The presentation highlights the different aspects of Public Private Partnership in Urban Transport. It highlights the investment required in this sector and what are the challenges faced by private investors.
With more roads, less density, rising incomes it is not surprising that vehicle numbers are increasing
Public-Private Partnership in Urban Transport
Public-Private Partnership in Urban Transport August 2010
Urban Transport = Public Transport Urban Transportation Scene in India Why PPP? Investment and Service Quality Regulatory Environment Conclusion Contents
Urban Transport = Public Transport Transport are the arteries of a city. <ul><li>This is India not USA or a developed city. </li></ul><ul><li>Roads widening, building new expressways or expensive metro is not enough. </li></ul><ul><li>Public transport needs to achieve an increasing share of trips, for a city to remain economically viable. </li></ul><ul><li>Larger a city – greater is the need for public transport. </li></ul>
Increasing Private Vehicle Ownership in Delhi Two Wheelers Cars Three-wheelers Buses and Other Heavy vehicles Vehicle Ownership – Delhi, 1981-2009 (Figures in Cumulative Numbers) Source: Transport Department, GNCTD More than 6 million vehicles are registered in Delhi alone, more than total number of vehicles in Kolkata, Mumbai and Chennai together.
Vehicle Growth in India Source: CIA World Factbook ; Road Transport Year Book 2006-07 (March 2009), Ministry of Shipping, Road Transport & Highways, Govt. of India India is growing – GDP Growth rate so is the vehicular traffic. Vehicle Growth and GDP Real Growth Rate in India, 1998-2006 (Vehicles in Millions) (GDP in %age)
Modal Spilt – Indian Cities Modal Split for Travel – Indian Cities (Figures in Percent of Trips) Source: “Transport in Cities – India Indicators” by EMBARQ <ul><li>In comparison, London, Paris and New York have a public transport share of 40%, 54% and 54% respectively. </li></ul>Public Transport Private Transport Bicycling & Walking The EMBARQ IS a global organization, which advocates environmentally and financially sustainable transport solutions to improve quality of life in cities. It has five Centers for Sustainable Transport, located in Mexico, Brazil, India, Turkey and the Andean Region, that work together with local transport authorities to reduce pollution, improve public health, and create safe, accessible and attractive urban public spaces.
<ul><li>Population per sq. km in Delhi is less compared to other cities like Hong Kong, Seoul and Paris (City) which are more densely populated. </li></ul><ul><li>Road space as percentage of total land area is 21% in Delhi, with limited expansion possibilities. </li></ul>Road Space as Percentage of Total Area Limited Road Space World Cities - Population per sq. km.
Cities require a Sustainable Transport System Delhi Population: 2004 = 14.8 million and 2030 = 26.0 million * ST = LCD + AT Source: “The health benefits of tackling climate change”, Lancet Study Aggregate Transport CO2 Emissions Transport CO2 Emissions Per Person (tCO2/ person) CO2 Emissions Increase on 1990 (%) 2004 Delhi 6,146,651 0.4 97% 2010 Business as Usual (BAU) 8,268,298 0.5 165% 2030 Scenario 1: BAU 19,550,693 0.8 526% 2030 Scenario 2: Low Carbon Motor Vehicles (LCD) 17,069,668 0.7 447% 2030 Scenario 3: Active Transport (AT) 10,458,736 0.4 235% 2030 Scenario 4: Sustainable Transport (ST)* 9,327,207 0.4 199%
Need to Develop an Integrated Network <ul><li>Metro system alone can’t work. There is need to promoting the use of public transport through user friendly features and a city-wide network. </li></ul><ul><li>Public Transport trips are multi-modal, usually involve non-motorized travel at either end of the journey. </li></ul>Delhi City Wide Network 2021
Buses Vital for Reducing Car Use Source: Bus Rapid Transit Planning Guide, GTZ Car use comes down only if city has an integrated network. Transport Share - Developing Cities (Figures in %age) NA NA
Where investments need to be made ? Transport System Transport Infrastructure IT Infrastructure
Levels of Investment required for different modes Source: “Bus Rapid Transit Planning Guide” (Institute for Transportation & Development Policy, 2007) With the same level of investment, varying system kilometres can be constructed with: Bus Rapid Transit is a mass transport mode adapted to the existing demand and that may be implemented in the short/medium term with comparatively low capital cost
Urban Transport - Metro Rail Projects <ul><li>Delhi is operating its Metro Lines with daily ridership of 1 million passengers / per day. </li></ul><ul><ul><li>98 km is under operations. </li></ul></ul><ul><ul><li>Another 42 km is under construction. </li></ul></ul><ul><li>Metro rail projects promoted under joint ownership with the concerned state governments in Delhi, Bangalore, Kolkata & Chennai </li></ul><ul><ul><li>20% Viability Gap Funding for urban transport projects on PPP in Mumbai </li></ul></ul>Ministry of Urban Development is supporting metro rail projects in large cities to serve high demand corridors. Source: “NUTP and JnNURM- Government of India Initiatives to Strengthen Public Transport”, S.K. Lohia, OSD (MRTS), MoUD, GOI City-wise Metro Systems – Kms City Kms Delhi 140.00 <ul><ul><li>Mumbai </li></ul></ul>62.89 Bangalore 42.30 <ul><ul><li>Kolkata </li></ul></ul>14.67 <ul><ul><li>Chennai </li></ul></ul>46.50 <ul><ul><li>Hyderabad </li></ul></ul>71.00 <ul><ul><li>Cochin </li></ul></ul>25.30 <ul><ul><li>Jaipur </li></ul></ul>28.5
Major Thrust on BRT System in India <ul><li>Current Status – 17 cities implementing busway/BRT projects. </li></ul><ul><li>10 of the 17 are being funded through J n NURM </li></ul><ul><ul><li>BRTS projects of 422 kms. sanctioned for 9 mission cities at a total cost of ` 46.1 billion (@ ` 108 million per km) </li></ul></ul>Note: * Delhi is implementing BRTS with its own funds. Buses - the most important mode of Public transport. City-wise BRT Systems – Kms City Kms planned Pune 101.77 <ul><ul><li>Pimpri Chinchwad </li></ul></ul>42.22 Indore 11.45 <ul><ul><li>Bhopal </li></ul></ul>21.71 <ul><ul><li>Ahmedabad </li></ul></ul>88.50 <ul><ul><li>Jaipur </li></ul></ul>39.45 <ul><ul><li>Vijaywada </li></ul></ul>15.50 <ul><ul><li>Vizag </li></ul></ul>42.80 <ul><ul><li>Rajkot </li></ul></ul>29.00 <ul><ul><li>Surat </li></ul></ul>29.90 <ul><ul><li>Delhi* </li></ul></ul>121.00
Investment Required in Next 20 years Urban Transport Investment Needs, 2008-2027 (Figures in ` Billion) <ul><li>According to a study conducted by MoUD, it is estimated that a total investment of ` 4,353.8 billion is required to develop urban transport in 87 cities . </li></ul><ul><li>The key objective is to build safe traffic management system in in small and medium cities and prevent a decline in the use of non-motorised modes in the next 20 years. </li></ul><ul><li>The government is planning to implement bus-based transport along major corridors in cities and augment bus services in cities. </li></ul>Source: Traffic & Transportation Policies and Strategies in Urban Areas in India (Wilbur Smith Associates – 2008)
<ul><li>The above three factors make “Cost recovery difficult” for Public Transportation System. </li></ul>Characteristics of Public Transport High Investment Effect of substitutes Income profile of people <ul><li>Marginal cost of two wheeler trip about ` 1.00 per km - Maximum fare level cannot be higher </li></ul><ul><li>Public Transport Infrastructure is expensive </li></ul>
Vehicle Ownership in Delhi About 50% households do not own any vehicle in Delhi. Source: Transport Demand Forecast Study, RITES Limited (Household Sample Size – 45,000) Vehicle Ownership in Delhi - % of Households (Figures in %age)
<ul><li>Bridge funding shortfall </li></ul><ul><li>Consistency in development goals and seeing through projects from start to finish in a time bound manner </li></ul><ul><li>Improvement in public service delivery </li></ul><ul><li>Incentivize patronage of public transport modes </li></ul>Why Public-Private Partnership?
Productivity Gap – Public Bus Service Source: DTC Operational Statistics (May 2010), Halcrow Fox for DfID (May 2000 ) Operating Parameters e.g. of DTC. <ul><li>There are some exceptions like BMTC (Bangalore Metropolitan Transport Corporation ), which operate efficiently. </li></ul>A pure public monopoly generally does not offer a superior alternative to a well designed competitive arrangement. Parameters Particulars Nos. Buses Average Fleet 4,564 (Nos.) Average buses on road (Daily) 3,598 (Nos.) Fleet Utilization (%) 78.83% Trips Scheduled Trips (Daily) 30,344 Operated (Daily) 21,139 Trip Efficiency (%) 69.35% Kms Scheduled Kms (Daily – in Lakhs) 234.07 Actual Kms (Daily – in Lakhs) 165.13 Kms Efficiency (%) 70.55%
<ul><li>Public Transport System requires financial support. </li></ul>Funding for Transport System DTC Monthly Ticketed Revenue & Passengers, Jan’09-May’10 ( Figures in ` Million) Source: Delhi Transport Corporation – Operational Statistics <ul><li>Even after 50% increases in the fare, DTC’s revenue increased by just 30% and number of passenger dropped by 13% in November 2009 </li></ul>
Public-Private Partnership A Panacea for All Evils?
<ul><li>PPP gives an advantage of exploiting the management qualifications and the efficiency of the private sector without giving up quality standards of outputs, owing to appropriate control mechanisms from the public party. </li></ul><ul><li>The core principle of PPPs lies in the risk allocation between the two parties . A PPP project should aim to redistribute the risk to the party that is best suited to manage it and to do it with the least cost. </li></ul><ul><ul><li>For example, in case of city-bus operation, loading revenue risk means compromising universal service obligation i.e. some routes will not be served and off peak timings will have poor service. </li></ul></ul>PPP = Financing + Service Quality
Project Features for PPP Projects Transport System Transport Infrastructure <ul><li>Fare box collection </li></ul><ul><li>Advertisement </li></ul>Revenue Sources Key Factors <ul><li>Commercial development </li></ul><ul><li>High capital Investment </li></ul><ul><li>Fare regulation </li></ul><ul><li>High social-economic benefits </li></ul><ul><li>Contract structure </li></ul><ul><li>Concession period </li></ul><ul><li>Market conditions </li></ul>
Transport System PPP Contracts Production (Cost) risk borne by Authority Operator Revenue risk borne by Authority Operator Gross Cost Net Cost Management Contract (cost plus) Gross Cost with passenger volume/revenue incentive Net Cost with shared revenue risk Source: SDG (2009)
Comparison of Gross Vs. Net Cost <ul><li>Net Cost </li></ul><ul><ul><li>Full transfer of revenue risk? </li></ul></ul><ul><ul><li>or shared risk? </li></ul></ul><ul><ul><li>Or minimum revenue guarantee? </li></ul></ul><ul><li> Gross Cost </li></ul><ul><ul><li>Resource contract </li></ul></ul><ul><ul><li>No transfer of revenue risk </li></ul></ul><ul><ul><li>Revenue paid to Government </li></ul></ul>Source: SDG (2009) Cost Revenue Profit Funding Support Govt Operator Cost Revenue Profit Funding Support Govt Operator
<ul><li>For each cluster, a private player will be selected through a bidding process. </li></ul><ul><li>The contract is based on gross cost system, where the authority takes all the revenue and provides a fixed sum for the specified operations. </li></ul><ul><li>The contract will be awarded for a period of 10 years. </li></ul><ul><li>One (1) cluster has been already awarded and four (4) cluster are in progress. </li></ul>Delhi Private Stage Carriage Schemes Routes clustered (657 bus routes classified in 17 Clusters) so as to leverage network synergies.
Some PPP Examples - Transport System Source: India Infrastructure Metro Link Authority Concessionaire Support Required Concession Period Delhi Metro Airport Link DMRC Reliance Infrastructure Limited -- 30 years Mumbai Metro Line I MMRDA Reliance Energy Limited ` 6.50 Billion 35 years Mumbai Metro Line 2 MMRDA Reliance Energy Ltd (REL) ` 22.98 Billion 35 years Gurgaon Metro Rail Link HUDA DLF Limited and IL&FS Limited -- 99 years
Transport Infrastructure - PPP Contracts <ul><li>The building will be of nine floors with the ground and first reserved for shopping and the rest for parking. The parking capacity is for 1408 vehicles. </li></ul><ul><li>The project was scheduled to be completed by May 2010. However, it is delayed due to adverse market conditions. </li></ul><ul><li>The concession period is 30 years and DLF needs to pay a Concession Fee to NDMC on annual basis. </li></ul>New Delhi Municipal Council (NDMC) awarded the contract to DLF Limited to design, engineer, finance, construct, operate and maintain Multi-level Parking and Commercial Complex at BKS Marg.
Some PPP Examples - Transport Infrastructure Source: India Infrastructure Infrastructure Authority Project Cost Concession Period ISBT Dehradun Mussoorie Dehradun Development Authority ` 130 m illion 20 years ISBT Wadala Mumbai Metropolitan Region Development Authority ` 3500 m illion 25 years Multi-Level Parking at Kamalanagar Municipal Corporation of Delhi ` 1600 m illion 30 years Multi-Level Parking at New Market area Kolkata Municipal Corporation ` 500 m illion 30 years
Skewed Regulatory Environment Tax Exemption – Metro Vs. Buses <ul><li>Metro can avail electricity at subsidized rates. On the other hand, buses need to bear the cost of fuel at market rates. </li></ul>Metro Buses Excise Duty Custom Duty Subsidized Fuel Tax Benefit
<ul><li>Under Section 80 IA of the Income Tax Act, " infrastructure facility " means,- </li></ul><ul><li>a road including toll road, a bridge or a rail system; </li></ul><ul><li>a highway project including housing or other activities being an integral part of the highway project; </li></ul><ul><li>a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; and </li></ul><ul><li>a port, airport, inland waterway or inland port; </li></ul>Section 80 IA of the Income Tax Act Urban transport is not yet recognized as ‘Infrastructure’ and therefore cannot avail the Tax Benefits under Section 80 IA of the Income Tax Act. Source: Taxman’s Direct Taxes Ready Reckoner 2010-11 & 2011-12
<ul><li>Need to choose between - Low Fare and High Patronage OR High Fare and Low Patronage System </li></ul>Conclusion <ul><li>PPP models are not successful for bus based transport system without government support. </li></ul><ul><li>Funding should not be the part of state annual budget. A private investor will not invest in a long term project (10-15 years), if the payment mechanism is not secured. </li></ul><ul><li>The government should setup a special fund for the urban transport, which can generate money though Fuel Cess, Congestion Charging, Development Tax etc. </li></ul>
Mutual Trust ?? Source: The Age Private Public Source: www.firgoa.usc.es Private Risk Source: www.pakrealestatetimes.com