Anouj Mehta Senior Infrastructure Finance Specialist (Public Private Partnerships) ADB’s Assistance for PPP’s in India

1. Anouj Mehta • Senior Infrastructure Finance Specialist • (Public Private Partnerships) • ADB’s Assistance for PPP’s in India On-Going & Proposed Initiatives • 26-27 February 2009, Bhopal,

2. BACKGROUND: Growth Fuelled Infrastructure Pressures Years of Investment Lags Rapid economic growth Rapid Urbanisation POWER Severe Capacity Pressures On All Sectors Population, Income & Consumption Levels Growth WATER TRANSPORT SOCIAL SECTORS

3. BACKGROUND: Huge Investment Needs Estimated at • US$ 500 billion over next 5 years • 70,000 MW Capacity / Coverage expansion • 6,500 km Golden Quadrilateral / North-South • and East-West corridors / 11,113 km Nat. • Highways / 1,000 km Expressways / 7,616 km • National Highways in North East • Dedicated freight corridors • 10,300 kms of new railway lines • 21 stations’ modernisation • 485 MT in major ports • A huge ask of private sector

4. Not Just Funds…….but also • EFFICIENCIES Poor Tariffs, Cost Recoveries & Financial Sustainability Poor Institutional Structures SUSTAINABLE INFRASTRUCTURE Outdated MIS and FM Systems DIVERSE FUNDING SOURCES EFFICIENT USAGE OF ASSETS EFFICIENT DEMAND MANAGEMENT OF RESOURCES Weak Incentives IDEAL REALITY Majority Public Large T&D / NRW Losses Large Wastages • Increasing impact on natural resources which are fast depleting • Interlinked – Efficient, predictable, financially sustainable enterprises will attract diverse funding options

5. Typical Situation • Implications • Less than 135 lpcd supplied – even the above 100 lpcd hugely un-even • Coverage poor • Sewerage situation even worse • WILL GET WORSE as population increases • Bulk water sources under severe pressure – looking for sources 50 kms away from city now • Investments of Rs 500 + crores required in BWS, Distribution etc Even the 4 buckets a day will fall to 2 if nothing is done!!

6. Funding?? • Normal focus will be • To enhance bulk water • Find investments from government for capex • JNNURM – limited supply • Commercial finance – limited • SUSTAINABILITY is the key – both JNNURM and banks want that for lending Certainly not sustainable!!

7. Phase in a PPP Solution • Focus is not just funds but IBM: • Institutional ring fencing and efficient delivery • Benchmarking and measuring performance improvements • Managing for MAINTENANCE not just CAPEX • PPP Phase in • Short term for technical baseline development, institutions development and revenue enhancements - for improving financials and confidence • Medium term for expansion and larger capex investments

8. ADB Assistance for PPPs

9. PPP is seen as one key solution • Attract FRESH FUNDS into sector • Develop Utility Institution’s EFFICIENCIES • Need for an Enabling Environment • P S S T • Faster response to CONSUMERS P Policy Strengthening S Strong Stakeholder Capacities S Supply of long term funds T Trust Amongst ALL Stakeholders • Policy for private – domestic & foreign investment • Regulation & Monitoring • Incentives for PPP’s • User charges policies • Viability support • Local and central government capacities to contract with and monitor PPPs • Good transaction advisory support • Good domestic contractors / operators • Long term to match long gestation infrastructure • Competitive and risk based • Strong domestic funding institutions with risk analysis ability • Awareness for all – ee’s, consumers, private players • Transparency in process • Participatory processes

10. ADB’s Support to Government of India for Mainstreaming PPPs • Follows the Value Chain Technical Assistance (TA) - Funds - Expertise • Catalytic Lending Products • - With & Without Recourse • Co-financing • Credit enhancement products Awareness & Capacity Building Sector Specific PPP Policy Development PPP Project Structuring – Demonstration Projects • Lending Window for PPP Projects • Non / Sub Sovereign Facility • For all stakeholders • Frameworks for PPP • Good early precedents • Catalytic risk sharing funds

11. ADB Initiatives: Capacity Building - State Level • SCOPE • $ 3 million Technical Assistance program • Further $2 million in final stage of Board approval – approved already by President • Focused on 15 states • TA 4890: Mainstreaming PPP at State Level (on-going) • FOCUS: Strengthening PPP Cells and Capacities by a) providing PPP and MIS in-house consultants for an extended period and b) access to legal advisory services • PREPARATORY: PPP constraints identification, PPP Frameworks and policies development • CAPACITY DEVELOPMENT: Training, manuals, good practices, improving systems for bid document and project appraisals, risk management systems • INSTITUTIONALISATION: MIS development, consultations with stakeholders, quality checks and improvements on PPP/bid documents, project pipeline conceptualisation and supervision of projects

12. ADB Initiatives: Capacity Building - State Level • STATUS • 13 PPP Specialists – 12 states and DEA • 14 MIS specialists appointed – 14 states and DEA • A Legal Advisory Panel • A large number of activities are taking place within the PPP Cells: • Workshops and training activities – including on risk, capacity development, sector focus (urban, health, education), etc • Exposure Visits and consultations with private sector and international governments • Value added assistance being provided by cells to projects from across sectoral departments and ministries in project risk structuring, improving bid documents • Assistance being provided for financial closure including VGF applications • Development of action plans for project pipeline development – urban, health, education • Several project concepts for PPP projects are being developed within the states for further DEA / ADB assistance • TA 4890: Mainstreaming PPP at State Level (contd.) Tremendous Response from States

13. ADB Initiatives: Capacity Building - Central Level • SCOPE • $ 2 million Technical Assistance program • Focused on 6 line ministries • Strengthening PPP Cells and Capacities FOCUS Strengthening PPP Cells and Capacities by a) providing PPP and MIS in-house consultants for an extended period and b) access to legal advisory services • PREPARATORY: PPP constraints identification, PPP Frameworks and policies development • CAPACITY DEVELOPMENT: Training needs assessments, training, good practices inculcation, improvement in systems for project appraisals and bid processes • INSTITUTIONALISATION: MIS development, consultations, quality checks and improvements on PPP/bid documents, project pipeline conceptualisation and supervision of projects • TA 4993: Mainstreaming PPP at Central Line Ministries (on-going)

14. ADB Initiatives: Sector Specific PPP Policy Assistance • SCOPE • Assistance provided for developing a PPP Framework for Health and Education • KPMG Consultants recruited • Cross sector-division ADB team worked with DEA (SAGF, SAUD, SANS) • ACTIVITIES • Consultation Visits with 5 states - T.N., Orissa, Uttarakhand, Rajasthan, A.P. • ADB-KPMG Consultants Report Produced • 6 PPP Models Identified • Framework for PPP development outlined • Consultation Workshops on Draft Report held - Ahmedabad & Panjim (February and April) 2008 • Workshop to evolve project concepts held - Panjim, April 08 – leading to a proposed concept pipeline of 20 projects • Assisted by PPP Cells in co-ordination and workshops – now assisting on project proposal development • Meetings being held with DEA and ADB for structuring projects and taking to market • Health & Education PPP Frameworks (TA 4890 Related) • Urban PPP workshops for all states held in Jaipur and Hyderabad in October 2007 (cross ADB divisions) • States developed action plans for PPP projects • Follow up activities co--ordinated by PPP Cells leading to pipeline of over 20 PPP project proposals from states Tremendous interest from states in developing projects further in a challenging area

15. ADB Initiatives: PPP Project Structuring Assistance • CONCEPT • Projects being evolved in the PPP Cells and across states and sectors • Need for assisting in structuring good pilot PPP projects • Create “demonstration” models • Allows for replication across country • ADB presence will improve risk perception • Catalyse private sector involvement • List of potential projects for TA already identified by DEA with assistance from PPP Cells – further can be added on • TA will leverage ADB TA funds with GOI development funds (IIPDF) to quickly provide transaction advisory and project preparation assistance to PPP proposals • Flexible, value added, quick response modality – first such TA from ADB • TA PPP Pilot Projects Initiative

16. THANK YOU For inquiries:Anouj MehtaTel No.: +632 632-5930/5968Fax No.: +632 636-2337Email: anoujmehta@adb.org