Infrastructure Development Corporation (Karnataka) Limited
• 5 times – the number by which GDP will have multiplied by 2030
• 590 million people in cities - ~ twice the population of USA
• $ 2.2 trillion capital investment needed
$ 1.2 trillion in capital investment
26% of capital investment from debt and PPP
• 700 - 900 million sqft of commercial residential space needs to be built ~ a Chicago every year
• 20 times than the past decade of the capacity of roads, metros and subways need to be created
Source : India’s Urban Awakening, McKinsey Global Institute
• Estimated investment for urban infrastructure over the next
20 years – Rs 39.2 Lakh Crore at 2009-10 prices (HPEC
• Funding – where will resources come from?
Onset of pessimism
Signs of success
A few projects grounded
High international interest
Pune, Hyd, Goa,
Bangalore Bulk water
– 100-300 Cr Failed
Sonia Vihar, Delhi,
Sangli – Bulk water
Bangalore – Rehab,
Efforts to prepare PPP projects
High NGO opposition
High profile projects in Delhi,
Successful projects also emerge
Many ongoing initiatives
Waiting for commercial results
PPP interest in pilots – scale up not demonstrated
• Tiruppur Water Supply – the first attempt?
– About 20% urban, and 80% industrial
• by the time the project was made, circumstances were unmade…
• Visakhapatnam Water Supply – the pretender
– Similar structure 20% urban and 80% industrial
• But somewhere when the BOT was being awarded, a question of conscience came up. Are contracts not better for all concerned?
• Pilots – KUWASIP, Nagpur etc.
– Management contracts – near risk free
• Tiger tasting the blood; is upscaling on similar model practical?
• Full city models
– Tariffs and adherence to agreements
PPP projects attempted
Too many models, limited bidders
Lesser financial bids ; more questions (pre bid queries)
Growing interest in participation
SWM Activities covered in PPP
Integrated Municipal Solid
Types of PPP
BOOT , DBOOT,
Average Tenure of the Project
20- 30 years (Some of the project tenures linked to the asset life)
3 years Collection, Transportation &
Transportation, Processing and Disposal
Treatment & Disposal
20 / 25 years
20 -35 years
3- 20 years
Status of implementation
Operational >1 year
Pre- project development
Stage / Concept
JNNURM Cities implementing MSW components on a PPP framework
Collection Collection &
Compost Plant Waste
Pipeline - Bid
Process to commence
• Lucknow Biomethanation
– Was the technology inappropriate, or did the ULB literally expect ‘gritto-gas’?
• Thiruvananthapuram Composting
– How much waste does the city generate
• “Misfortunes one can endure--they come from outside, they are accidents. But
to suffer for one's own faults--ah!--there is the sting of life.”
• Bangalore – the first sanitary land-fill in the country
• “In any collection of data, the figure most obviously correct, beyond all need
of checking, is the mistake.”
Finagle's Third Law
• A number of tipping fee based contracts have been awarded
• Some developers continue to rest hopes on WTE
– “In all things it is better to hope than to despair”:
• One of the earliest LRT system awarded was in Bangalore, but later cancelled
• A few large projects bid/ awarded
– With capex
• Mumbai, Hyderabad (!), Haryana
– Without capex
• Delhi Airport Link
– Bangalore airport rail link, Hyderabad (encore)
– Indore, a successful model
• Interestingly, why is this model not widely replicated?
– Ahmedabad BRT
– A number of BRT systems (Delhi, Bangalore, Mysore) studied and structured on PPP, but being executed by the Authority
• A large number of projects being attempted on this formula
– Project = land available with Authority + Some public use + commercial development
• Bus terminals. Convention centers. Malls (oops – parking complexes). IMAX (uh – tourism projects).
• What is the Government’s “acceptable” price for land, especially when they still “own” it?
• Feasibility studies provide only a partial picture – projects not financially free standing!!
– Water: Tariffs set to recover only O&M costs, and after factoring efficiencies, there is a deficit in finances.
– SWM: Hardly any user charges or markets for sale of products/ recyclables
– Dependence on government finances in some form (capital grants/ annuities/ tipping fees etc.)
– Land and other support infrastructure requirements could be quantified
– Other project parameters are matters of detail
• Assuming we get the above elements right, will the project (s) go
• Given the financial situation (and lack of political will in improving it),
how can a credible investment environment be built, where many projects require financial support?
• Lots of “concerns” remain unanswered!!
• Nation wide impact/ externalities – central scheme
– JnNURM - large corpus, based on reform agenda
• For the first time, cities were forced to think of an aggregate vision and investment plan
– But these were very large numbers (Bangalore is at Rs. 60,000 Crores) and the fund flow is the proverbial drop in the ocean.
• However, the structure seems to have a disincentive for improvising efficiencies , though the objective was to encourage it.
– Most projects focused on asset creation. E.g., in Bangalore, a series of projects that was being structured through PPP became EPC contracts after
• To see how the newer version will fare?
– “Iteration, like friction, is likely to generate heat instead of progress.”
• Tax Buoyancy
• Project specific/ general purpose loans from banks/ FIs/ MLAs, securing municipal revenues
– Loan conditionality; State Government guarantees
• Bond issues of Ahmedabad, Hyderabad, BMP, Nashik, KUIDFC etc., have not led to large-scale replication
– Issues of market appetite, end-use
– Limited number of ULBs which can access financing on a standalone basis
– Small ‘pilots’ Rs. 40-100 Crores. Enormous amount of effort and arm twisting to close.
– Pooled Finance ‘seems’ a more appropriate structure for small ULBs
• No perceptible efforts to leverage
PPPs in urban sector need to be hybrid models
less focus on ‘typology’……more focus on
tailored solutions + results
Continuity of services
Profit motives of private sector
Hand back of assets
Availability of funds for payments to private operator on a continuous basis
Concerns need to be addressed
Increase in tariffs
Lack of baseline data
Impractical performance standards
• Cities have coped reasonably well in the past
– Though under immense stress now
– No reason why the problem cannot be addressed in the future
• Political/ Social realization of imperative need for improvement of urban services
• Policies slowly
being set in place
• Local capacities improving
• PPP experience building up – emerging models validating proof of concept
– Various precedents are being tried and tested, and experience is maturing
• But yet a long way to go