The document discusses the application of the public-private partnership (PPP) model for highway projects in India. It outlines the origins and evolution of the PPP model worldwide and in India. It then describes the establishment of the National Highways Authority of India (NHAI) to oversee highway development projects using the PPP model. The document also examines the various risks involved in PPP highway projects and identifies bottlenecks and remedial measures to make the PPP model more successful.

1. Application of PPP Model in Highway
Projects in India, Identification of Bottlenecks
& their Remedial measures

2. Introduction to PPP Model
• PPP stands for Public Private Partnership.
• It is an arrangement between Government or Statutory entity of
Government on one side and a Private sector entity on the other side for
the provision of public assets or public services through investments made
or management undertaken by the private sector entity, for a specified
period of time.
• In PPP, there is well defined allocation of risk between the Private sector
and the Public entity.
• The private entity receives performance linked payments that conform to
specified and pre-determined performance standards, measured by the
public entity or its representative.
• PPP is the most cost-effective way to create the infrastructure and delivery
of public services.
• Under PPP, each party draws its own benefit, proportionate to its interest.

3. PPP Strengths and Effectiveness
• Robust and dynamic structure.
• Government in an enabler role.
• Government ownership is high.
• Governance structure ensures consumer and public interests and they are
safeguarded.
• Commercial interest protected.
• Domicile risks to parties that are well equipped to deal with them.
• Transparent and well-conceived contracts.
• Documentation recognizes rights and responsibilities of all project-related
parties.
• Concerns of all stakeholders addressed.
• Involves participation of a large number of institutions i.e government,
politicians, banks, financial institutions, investors, contractors, consumers,
NGOs etc.

4. Origin & Evolution of PPP Model in World
Perspective
• PPP has been a form of public tasks implementation widely used in the
countries of Western Europe.
• in 1438, the French nobleman Luis de Bernam was granted a river
concession to charge the fees for goods being transported on the Rhine.
• Another Concession was granted in 1792 to the brothers Perrier for water
distribution in Paris.
• In 1992, the UK began to implement Private Finance Initiative (PFI),
a comprehensive program of the government, which had to cover the
state-owned enterprises.
• The contracts for construction and infrastructure management in
countries such as Germany, Italy, Spain, Portugal, Netherlands,
Scandinavian countries, Ireland, Greece, Czech Republic, Bulgaria,
Romania, and Hungary reached hundreds of millions of Euros by the end
of 20th century.

5. Origin & Evolution of PPP Model in India
• India had a few notable PPPs as early as in the 19th century.
• The Great Indian Peninsular Railway Company started
operating rail service between Mumbai and Thane in 1853.
• The Bombay Tramway Company was running tramway
services in Mumbai in 1874.
• The power generation and distribution companies in Mumbai
and Kolkata in the early 20th century are some of the earliest
examples of PPP in India.
• In 1991, Indian Government announced new economic policy
to develop industrial and infrastructure sectors which gave
more emphasis on private participation.

6. Why PPP Model was necessitated by
Government of India?
• Massive deficit in infrastructure services.
• Deficient infrastructure was found a binding
constraint for the development of nation.
• Government emphasis on spending to develop
Infrastructure of Global standard.
• Capacity building at the state and central level.
• Sustained accelerated development can only be
achieved through a quantum growth in the
infrastructure sector.

7. Implementation Strategy of PPP Model in
Highway Sector
• A good road network is a critical infrastructure requirement
for rapid growth as it provides connectivity to remote areas
and their access to markets.
• The PPP model has been acknowledged as a successful tool
not only in the worldwide but also in India for the
development of road network.
• Majority of the on-going highways development projects have
been taken up under this model under various NHDP Phases.
• With a view to attract private investment in road
development, maintenance and operation, National Highways
Act (NH Act) 1956 was amended in June 1995 to facilitate
private participation in highway infrastructure projects.

8. Origin & Evolution of National Highways
Authority of India
• The National Highways Authority of India (NHAI) was constituted by an Act
of Parliament, namely the National Highways Authority of India Act, 1988.
• NHAI has been made responsible for development, maintenance and
management of National Highways vested or entrusted to it by the Central
Government and for matters connected or incidental thereto.
• The vision of central government behind to create NHAI was to develop
the network of National Highways in the country at par to the global
standards and to meet user’s expectations in time bound and cost
effective manner.
• NHAI has to advise the Central Government on matters relating to
highways. It has also to assist on such terms and conditions as may be
mutually agreed upon, by any State Government in the formulation and
implementation of schemes for highway development.

9. Origin & Evolution of National Highways
Authority of India(Contd.)
• NHAI is mandated to implement National Highways
Development Project (NHDP) which is India’s largest ever
Highways Project in a phased manner.
• The National Highways have a total length of 72,000 (approx)
km to serve as the arterial network of the country. Although
National Highways constitute only about 2 per cent of the
road network, but it carries 40 % of the total road traffic.
• Rapid expansion of passenger and freight traffic makes it
imperative to improve the road network in the country.
• Government of India launched major initiatives to upgrade
and strengthen National Highways through various phases of
National Highways Development Project (NHDP).

10. Origin & Evolution of National Highways
Authority of India(Contd.)
• The highway projects taken up by NHAI under different NHDP
phases are:-
• NHDP Phase I : It was approved by the Government in
December 2000 at an estimated cost of Rs.30,300 Crores and
comprises mostly of Golden Quadrilateral (5,846 km) and NS-
EW Corridor (981km), Port connectivity (356 km) and others
(315 km).
• NHDP Phase II : It was approved in December 2003 at an
estimated cost of Rs.34,339 Crores and comprises mostly of
NS- EW Corridor (6,161 km) and other National Highways of
486 km length.
• NHDP Phase-III: GoI approved up-gradation and 4 laning of
4,815 km of NHs on BOT basis at an estimated cost of
Rs.33,069 Crores under NHDP Phase IIIA in April,2007. Govt.
also approved up- gradation and 4 laning of 7294 km at an
estimated cost of Rs.47,557 Crores under NHDP Phase IIIB.

11. Origin & Evolution of National Highways
Authority of India(Contd.)
• NHDP Phase-IV: In 2008, Govt. of India approved the up-
gradation/strengthening of 5000 km of single/intermediate/two lane NHs
to two lane with paved shoulder under NHDP Phase-IV on BOT (Toll) and
BOT (Annuity) basis.
• NHDP Phase V: Government of India approved Six laning of 6,500 km of
existing 4 lane highways under NHDP Phase V (on DBFOT basis) on
5.10.2006 at an estimated cost of Rs.41, 210 Crores. Six laning of 6,500 km
includes 5,700 km of GQ and about 800 km of other stretches.
• NHDP Phase VI: Government of India approved for the construction of
1000 km of expressways at an estimated cost of Rs.16680 Crores in
November 2006.
• NHDP Phase VII: Government approved implementation of NHDP Phase
VII which envisages construction of approximately 700 km of Stand Alone
Ring Roads/Bypasses, Grade Separators, and Flyovers at an estimated cost
of Rs.16680 Crores in December, 2007.

12. Financing of the NHAI Projects
• Through budgetary allocations from the
Government of India.
• Cess, collected on Diesel & Petrol.
• Loan assistance from international
funding agencies i.e World Bank, ADB &
JBIC.
• Market Borrowing by issuing
Securities/Bonds.
• Private Sector Participation by
launching PPP Model.

13. Models of PPP adopted by NHAI
• DBFOT/BOT(Toll)
A. Premium
B. VGF( Viability Gap Fund)
• BOT(Annuity)
• Special Purpose Vehicle (SPV) for Port
Connectivity Projects.
• Operation, Maintenance &Transfer(OMT).

14. Stages in Project Development and
Implementation on PPP Mode
• Project Identification and preparatory
activities.
• Project development and due diligence.
• Implementation arrangement and pre-
procurement.
• Procurement and Project Construction.
• Contract Management.
• Dispute Resolution Mechanism.

15. Stakeholders of Projects
• General Public at large.
• All Concessionaires of road projects.
• All Contractors of road projects.
• All Supervision Consultants / DPR Consultants.
• All toll collecting agencies.
• Other Vendors / Service Providers (viz. housekeeping,
security, catering, printing agencies etc.)
• State Governments.
• Financial Institutions.
• All recognized unions / associations of road.

16. NHAI & Concessionaire Risks
• Construction Risk
• O & M Risk
• Financial Risk
• Traffic Risk
• Land Acquisition Risk
• Approvals/ Clearances Risk
• Force Majeure Risk

17. Critical Success Factors of Highway Projects
• Private sector capability
• Payment on termination
• Project Size
• Penalty clause in MCA
• Competitive procurement
• State support
• Political support
• Encumbrance free land
• Exit clause
• Change of scope
• Transparency
• Technical feasibility
• Financial feasibility
• Project structure
• Good governance
• Public support
• Financial market
• Legal framework
• Appropriate risk allocation
• Dispute resolution
mechanism.

18. Bottlenecks in the Implementation of Projects
• Regulatory environment
• Lack of institutional capacity
• Financing availability
• Delay in land acquisition
• Delay in obtaining approval of
GAD/CRS of ROB/RUB.
• Lack of coordination between
Central Govt. & concerned State
Govt.
• Intentional delay by the
Concessionaires.
• Poor quality of planning and
engineering design
• Tendering of unviable PPP
projects
• Contracts in use are inappropriate
• Centralized & slow pre-tendering
approval process.
• Ineffective dispute resolution
process. ƒ
• Performance management is
weak
• ƒWeak risk management skills ƒ
• Lack of best-in-class procurement
practices

19. Remedial Measures to make PPP model
successful
• Risk should be allocated equitably between the government and
private companies to prevent from disputes, delays and re-
negotiations.
• MCA (Model Concession Agreement) needs to be re-designed taking
into account the Indian context & successful project execution
perspective.
• Concerned state Governments may be made responsible for timely
acquisition of project land and for providing necessary clearances on
their parts.
• The provisions of new Land Acquisition Act should be made clearer
since, the State Government officials interpret the law in their own
way. This has caused undue delay in the preparation of 3(G) Award.
• The prescribed provision of the new Land Acquisition Law should be
suitably conveyed to the land losers by the District administration to
avoid unnecessary post acquisition disputes.
• Railway Board has also very important role in timely execution of
projects. Therefore, the Board may also be made responsible for
timely approval of GADs of ROB/RUB and subsequent design & CRS
sanction

20. Remedial Measures to make PPP model
successful(Contd.)
• MoEF (Ministry of Environment & Forest) used to take more
time in providing forest & environmental clearances, which
needs to be squeezed for timely fixing the appointed date
of projects.
• The role of concessionaire & financial institution needs to be
redefined to reduce post award disputes.
• The credentials of participating Contractors /
Concessionaires should also be critically examined before
declaring successful in RFQ stage.
• Criteria of awarding contracts need to be redesigned by the
central Government based on the past experiences during
the execution of contracts.
• There should be absolutely zero political influence in
awarding the contracts & their implementation.
• Align the economic interest of all stakeholders.

21. Remedial Measures to make PPP model
successful(Contd.)
• Induct the private sector as partners.
• Provide Capital grant and other forms of financial
support to developers.
• Provide Revenue guarantee to the developers.
• Foreign exchange risk should be minimized by
the Government.
• Tax incentives may be provided to developers.
• Protection of developers against reduction of
tariffs or shortening of concession period.
• Loan guarantee for the project to developer.