This document discusses a proposed public-private partnership irrigation project along a 1000km road from Bangalore to Mumbai. The project would build 200 irrigation projects across villages and cities along the road to irrigate 250,000 acres of currently non-irrigated land. This would boost agricultural incomes in the region and economic development. Key stakeholders in the proposed partnership include a private company, central and state governments, farmers associations, and political parties. The expected costs, revenues, profits, and benefits of the project are analyzed over a 20-year period.

1. Dr. D.N.S.Kumar
Professor in Finance & Associate
Director
Centre for Research-Projects
Christ University, Bangalore, and
Management Consultant,
Rajat Financial Services
Bangalore
PPP and Comppetitiveness

2. } To build upon the resource by exploring a
resource through integration of sectors
across economic and non-economic activities
} To encourage ….,participants or stakeholders
in the idea to achieve a win-win results in
long run
PPP and Comppetitiveness

3. i. Roads and bridges, railways, seaports, airports,
inland waterways;
ii. Power;
iii.Urban transport, water supply, sewerage, solid
waste management and other physical
infrastructure in urban areas;
iv.Infrastructure projects in Special Economic Zones;
and
v. International convention centres and other tourism
infrastructure projects;
PPP and Comppetitiveness

4. Backbone Sector
PPP and Comppetitiveness

5. } Irrigation Scheme across Bangalore-Bombay
Golden Quadrilateral Road
PPP and Comppetitiveness

6. } Farmers
} Private Sector
} Government
} Society
PPP and Comppetitiveness

7. } “Contractual three party arrangement between
government, private party and farmers for the
provision of assets, clearances, the delivery of services
and purchase that have been traditionally not provided
by anybody”
} “…. a cooperative venture between the public, private
and farmers sectors, built on the expertise of each
partner, that best meets clearly defined public needs
through the appropriate allocation of resources, risk
and rewards”
} … a P3 involves a sharing of risk, responsibility and
reward, and is undertaken in those circumstances when
there is value for money benefit to the taxpayersPPP and Comppetitiveness

8. Design-Finance-Build-Own-Operate-Maintain
(DFBOOM)
PPP and Comppetitiveness

9. } Length of Road - 1000km
} No. of villages/cities and cities across the road –
200
} Population of above villages/cities – 1000000
} No of acres of land each village/city – 2500
} No. of acres of land non-irrigatted(50%) in such
villages/cities – 1250*200 =250000
} Current Income from agriculture- per acre Rs.
15000 – Rs. 20000 p.a. (average Rs. 17500/-)
PPP and Comppetitiveness

10. } 200 irrigation projects-units across the
roadside connecting all villages/cities
} Cost of each project Rs.15 crores
} Total cost of the entire project Rs. 3000
crores
PPP and Comppetitiveness

11. } Multiple departmental approach- Commerce, Industry, Finance(DEA),
Agriculture, and Social Welfare
} Multi-Governmental Agro-Irrigation Park
} Special package(s), Benefits and Incentives
} Incentives for establishment of agro-oriented SEZs, Export promotion
schemes
} Monitoring by the apex committee of Ministries, NABARD etc.,
} International Participation
} Foreign Direct Investments
} Financial Institutions, such as, IDBI,ADB, SBI etc.,
PPP and Comppetitiveness

12. } Private Company- for investment and
professional management
} Central and State Governments – for
subsidization and clearances
} Farmers associations – cooperation
} Political parties – to understand the significance
of well being of people and respective
states/constituencies
PPP and Comppetitiveness

13. } Central Government(VG-grant) - 10%
} State Governments(grant) - 15%
} Private investors investment - 60%
} Capital to be raised from farmers - 7.5%
} Capital from other organizations(Debt) - 7.5%
Single window clearances be given by the
respective state/central government
PPP and Comppetitiveness

14. } Total cost of Project - Rs. 3000 crores
} Grants from Govts - Rs. 750 crores
} Net cost of project - Rs. 2250 crores
} Expected Cost of Finance to investor – 12%
} Cost of debt - 18.5%
} Expected return by the investor - 18%
PPP and Comppetitiveness

15. } Irrigation of 250000 acres of land
} Enhancement of Purchasing power of minimum
1000000 population
} Even if crop such as Maize is grown:
per acre income per year would be:
50 quintals(100KG)* two crops a year*
average price Rs.10 per KG= Rs. 100000/-
} Other products such as vegetables, fruits, tobacco,
sugarcane, groundnut, cotton etc., would give 2 -
2.5 times more income
PPP and Comppetitiveness

16. } Current Income from 1250 acres:
250000*17500= 437.5 crores
} Expected Income
250000*100000= Rs. 2500 crores
PPP and Comppetitiveness

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19. PPP and Comppetitiveness

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21. } Life of project 20 years
} Royalty per acre Rs. 15000/- p.a.
} Cost of maintenance 5% of cost of project p.a
} Costs related to project:
◦ Cost of funds p.a - Rs.270 crores
◦ Cost of maintenance - Rs.150 crores
◦ Royalty 250000*Rs.15000 - Rs.375 crores
PPP and Comppetitiveness

22. } Income from provision of water
◦ to corporates 20000 corporates *Rs.100000 p.a.
= Rs.200 crores
◦ Local bodies 1000000 population * Rs.500 p.a.
=Rs.50 crores
PPP and Comppetitiveness

23. } Income:
◦ Royalty - Rs. 375 crores
◦ Provision of water - Rs. 250 crores
◦ Total - Rs. 625 crores
} Expenses:
◦ Cost of funds - Rs. 270 crores
◦ Cost of maintenance - Rs. 150 crores
◦ Total - Rs. 420 crores
◦ Net benefit - Rs. 205 crores
PPP and Comppetitiveness

24. } Cash Inflows: (Net savings – Tax) + Depreciation
= (Rs.205crores – 0) + Rs.75crores
=Rs.280crores
*50% of cost of project is assumed as fixed investment
} Original net investment / net savings
Rs.2250crores/Rs.280crores
That is, 8 years
PPP and Comppetitiveness

25. Fixed cost of project:
=Depreciation + Interest on debt
=Rs.75 crores +((2250*7.5%/100)*12%
=Rs. 90.25crores
Therefore, BEB = Fixed cost/ Royalty per unit
= Rs.90.25crores/(1250 a unit* Rs. 12000 p/a)
= 60 units
PPP and Comppetitiveness

26. } High powered due to profit motive
} Benefits of coordinated decision-making- in Design,
Construction, Operation, financing etc.
} Complementarities with other parts of the given project
} Capacity to raise capital at low cost
} Brings efficiency improvement through inventions
} Ability to control costs
} On-going relationships, not spot market
} Sharing of authority for decision-making
PPP and Comppetitiveness

27. } Increased revenue to government in the form of sales
tax
} Reduced pressure for subsidy
} Economic wellbeing of people
} Purchasing power improvement
} Economic development
} Reeducation in social tension
} Added business and enhanced competitiveness
among all economic activities/enterprises
PPP and Comppetitiveness

28. dnsk2000@yahoo.com
dns.kumar@christuniversity.in
09342266072
08040129018(O)
08040988972( R )
PPP and Comppetitiveness