercial and political risks of water supply and sewerage projects are high as the projects dependent on other cash flows of ULBs like property taxes. The general financial health of most ULBs is weak. Low tariffs and poor fiscal status of majority of ULBs, in turn, increase the commercial and political risks for a private investor. All put together, many of the urban infrastructure sub-sectors are perceived as a high risk sector, resulting in anemic inflows of private capital. This is, however, likely to change significantly with the deepening of the reforms supported by JNNURM.

Improving prospects for urban infrastructure PPPs through the JNNURM. The following factors resulting from JNNURM are likely to create demand for private capital as well as greater interest of private sector in the urban infrastructure development: (i) part-grant financing by the JNNURM (which is likely to increase the bankability of a number of large urban infrastructure projects) and (ii) the financing gap/needs arising from the state- and city-level contribution for the JNNURM projects. However, for the PPPs to take-off in the urban sector in a large way, a great deal of ground work needs to be done within appropriate sectoral policy environment of respective state governments, and will be largely contingent on the developing shelf of 'bankable' projects, and demonstrating feasibility of urban PPPs in sub-sectors like water supply and sewerage, and urban transport with help of demonstration projects that highlight global best practices in urban PPPs.
Objectives and Scope The proposed TA will complement the ongoing advisory TA for Mainstreaming PPP at State Level, and the TA for Mainstreaming PPP cells at the central line ministries, including MOUD. However, the TA will focus on promoting PPPs in urban infrastructure, and assist selected states and cities in addressing key bottlenecks that will lead to the eventual structuring of bankable urban projects that will attract private capital and/or private sector strategic interests. The long term impact of the TA will be that increased number of cities provide improved urban services by engaging PPP all over India; accelerate economic growth and reduce poverty; and improve urban environment and enhance the quality of life of urban inhabitants. The outcomes of the TA will be that: (i) legal, policy and regulator barriers to PPP at selected state and city-level identified and addressed; (ii) capacity of local government officials to strategize and plan for private sector involvement in urban sectors (water supply, sanitation, solid waste, and urban transport), which includes PPP structuring, transparent and competitive procurement, implementation, and enforcement of PPP contracts strengthened; and (iii) 3 to 4 well structured urban PPPs incorporating private sector efficiencies and capital are brought to financial closure, serving as replicable PPP models for other Indian cities.
Linkage to Country/Sector Strategy The Government of India and the Asian Development Bank (ADB) have given high priority for promoting public-private partnerships (PPPs) to accelerate and sustain infrastructure growth in India. ADB has provided technical assistance (TA) to the Government of India for mainstreaming PPPs at state level. In addition, ADB is also processing a TA support to establish PPP cells in all the line ministries at the central government level, including the Ministry of Urban Development (MOUD). Implementing PPPs in urban infrastructure, particularly water supply and sewerage, has been challenging and the progress has been relatively slower than in other infrastructure sub-sectors. The Government of India requested ADB for advisory TA to promote PPPs in urban infrastructure development. The ADB's Country Strategy and Program Update 2006–2008 lays emphasis on supporting PPPs in urban infrastructure development. Likewise, ADB's Innovation and Efficiency Initiative gives greater flexibility to ADB to support sub-sovereign entities to introduce and scale-up innovative PPP modalities. There is need for a separate advisory technical assistance (ADTA) for promoting PPPs in urban infrastructure in India. The proposed ADTA will complement the ongoing TA of ADB for mainstreaming PPPs at state level, however, with specific focus on promoting PPPs in urban infrastructure.
Summary of Environmental and Social Issues The TA will help address institutional and implementation issues for accelerating urban infrastructure development through PPP modalities. It is likely to lead more private sector investments in water supply, sewerage, solid waste management and urban mass transport. And more important, the TA is likely to bring greater private sector efficiencies into these sub-sectors. Both greater investments and efficiencies are likely to have positive impact on basic urban services with direct positive impact on the quality of life of urban poor, and urban environment. Thus, the TA is likely to have positive impact on urban social and environmental issues.
Consultations Planned or Carried Out Extensive consultations have been held by the Mission with governments, city corporations, private sector and financial institutions. The Mission held meetings with the Department of Economic Affairs, Government of India; Ministry of Urban Development, Government of India; Departments of Urban Development in various states including Gujarat, Maharashtra, Andhra Pradesh, Tamil Nadu and Karnataka; meetings with city corporations in Ahmedabad, Pune, Mumbai, Nagpur, Hyderabad, Vijayawada, Chennai and Bangalore. The mission also met a number of important urban infrastructure financial intermediaries, consulting firms active in urban infrastructure, and private firms interested in water supply, solid waste and sanitation.
Responsible ADB Officer Mr. Sekhar Bonu
Responsible ADB Department South Asia Department
Responsible ADB Division Urban Development Division, SARD
Executing Agencies Department of Economic Affairs

Ministry of Finance

Top
Timetable
Fact Finding 10 Apr 2007 to 20 Apr 2007
Approval 26 Oct 2007