IMPLEMENTATION FRAMEWORK FOR THE TOURISM Through PPP

CHAPTER - 7
IMPLEMENTATION FRAMEWORK FOR THE TOURISM

PROJECTS THROUGH PUBLIC PRIVATE PARTNERSHIP-
A ROLE MODEL
7.1 Concept of Public Private Partnership
Need for the Public Private Participation
Options for Public Private Partnership
Benefits from Public-Private Partnership
Private sector more efficient than the Public sector
7.2 World wide Scenario of the Public Private Partnership
7.3 Public Private Partnership Scenario in India
A Role Model of the Tourism Project through PPP- International

Convention Centre Complex, Thrivananthapuram
7.4 Public Private Partnership Scenario in Himachal Pradesh
A Role Model of the Tourism Project through PPP- Aerial Ropeway-cum-

Ski- Centre at Solang, Distt. Kullu, HP
References
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Tourism Projects through Public Private Partnership
This chapter will discuss the concept of the Public Private Partnership (PPP), its
origin, need for the PPP, existing experience on the PPP and implementation of the tourism
related projects through PPP. It also explains Public Private Partnership scenario world
wide, in India and in the State of Himachal Pradesh of the tourism related projects.
7.1 Concept of Public Private Partnership (PPP)
To sustain and accelerate higher economic growth rate, the State needs to build,
upgrade and modernize its infrastructure. Today public-private partnership has emerged as a
vital tool to build, manage and operate infrastructure services efficiently. Public-Private
Partnership (PPP) is a system in which a government service or private business venture is
funded and operated through a partnership of government and one or more private sector
companies. These schemes are sometimes referred to as PPP or P3. Pressure to change the
standard model of public procurement arose initially from concerns about the level of public
debt, which grew rapidly during the macroeconomic dislocation of the 1970s and 1980s.
Governments sought to encourage private investment in infrastructure, initially on the basis
of accounting fallacies related to the fact that public accounts did not distinguish between
current and capital expenditure.
Although the idea that private provision of infrastructure represented a way of

providing infrastructure at no cost to the public has now been generally abandoned, interest
in alternatives to the standard model of public procurement persisted. In particular, it has
been argued that models involving an enhanced role for the private sector, with a single
private sector organisation taking responsibility for most aspects of service provisions for a
given project, could yield an improved allocation of risk, while maintaining public
accountability for essential aspects of service provision.
Initially, most Public-Private Partnerships were negotiated individually, as once-off

deals. In 1992, however, the Conservative government of John Major in the United
Kingdom introduced the Private Finance Initiative (PFI), the first systematic program aimed
at encouraging Public-Private Partnerships. In the 1992 program, the main focus was on
reducing the Public Sector Borrowing Requirement, although, as already noted, the effect on
the public accounts was largely illusory. The Labour government of Tony Blair elected in
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1997, persisted with the PFI sought to shift the emphasis to the achievement of "value for
money" mainly through an appropriate allocation of risk.(Indian lnfrastructure,2006)
"A Public-Private Partnership is a contractual agreement between a public agency

(federal, state or local) and a private sector entity". Through this agreement, the skills and
assets of each sector (public and private) are shared in delivering a service or facility for the
use of the general public. In addition to the sharing of resources, each party shares in the
risks and rewards potential in the delivery of the service and/or facility. A Public Private
Partnership (PPP) is a partnership between the public and private sector for the purpose of
delivering a project or service traditionally provided by the public sector. Public Private
Partnership recognizes that both the public sector and the private sector have certain
advantages relative to the other in the performance of specific tasks. By allowing each sector
to do what it does best, public services and infrastructure can be provided in the most
economically efficient manner.
The role of the government is evolving from that of owner and sole provider, to that
of a facilitator and regulator. In this capacity, the emphasis of government is on
safeguarding the interests of the vulnerable segments of the community through effective
legal and institutional frameworks.
The Guidelines for formulation, appraisal and approval of public partnership projects
articulate the need for 'due diligence' in the formulation, appraisal and approval of Public
Private Partnership (PPP) projects of the Government. Unlike private projects where prices
are generally determined competitively and Government resources are not involved, PPP
infrastructure projects typically involve transfer of public assets, delegation of governmental
authority for recovery of user charges, private control of monopolistic services and sharing
of risks and contingent liabilities by the Government. In some types of PPP, the government
uses tax revenue to provide capital for investment, with operations run jointly with the
private sector or under contract. In other types (notably the Private Finance Initiative),
capital investment is made by the private sector on the strength of a contract with
Government to provide agreed services. Government contributions to a PPP may also be in
kind (notably the transfer of existing assets).
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Typically, a private sector consortium forms a special company called a "Special

Purpose Vehicle" ( SPV) to build and maintain the asset. The consortium is usually made up
of a building contractor, a maintenance company and a bank lender. It is the SPV that signs
the contract with the Government and with subcontractors to build the facility and then
maintain it.
The term "Public-Private Partnership" The need for private sector involvement in
urban infrastructure development is indisputable in the above context and it has been proven
beyond doubt that depending on the option of private participation used it could deliver the
required benefits in urban infrastructure projects. Private sector participation could help to
bring technical and managerial expertise, improve operating efficiency, large scale injection
of capital, greater efficiency in using the capital.
A typical PPP example would be a hospital building financed and constructed by a

private developer and then leased to the hospital authority. The private developer then acts
as landlord, providing housekeeping and other non medical services while the hospital itself
provides medical services. Chart 7.1 shows the Public Private Partnership generic life cycle
from the stage decision to explore Public, Private Partnership to signing of the contract of a
project. Source: World Tourism Organization
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Chart 7.1 PPP PROJECT GENERIC LIFE CYCLE
Decision to explore PPP solution

Inform PPP Unit of decision, and of expertise avaibble
Include project in the budget process
Appoint project Terms of reference for

officer advisers
Assign project Select and assign
team transaction adviser team
Prepare a feasibility study v/hich:

• Describes the institutional function to be performed
by the private party
• Sets out results of a sector needs and options analysis
• Demonstrates affordabillty
• Shows how risk will be transferred to private party
• Gives an initial indication of how value for money will
be achieved
• Describes institutional arrangements for monitoring
the PPP
•
•
X
Possible expression of interest phase
Prepare and disseminate a request for qualification
(RFQ) document
• Prepare a request for proposals (RFP) document and

a draft contract.
• Ensure fair, transparent, competitive process
• Issue RFP to pre-qualified parties

• Structured engagement with bidders for clarification
• Receive bids
• Evaluate
• Compare with feasibility study
• Select preferred bidder, based on best value for money
• Negotiate contract with preferred bidder

• Set up contract management
lager system
• S ^ contract
• Conclude close-out report
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7.1.2 Need for the Private Sector Participation
In the present scenario most of the governments turning to the private sector for help
in developing and delivering in the Public Private Partnership (PPP) projects. They hope to
take advantage of private sector skills and know-how, improve the efficiency of service
delivery, and gain access to finance for new investments. Experience in countries that have
entered into arrangements for private sector participation shows that, if well designed, these
arrangements can bring big improvements in the quality, availability, and cost-effectiveness
of services.
It requires a partnership between government and the private sector participants, and
the nature of this partnership - and the rights, responsibilities, and risks it entails for each
partner - must be carefiiUy mapped out. The first step is choosing the private sector option
best suited to local circumstances. To make this choice, a government must identify the
problems in service provision, evaluate how well different option address those problems,
and assess its capacity to accept the roles, duties, and risks that each option imposes.
Govenmients seeking to involve the private sector, generally have one or more of the
following objectives in mind:
• Bring technical and managerial expertise and new technology into the sector;
• Improve economic efficiency in the sector - in both operating performance and the
use of capital investment;
• Inject large-scale investment capital into the sector or gain access to private capital
markets;
• Reduce public subsidies to the sector or redirect them from the groups now served to
the poor and those now served;
• Insulate the sector from short-term political intervention in utility operation and limit
opportunities for intervention by powerful interest groups and
• Make the sector more responsive to consumers' needs and preferences.
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All forms of private sector participation can be designed so as to improve technical

and managerial capacity. But the other objectives can only be achieved if the appropriate
arrangement for private sector participation is chosen and if the government creates the
necessary enabling and regulatory environment. The toolkits therefore, emphasize not only
choosing a contract for private participation that is well tailored to local needs but also
putting a supporting regulatory environment in place.
The toolkits also address other concerns that governments often have about involving
the private sector - such as the consequences for utility employees, loss of control of a
strategic sector, and price increases and their impact on the poor. The toolkits show how to
deal with these concerns through the design of the process for private participation and of
the contract and associated regulatory provisions.
7.1.3 Keys to successful Public Private Partnership
There are six critical components of any successful Public-Private Partnership (PPP).
While there is not a set formula or an absolute foolproof technique in crafting a successful
PPP, each of these keys is involved in varying degrees.
Political Leadership
A successful partnership can result only if there is commitment from "the top". The
most senior public officials must be willing to be actively involved in supporting the concept
of PPPs and taking a leadership role in the development of each given partnership. A well-
informed political leader can play a critical role in minimizing misperceptions about the
value to the public of an effectively developed partnership. Equally important, there should
be a statutory foundation for the implementation of each partnership.
Public Sector Involvement
Once a partnership has been established, the public sector must remain actively
involved in the project or program. On-going monitoring of the performance of the
partnership is important in assuring its success. This monitoring should be done on a daily,
weekly, monthly or quarterly basis for different aspects of each partnership (the frequency is
often defined in the business plan and/or contract).
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A Well Thought - Out Plan
A carefully developed plan (often done with the assistance of an outside expert in
this field) will substantially increase the probability of success of the partnership. This plan
most often will take the form of an extensive, detailed contract, clearly describing the
responsibilities of both the public and private partners. In addition to attempting to foresee
areas of respective responsibilities, a good plan or contract will include a clearly defined
method of dispute resolution (because not all contingencies can be foreseen).
A Dedicated Income Stream
While the private partner may provide the initial funding for capital improvements,
there must be a means of repayment of this investment over the long term of the partnership.
The income stream can be generated by a variety and combination of sources (fees, tolls,
shadow tolls, tax increment financing, or a wide range of additional options), but must be
assured for the length of the partnership.
Communication with Stakeholders
More people will be affected by a partnership than just the public officials and the
private-sector partner. Affected employees, the portions of the public receiving the service,
the press, appropriate labour unions and relevant interest groups will all have opinions, and
frequently significant misconceptions about a partnership and its value to all the public. It is
important to communicate openly and candidly with these stakeholders to minimize
potential resistance to establishing a partnership.
Selecting the right Partner
The "lowest bid" is not always the best choice for selecting a partner. The "best
value" in a partner is critical in a long-term relationship that is central to a successful
partnership. A candidate's experience in the specific area of partnerships being considered is
an important factor in identifying the right partner. The listing of NCPPP members provides
a logical starting point for the identification of potential partners or services that might be
required in the development of a partnership. (World Bank, Tool Kit,2006)
James Cuorato argued that for a partnership to succeed, it must have the following
characteristics:
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1. It must be a real partnership, with shared burdens and shared rewards for both the
pubhc and private participants;
2. There must be real incentives for the private sector or they will not participate;
3. The public-sector must use its resources effectively and judiciously, focusing on
projects where there can be success;
4. Keep it simple for the private-sector by minimizing the bureaucratic procedures that
can cripple a project;
5. Remember that "Land is King"—it provides the public with the opportunity to control
the projects and
6. Public-Private Partnerships are a necessary and important part of the process.
7.1.4 Options for Public Private Sector Participation
Why are more and more governments turning to the private sector for help in
developing and delivering water and sanitation services? They hope to take advantage of
private sector skills and know-how, improve the efficiency of service delivery, and gain
access to finance for new investments. Experience in countries that have entered into
arrangements for private sector participation shows that, if well designed, these
arrangements can bring big improvements in the quality, availability, and cost-effectiveness
of services.
But private sector participation on its own is no panacea for problems in water and
sanitation. It requires a partnership between government and the private sector participants,
and the nature of this partnership - and the rights, responsibilities, and risks it entails for
each partner - must be carefully mapped out. The first step is choosing the private sector
option best suited to local circumstances. To make this choice, a government must identify
the problems in service provision, evaluate how well different option address those
problems, and assess its capacity to accept the roles, duties, and risks that each option
imposes.
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Options available
The options for private sector participation can be ranged along a spectrum. At one
end are those in which the government retains full responsibility for operations,
maintenance, capital investment, financing, and commercial risk - at the other, those in
which the private sector takes on much of this responsibility (Chart 7.2.) But even where the
private sector takes on full responsibility for operations and financing, as in concessions and
assets sales, it does o within a framework created by the government. The most important
part of this framework is regulatory arrangements to protect consumers from monopolistic
pricing and enforce health and environmental standards and subsidy regimes to ensure
access to services for the disadvantaged.
Spectnun of public-private partnersliip options

Public ^ Investmeflt- —^Pnvate
Enablec
Providex ^ Grovernmeiit -ând
Regulator
Management Leas( Concession

Contcacts BOT
Chart 7.2
Spectrum of public - private partnership options
Source: World Bank
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The range of options
Divestiture
<L>
>
C
> Build-operate-
own contracts
Concession
Build-operate-
B Lease transfer contracts
2 Management
o
3
a. Service contracts
10 15 20 25 3 0 — 3 5 —
Duration
Increasing level of delegation, risk irreversibility
Figure 7.1
Source: World Bank
The main options for private participation can be clearly distinguished by how they
allocate responsibility for such functions as asset ownership and capital investment between
the public and private sector (Chart 7.2). But in practice private sector arrangements are
often hybrids of these models. For example, leases often pass some responsibility for small-
scale investment to the private sector, and management contracts may have revenue-sharing
provision that make them a little like leases.
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Table 7.1
Allocation of key responsibilities under the main Public Private Sector Participation
options
Option Asset Operation Capital Commercial Duration

ownership and investment risk
maintenance .
Service Public Public and Public Public 1 -2 years

contract Private
Management Public Private Public Public 3-5 years

contract
Lease Public Private Public Shared 8-15 years
Concession Public Private Private Private 25-30 years
BOT/BOO Private and Private Private Private 20-30 years

public
Divestiture Private or Private Private Private Indefinite

private and
(may be limited by
public
Source: World Bank
Service contracts—simple, but with limited benefits
Service contracts secure private sector assistance for performing specific tasks e.g. in
the tourism sector like -house keeping, laundry, computerization, garbage disposal system
etc. They are typically for short periods, from six months to two years. Their main benefit is
that they take advantage of private sector expertise for technical tasks or open these tasks to
competition. They leave the responsibility for coordinating these tasks with the public utility
managers. They also leave the responsibility for investment with the public sector.
Service contracts are widely used, in India, where Madras Metro Water has
contracted services ranging from the provision of staff cars to the operation and maintenance
of sewerage pumping stations. The water utility in Santiago do Chile has contracted out
services accounting for about half its operating budget, including computer services.
33
engineering consulting services, repair and maintenance and rehabilitation of the network.
To enhance competition, the Sanitago utility has at least two service contracts for each kind
oftask.
Although relatively simple, service contracts must be carefully specified and

monitored. If a utility is poorly managed, its service contracts probably will be too. Service
contracts are at best a cost effective way to meet special technical needs for a utility that is
already well managed and commercially viable. They cannot substitute for reform in a
utility plagued by inefficient management and poor cost recovery.
Management Contracts- a good first step
Management contracts transfer responsibility for the operation and maintenance of

government owned business to the private sector. These contracts are generally for three to
five years. The simplest involve paying a private firm a fixed fee for performing managerial
tasks. More sophisticated management contracts can introduce greater incentives for
efficiency, by defining performance targets and basing remuneration at least in part on their
fulfilment. To be worthwhile, these more complex management contracts must produce
efficiency gains large enough to offset the regulatory costs of establishing targets and
monitoring performance against them.
Specifying clear and indisputable targets is often difficult; especially when

information about a system's current performance is limited. Some targets may be beyond
the private sector partner's power to achieve. There is often a fine dividing line between
operations and maintenance expenditures, for which the private operator is responsible and
capital investment, for which the government is responsible-and both will affect the
operator's performance.
Because management contracts leave all responsibility for investment with the
government, they are not a good option if a government has as one of its main objectives
accessing private finance for new investments. Because they do not necessarily transfer any
of the commercial risk to the management contractor, they draw little on private sector
incentives to reduce costs and improve the quality of services.
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Management contracts are most likely to be useful where the main objective is to
rapidly enhance a utility's technical capacity and its efficiency in performing specific tasks,
or to prepare for greater private involvement.
Management contracts-a step toward greater private sector participation
Management contracts can be a good first step toward more full-fledged private
sector involvement where conditions make it difficult for the government to commit to a
long-term arrangement or to induce the private sector to undertake capital investment or
accept commercial or political risk. A management contract might be chosen, for example,
where:
• Tariffs are too low to support a commercial operation, and the government needs
time to increase tariffs or develop a system of public subsidies compatible with
private sector participation.
• The regulatory framework has defects that need to be remedied before a long-term
private sector arrangement can be secured.
• The country lacks a good track record in public-private partnerships.
• The government faces difficulties in getting key stakeholders to agree to long-term

involvement of the private sector.
In such conditions a management contract can provide a window of opportunity for

developing trust between the public and private sectors and for the government to create an
environment more conductive to private risk-taking. This was the approach adopted in
Mexico City and in Trinidad and Tobago.
Where lack of information about the system is a problem, a requirement to collect

and disseminate this information can be included in the management contract. But making
the contract holder responsible for gathering information could give it an advantage in
bidding for a longer-term lease or concession. Appointing an independent engineer or
auditor can help ensure equitable access to the information produced by the management
contractor.
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Leases-a way to pass on commercial risk
Under a lease arrangement a private firm leases the assets of a utility from the
government and takes on the responsibility for operating and maintaining them. Because the
lessor effectively buys the rights to the income stream from the utility's operations (minus
the lease payments), it assumes much of the commercial risk of the operations. Under a
well-structured contract the lessor's profitability will depend on how much it can reduce
costs (while still meeting the quality standards in the lease contract), so it has incentives to
improve operating efficiency.
Leases have been widely used in France and Spain and are currently in place in the
Czech Republic, Guinea, and Senegal. They were also used in Cote D'lvoire until replaced
by a concession. Leases leave the responsibility for financing and plarming investments with
the government. So if major new investments are needed, the government must raise the
finance and coordinate its investment program with the operator's operational and
commercial program.
Leases are most appropriate where there is scope for big gains in operating efficiency
but only limited need or scope for new investments. Leases have also sometimes been
advocated as stepping stones toward more full-fledged private sector involvement through
concessions. But their administrative complexity and the demands they place on
governments for commitment are nearly as great as those of concessions-so a lease is a
much bigger first step than a management contract.
"Pure" leases are rare, however. Most place some responsibility for investment on
the private partner, if only for rehabilitation works. These contracts operate as a hybrid
between a lease and a concession contract.
Concessions-a route to full-fledged private participation
A concession gives the private partner responsibility not only for the operation and
maintenance of utility assets but also for investments. Assets ownership remains with the
government, however, and full use rights to all the assets, including those created by the
private partner, revert to the government when the contract ends- usually after 25 to 30
years. Concessions are often bid by price: the bidder that proposes to operate the utility and
334
meet the investment targets for the lowest tariff wins the concession. The concession is
governed by a contract that sets out such conditions as the main performance targets
(coverage, quaUty), performance, standards, arrangements for capital investment,
mechanism for adjoining tariffs and arrangements for arbitrating disputes.
Concessions have a long history of use infrastructure in France. Recently it has

spread to the developing world, where it is being used for water and sanitation in Buenos
Aires, for water in Macao, and for sewerage in Malaysia.
The main advantage of a concession is that it passes full responsibility for operations
and investment to the private sector and so brings to bear incentives for efficiency in all the
utility's activities. The concession is therefore attractive options where large investments are
needs to expands the coverage or improve the quality of services.
On the government's side, administering a concession is a complex business,

however, because it confers a long term monopoly on the concession, particularly the
distribution of its benefits between the concessionaire (in profit) and consumer (in lower
prices and better service)
Joint venture leases and concessions:
In such countries as Spain, it has become common for governments- national,

regional and local- to establish joint ventures with the private sector to run leases and
concessions. A typical joint venture creates a new company, with the state entity holding 51
percent of the equity and the private sector or a financial institution (for both) holding the
remaining shares. By limiting the private sectors, these joint ventures can help secure
stakeholders agreement to private sector participation. By demonstrating public commitment
to the venture, they can reduce the private sector's perception of risk. But they can create
conflicts of interest if the same government entity is both the regulator of the utility
company and its part owner.
Another issue is the extent to which to which the private firm can exercise
management control, especially if it has only a minority shareholding in the joint venture.
Without such control the private firm may not feel that its interests are protected and may
not be able to produce the efficiency gains expected from private involvement. Most joint
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ventures address control issues through detailed clauses in the company's by-laws allowing
both parties to vet key managerial appointments. These clauses may foster partnership, but
they can also complicate the utility governance.
Build-Operate-transfer contracts- a solution for bulk supply and treatment problems.
Buih-operate-transfer (BOT) arrangement resembles concessions for providing bulk

services but is normally used for Greenfield projects, such as a water or waste-water
treatment plant. In a typical BOT arrangement a private firm might undertake to construct a
new dam and water treatment plant, operate them for a number of years, and at the end of
the contract relinquish all rights to them to the public utility. The government or the
distribution utility would pay the BOT partner for water from the project, at a price
calculated over the life of the contract to cover its construction and operating costs and
provided a reasonable return. The contract between the BOT concessionaire and the utility is
usually on a take-or-pay basis, obligating the utility to pay for a specified quantity of water
whether or not that quantity is consumed. This demands risk on the utility. Alternatively, the
utility might pay a capacity charge and a consumption charge, an arrangement that shares
the demand risk between the utility and the BOT concessionaire. BOT have been used for
water treatment in such countries as Australia and Malaysia and for sewage treatment in
Chile and New Zealand. BOT tend to work well if the main problem a utility faces relates to
water supply or wastewater treatment. But if the problem is a faulty distribution system or
poor collocation performances, a BOT is unlikely to remedy it- and may even aggravate it.
Where private sector participation is needed both to provide new bulk services (a
servitor or a water or wastewater treatment plant) and to improve the performance or expand
distribution systems, separating the tasks maximizes the potential efficiency gains from
competitive bidding and reduce the monopoly power given to a single company. There are
many possible variations on the BOT model, including build-operate-own (BOO) at
arrangement, in which the assets remain indefinitely with the private partner, and design-
build-operate (DBO) arrangements, in which the public and private sectors shares
responsibility for capital investments. BOTs may also be used for plants that need extensive
overhauls- in arrangements sometimes referred to as ROTs (rehabilitate-operate-transfer)
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Full or partial divestiture- another route to full-fledged private participation.
A complete divestiture, like a concession, gives the private sector full

responsibility for operations, maintenance, and investment. But unlike a concession, a
divestiture transfer ownership of the assets to the private sector, so the nature of the public-
private partnership differs slightly. A concession assigns the govenmient two primary tasks:
to ensure that the utility assets- which the government continues to own- are used well and
returned in good condition at the end of the concession and, through regulation, to protect
consumers from monopolistic pricing and poor service. A divestiture leaves the government
only the task of regulation. Since, in theory, the private company should be concerned about
maintaining its assets base. But private companies may not always take the long view. Even
with an asset sale, the regulator may need to scrutinize the utility's plans for renovating or
enhancing its assets. In England and Wales the regulator required utilities to report the
service ability of their assets.
Although widely used in other infrastructure sectors, divestitures in the water and
sanitation sector have been limited to England and Wales, (private water companies have
also long operated in the United States .) Given the national economic importance of
infrastructure services, governments are generally unwilling to divest water and sanitation
assets without introducing safeguards. The U.K. government retains "safety net" power of
appointment another operator in case a water company fails. It also limits the length of the
licenses under which water companies operate.
Even though governments may find divestiture ideologically or even

constitutionally difficult to contemplate, they should not dismiss it without evaluation. In
some circumstances divestiture may be more appropriate than a concession. Where the
public sector utility is technically capable, for example, divestiture by sale of shares or
management buyout may produce the required efficiency gains without involving the
foreign water conglomerates that typically dominate bids for concessions.
Objective options and Requirement options about PPP are described in Table 7.2
and Table 7.3 respectively.
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Table 7.2
Objective Tecl2Dic«I Managing Operating Invest:

Optica Expertise £?cp«ni»e i s Bulk ia Distri:
S e r \ i c * Coiilr»ct Y « No No Ko No
Yes Yes Sonae No No
Contract
Z-ea&« Yes Yes Some No No
C one e isi o i r B O T Yes Some Some Yei No
BOOT BOO Y « Ye» Yea. Ye* Yeb
Source: World Bank
Table 7.3
C QSt-1 OVMling Reji'.l5.torTr Good

Optio-i Codiiiitiiieflt TlX:f/s FximewodK Iiifom'zitioi^
Sei^-ice C o n t t a c i Lccs- Low Lo-^v LD^JT
^1 Ltwigcm cftt
Ccntnct Moderate Modeiare Alodeiale LO'DT
Lease Moderate HlTh Hxgh H.£h

BO*r Concession Moderate High High High
BOOT/BOO H^h High High H.£il
Source: World Bank
7.1.5 Benefits from Public-Private Partnership
Pub lie-Private Partnership provides opportunities for development co-operation to

harness private enterprise as a locomotive of economic and social development in the
interest of the countries involved. Co-operation between the private sector and development
co-operation agencies enables both sides to achieve their respective goals better, faster, and
at lower costs. Public-Private Partnership is not a fashion. Numerous high, middle and low
income countries would not have embarked on such complex and risky projects if they were
not expecting real benefits from such arrangements. Those benefits can be achieved in four
main areas:
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Increasing efficiency in the execution of projects
There is evidence that often, road maintenance workforces directly employed by

government departments (known as force accounts) are less efficient than competitive
private sector contractors. In Brazil, a 1992 World Bank study showed that routine road
maintenance costs by contract were 25% lower than by force account, and in Colombia, they
were 50% lower. The chart below shows efficiency gains (cost reduction of maintenance
operations) obtained in Australia from different forms of maintenance outsourcing compared
to performance of the Road Transport Agency (RTA). Interestingly, the chart shows a
simultaneous reduction of the agency cost, stressing the overall rationalization effort
conducted by the RTA.
-52%
40%
RTA
30K s o f t Contract
Tnnsfl«U Corrtm:! \
0% Time (mDHVia from Jirta 1961)
10 2Q 30 40 90 00 TO
Graph: 7.1
Saving of maintenance costs obtained in Australia through contracting
Source: RTA
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Enhancing implementation capacity
By giving more flexibility in the mobilization of resources both in nature and

planning, contracting out allows the delivery of more and more responsive services.
Particularly in countries facing pressure to reduce the size of the public sector, the issue is
critical. For instance, in Peru, a rural roads program relied on community-based micro-
enterprises to deliver routine maintenance services under performance-based contracts. The
program addressed the difficulties of ensuring central-government maintenance of a myriad
of scattered rural roads and the failure of traditional municipal force account works. The
system has excelled in improving reliability of access of rural roads while generating
employment opportunities and acting as a catalyst for other local development initiatives.
dO% •ucfo«nliipito ao%

•Othen lOthen
60% B 60%
40%
40% HI 40% I
J»lllll»_, J—lillil •!,

Hy^t i ^ unsfitlBladDry
unsfitlBladDry SatefBdory
SaHBtBdory HigDIy
Higlily V ^ Oood Oood Fsir Poor VeryPooi
Unsatisfeckxy
Graph: 7.2
Peru: Improving reliability of access with community-based micro-enterprises
Source: Irigoyen.
On heavily trafficked roads were congestion and safety can be critical, private sector
involvement can deliver more diversified services optimized to respond to road users' needs
340
=============Împlementation Framework for the
and expectations. Innovative systems and services for traffic management or stand-by
services for accidents are more efficiently provided by the private sector.
Reducing risk for the public sector
Transfer of part of the project risks to private partners is one of the key incentives
generated by pubHc private partnerships and directly results in a better control by the public
sector of the overall project cost, delivery time frame and quality of outputs.
Mobilizing financial resources
Private financing in infrastructure is often quoted as a "new" source of financing.

There should be no confiasion however between the financial sources of investment that
could come from the private sector in the form of debt or (to a lesser extent) equity and the
source of revenue that will eventually pay back the investment and must come from the
taxpayer or the beneficiaries of the road. There are no "free lunches". However, private
financing for road construction or rehabilitation allows to mobilize the resources and
execute the relevant investments more rapidly because of the incentive the private sector has
to maximize the return on the investment.
Freeing scarce public funds for other uses
PPPs financed by the private sectors allow the spreading of the project cost for the
public over a longer period of time, in line with the expected benefits (savings on vehicle
operating cost, on travel time, on accidents). Public funds are thus freed up for investments
in sectors were private investment is impossible or inappropriate (social services).
341
= — = = Implementation Framework for the
B«n«m>for Bontfltf
thft community
Cost to th»
community
I •I yaaiB
ruMc
lnv««tm«(tt
Private financed project
B«nefhftfor Btntm
ttii community
SUMII public RoaduMrdwyHor y«m

Invtilmvnt piyminti bytfwpubic ttctor
Graph: 7.3
Schematic illustration of cost and benefits flows to the

communit> under public versus private financed projects
Source: Group EGIS
On public financed projects, an initial investment is made by the public sector and
recovered by the community in form of the project benefits. On private financed projects the
cost for the community is incurred trough payments to the private sector over the entire
project operation phase, either through regular payments from the Government or through
collection of tolls from the road users.
7.1.6 Private sector more efficient than the Public sector
The advantages of private involvement are an increase in efficiency in the provision

of services, avoidance of political interference in operations, and circumventing of public
sector budget constraints. Supply can be made more efficient by involving the private sector
in the design and construction of infrastructure facilities even when they are owned and
342
========= =====Implementation Framework for the
managed by the public sector. Private sector skills can then be used to put the initial project
together, assemble the necessary partners to complete the scheme and manage procurement
and operations. PPP systems are, therefore, particularly appropriate when skills are scarce in
the public sector. The private sector usually has more flexible procurement rules than the
public sector, and this can speed up implementation. PPPs involving private financing can
also ease fiscal problems by moving infiâstructure projects off-budget during the years of
construction. The potential for raising finance on both domestic and international capital
markets can be enhanced by making policy reforms that create clear rules allowing investors
to form reasonably firm expectations about the cash flow generated in an infrastructure
business.
Typical reasons for a greater efficiency of the private firms over public agencies are to be
found in:
A system of incentives and sanctions:
In human resource management: motivation at company level such as fear of

bankruptcy and hope for results are passed on to individuals in the form of wage increases,
promotion of productive ones and dismissal of inefficient ones. In the relationship between
the government and the private firm, incentives and sanctions are also put in place through
an enforceable contract. While this can theoretically be achieved through State to State
Performance Agreements, the willingness or ability to enforce them is often questioned.
Flexibility: the private sector has greater flexibility in adjusting its resources (personnel,
equipment and materials) to a constantly changing situation.
Comprehensive approach: when entrusted with a long-term contract and a wider scope of
work, private firms can balance expenditure over the project life and make effective trade-
offs between investment, maintenance and operation costs subject to environmental, social
and economic considerations.
Access to technology: large firms are massively investing in research and development and
constantly improving the quality and efficiency of construction techniques, processes and
equipment.
343
Competition is a necessary condition to stimulate private entities in the optimization of their

services. It is also a good way for the community to benefit from the efficiency gains made
by the private sector by paying the optimum price. Competition is the primary factor
motivating managers to cut waste improve operational performance and allocate resources
efficiently. Two mains forms of competition can be used.
(a) Competition in the market (Competition between private firms or transport modes in a
market with no regulation on entry) is not easy to put in place in the road sector. The
requirement of long-term and comprehensive contracts to maximize efficiency gains and the
practical impossibility to have several firms providing the same services on the same road
are conflicting with this principle. On a case to case basis, measures can however be put in
place to prevent abuse of dominant position firm the private operators. Contracting
simultaneously several firms to provide similar services on comparable portions of the
network will provide good benchmarking references and naturally regulate the market. On
toll roads, allowing alternative routes on the same corridor (roads or other transport modes)
can also have stimulating effect when not jeopardizing financial viability).
(b) Competition for the market (Competition between private firms for the right to provide
services on a particular road or a portion of the network) is best obtained by selecting private
firms through competitive bidding procedures. Under this provision, competition is
concentrated in the few month of the procurement period while the benefits are expected to
be brought through the entire operation period. Pressure on competitors is so high during the
procurement phase that it often pushes unrealistic firms to bid on an excessively low-price
basis (called low balling) and jeopardize the sustainability of the project.
7.2 World wide Scenario of the Public Private Partnership
After World War I, infrastructure was mainly designed, constructed and financed
from public fiinds and prior to 1982 there was virtually no private financing of infrastructure
in developing or transition countries. The trend towards the liberalization and privatization
of infrastructure activities that began in a few countries in the 1970s and 1980s turned into a
wave in the 1990s. Developing countries have been on the crest of this wave, pioneering
better approaches to providing infrastructure services. Market leaders among emerging
economies such as Argentina, Chile, and Hungary-have went further in privatizing
344
infrastructure than all but a few industrial countries. Simultaneously, initiatives aiming at
outsourcing maintenance activities to private firms are being implemented in Africa, Asia
and to a larger extent in Latin America. Generally the investment in tourism related
infrastructure projects with PPP are in the tourism related projects like Energy , Telecom,
Transport, Water and Sewerage sectors -.
• Energy
o electricity generation, transmission, and distribution
o natural gas transmission and distribution
• Telecommunications
o fixed or mobile local telephony
o domestic long-distance telephony
o international long-distance telephony
• Transport
o airport runways and terminals
o railways services including fixed assets, freight, intercity passenger, and local
passenger
o toll roads, bridges, highways, and turmels
o terminals and channel dredging
• Water
o potable water generation and distribution
o sewerage collection and treatment
The Investment classifies private infrastructure projects in four categories:
• Management and lease contracts
• Concessions (or management and operation contracts with major private capital
expenditure)
345
^ = = ^ = = = = = = = = = = Implementation Framework for the
Greenfield projects
Divestitures
International experience in PPPs

tNfKASntUCnJRE
WdMvferGraMh lo^'estmeDt in Infrastructure Projects nith Private Participation:

Developing C ountries (SUS hn)
1 r 1 1 1 1—'—I r 1 r
^ ^ ^ ^ J^ ^ ^ ^ J> ^ ^ ^^ ^ ^ ^
Source: WoridBank
Infcrmation Sourc*: wwfvJnfr9«taîctur«.90vJn | All Rights Rvftrvtd
Graph 7.4
International Experience in PPPs
Table 7.4
Regions ranked by number of PPP Projects, 1990-2004
's- T ^ i ; •
Region
Projects
Latin America and the Caribbean 1,062
East Asia and Pacific 789
Europe and Central Asia 555
Sub-Saharan Africa 249
South Asia 235
346
^ = ======= = = = = = Implementation Framework for the
Middle East and North Africa

Total 2.976
Source: World Bank
Table 7.5
Top 10 countries by PPP projects, 1990-2004
Country Projects
China 431
Brazil 280
Russian Federation 190
Argentina 182
India 163
Mexico 147
Chile 100
Colombia 8S
Malaysia 82
Thailand 82
Source: World Bank
Table 7.6
Top 10 countries by investment in PPP Projects, 1990-2004(USS)
Country Total Investment

Brazil 164.919
Argentina 73.980
China 67.536
Mexico 65,499
India 42.490
Malaysia 41,127
Philippines 32,074
Indonesia 29,431
Thailand 25,895
Poland 24,504
Source: World Bank
347
== = = === = ======lmplementation Framework for the
Most infrastructure projects with private participation fit in one of these four
categories. But the boundaries between these categories are not always clear, and some
projects have featured of more than category. In these cases projects have been classified in
the category that better reflects the risk borne by the private sector.
Table 7.7
Total Investment in PPP Projects by Type and Primary Sector (USS)
Sector Concession 1Divestiture Greenfield Management rotal

project and lease
contract
Energy 0 2,976 14,622 0 17,598
Telecom 0 2,652 25,543 0 28,195
Transport 1,167 0 2,727 0 3,894
Water and
0 0 2 0 2
sewerage
Total 1,167 5,628 42,895 49,690
Source: World Bank
348
7.3 Public Private Partnership Scenario in India
Although Public Private Partnership, referred to as PPP in short, has been formalized
as a developmental strategy recently, the history of partnership between public bodies, and
between public and private organizations is not so new. Right from the first five year plan
onwards, the government has consciously sought and created, and to a large extent obtained
community participation in implementation of Government programmes, especially in the
area of rural development. In the subsequent plans too, the Government has recognized the
role of NGOs and voluntary organizations in various rural infrastructure, employment
generation and poverty alleviation programmes. However, of late Public private partnership
has been recognized as an effective tool to build, manage and operate large infrastructure
facilities successfully. All the States recognize the need to build, upgrade and modernize
infrastructure to sustain and accelerate the economic growth rate. PPP provides the
necessary technical, managerial and operational efficiencies as also injection of capital
which at times may be scarce in public domain. Government support and resources
partnered with private sector capital and managerial expertise could go a long way in
creating best in the world infrastructure and facilities.
Government of India recognizes that there are significant shortcomings in the

availability of critical infrastructure in the country at central as well as state and local level
and that this is hindering rapid economic development. In addition, the development of
infrastructure requires very large investment that may not be possible out of the budgetary
resources of government of India alone. In order to remove these shortcomings and to bring
in private sector resource as well as techno-managerial efficiencies, the government is
committed to promoting public private partnerships (PPPs) in infrastructure development.
It is also recognized that infrastructure projects have a long gestation period and
may not all be fully financially viable on their own. On the other hand, financial viability
can often be fully financially viable on mechanism that provides government support t
reduce project costs. The government of India there fore proposes to set up a special facility
to provide such support to PPP projects. The role of the government is evolving from that of
owner and sole provider, to that of a facilitator and regulator. In this capacity, the emphasis
349
======= = ====="Împlementation Framework for the
of government is on safeguarding the interests of the vulnerable segments of the community

through effective legal and institutional frameworks.
There are various projects that have already been implemented by the Government of
India and various state governments in association with private players. Notable ones are the
Bhoomi project of the Kamataka state government, Community Information Centres in the
North-Eastem States, Andhra Pradesh Online, Kalyan Damodar Valley Project, CDFD
Medical Bioinformatics Centre for Excellence in Hyderabad, the Government of India gave
in principle approval to 12 projects worth Rs 2,643 crores under support to 'Public Private
Partnerships (PPP) scheme for infrastructure. The total investment for these projects is
estimated at Rs 2,643 crores. Approximately Rs 529.78 crores is to be provided as viability
gap funding (VGF) support by the Government, an official release said.
• First Public Private Partnership in India : Rau-Pithampur Toll Road in Madhya
Pradesh developed and sponsored by IL&FS
• First PPP Project in Water Sector in India and Largest Greenfield Water Project in
Asia under PPP format: Tirupur Water Supply Project in Tamil Nadu. Developed
and Sponsored in India
• First Large Private Sector Initiative in the Surface Transport sector in India: Noida
Toll Bridge The project has a number of firsts and unique features to its credit, and
was completed within the budgeted cost and, ahead of schedule. Developed and
Sponsored by IL&FS
• First PPP project in Airport in India: Cochin International Airport
Graph 7.5 shows sector wise information of tourism related projects of Government of
India in PPP and Graph 7.6 states wise information of Public Private Partnership projects.
350
- = = = = = = = = = = ^== Implementation Framework for the
PPPs in India - Uneven Progress

Number of awarded PPPs by sector
lnrfdiiiC tor G r e w *
(total projects = 86) SMi{(: World Buk
Sitn-ey covering 12 states and

3 central agenaes and 5
Roads & bridges
infrastructure sectors.
74%
Year: 2005
7
[nfcrmition Source imnJnfrHtnictura.ôvJn | All RightJ Risinitd
Graph: 7.5
Awarded PPP Projects by States & Central Agencies
351
==============ImplemerHation Framework for the
PPPs in India - Uneven Progress CORtd.
INFRASmucnjRE
Awarded PPP projects by states & central agencies
(total = U) »ir((: World Buk
M08RTH
Ktriii
Karnataka
Punjab
Sui\ê\'coYemigl2
states and 3 central ®*'|*'**
agencies and 5
infrastructure sectors.
Klihanihtr)
Year: 2005 1ftH
bfcmitiori Sourcf. vmviJnfrutructir«.qovin i W! Rights R«strv»d
G r a p h : 7.6
PPPs in India- number of awarded PPPs sector wise
352
7.3.1 A Role Model of the Tourism Project through PPP - International Convention
Center Complex, Thiruvananthapuram
Background
Government of Kerala (GOK) intends to establish a state-of-the-art International

Convention Centre to tap business tourism including the fast-growing Meetings Incentives
Conventions and Exhibitions (MICE) tourism segment. The facility is proposed to be
developed through Public Private Partnership (PPP). The project is structured as an
institutional-cum-tourism infrastructure project and would have substantial leisure facilities
to provide fillip to tourism growth in the region and a wide array of revenues to the private
sector.
GOK has identified Thiruvananthapuram as having the maximum potential for fast
track development in the southern part of Kerala during next 3-5 decades. It is emerging as
centre of knowledge, renewal of ancient medicinal system and alternative information
system hub of the country. In order to promote balanced growth in the region
'Thiruvananthapuram Capital Region' (TCR), comprising core economic centres, has been
identified by GOK comprising an area of about 400 sq.km. Under the TCR initiative of the
GOK, the government is undertaking projects to improve basic physical infrastructural
facilities in the region like transportation network, new tourism avenues, transhipment hub
etc.
International Convention Centre Complex
a) Concept: International Convention Centre Complex (ICCC) has been conceived under
TCR development projects of GOK. The ICCC would provide an integrated venue for
conferencing, convention and exhibition facilities for domestic and international events
equipped with state-of-the-art facilities, audio and video equipment and other auxiliary
services required to attract international conferences along with medium scale exhibitions.
The ICCC would also have flexible facilities for multipurpose usage to cater to local
demand like weddings, trade fairs and exhibitions. The Project would be an icon project in
the region and would attract international as well as domestic events. This unique facility
353
would serve as an anchor for other projects to develop and foster tourism growth in the
region.
b) GOK's Role: The Government is acting as a facilitator to develop the project to achieve
its vision of extending the 'God's own Country' brand of Kerala to the MICE segment of
tourism. To this end, efforts have been initiated for providing the necessary environment to
facilitate the desired development.
c) Scope of Project: The Scope of the Project includes design, construction, management,
operation and maintenance of the following components for the authorization period of 90
years (including construction period):
• Convention & Exhibition Centre (C&EC): The C&EC facility would broadly include
the Plenary Hall (capacity of 1500), Hi-tech hall (capacity of 500), meeting rooms,
divisible exhibition space. The Hi-tech hall would comprise of retractable seating
and state-of-the-art equipments for conferencing. These facilities would be
multipurpose and divisible and will be supported with specialty areas such as a
media, business and medical centre. In addition to these, there would be food and
beverage areas such as coffee shops, cafeteria and food courts to promote the facility.
• Hotel Complex/ Resort/ Service Apartments: The Resort would be a 150 rooms
facility, minimum three star category or above, that would include recreational
facilities such as an Ayurveda Spa and water sports.
• Retail/ Entertainment Space: The present plan proposes around 7,000 square meters
of retail area with lifestyle shopping, food courts, etc. This area could house a key
anchor client or alternately, it could comprise of several individual retail stores.
• Supporting facilities and on- site infrastructure: This would include internal roads,
Parking area. Security, Air conditioning, Sewage Treatment Plant (STP), Jetties,
landscaping and other services required for the complex.
d) The ICCC configuration responds to the market demand and stakeholders' requirements.
The Project can be developed to leverage the site features to provide water based recreation
and innovative architecture using maximum water frontage would develop a unique facility.
The local usage of the Convention centre would also cater to the demand for exhibitions and
large gatherings thus providing a key facility for the city.
354
======= =======Implementation Framework for the
Nodal Agency
a) Department of Tourism, GOK

The Project is being developed by Government of Kerala. Department of Tourism is the
nodal department of the Government for the project.
b) Office of Theerapatham Urban Development Project (TUDP)
TUDP has been incorporated by the State Government with a mandate to develop and
implement the projects in TCR region. Office of TUDP would facilitate and provide
necessary support for the project.
c) Strategic Advisors: IL&FS Infrastructure Development Corporation (IIDC)
IL&FS is an investment banking company set up in 1988 to promote commercialisation of

infrastructure projects in the country. IIDC, under the 'Project Development & Promotion
Partnership' (PDPP) agreement with GoK, is strategic advisor to the State Government in
infrastructure project development, structuring and bid process management of
infrastructure projects in Kerala. ICCC is one of the projects that has been developed for
implementation on Public Private Partnership format.
Implementation Strategy
The Project has been structured as an institutional cum tourism project keeping in view the
commercial viability aspects. Government is committed to provide adequate support for the
project including off-site infrastructure and policy framework. The main features of
Implementation framework are as follows:
a) Authorization: The Developer would enter into an Agreement with the Government to
jointly Develop, Build, Operate and Maintain the Project Facilities over the Authorization
period of 90 years including Construction Period.
b) Institutional Structure: The Project is proposed to be implemented by a Special
Purpose Company (SPC) incorporated under the Indian Companies Act, 1956. GOK or any
other agency nominated by the Government would hold 26% equity in the SPC, and the
Developer would have balance shareholding.
355
= = = = = = === = ====Implementation Frameworkfor the
c) GOK's Equity in SPV: Government will hold 26% equity in the Project. Amortised
lease rentals @ 10% of the land value with an escalation @10% every tenth year would be
taken as Government's equity in the project.
d) Developer's Role: The Developer would be required to Design, Construct, Finance,
Operate, Maintain and Manage the Project for the Authorization Period in line with
conditions laid forth in the RFP document.
e) Revenue: The recovery of investments would be from revenue of Convention Facility
(Rentals and F&B), income from resorts/ hotels, lease rentals from retail space.
Selection of Private Sector Party
a) Bidding Process: The bidding for ICCC was a single stage process wherein the
interested bidders would obtain the Request for Proposal (RFP) and submit their capability
statement, technical and financial bids within the stipulated time.
b) Selection Criteria: The preferred bidder would be the one with the highest quoted Land
Value per Acre over and above the base Land Value of Rs. 20 Lakhs per Acre.
c) Authorization Agreement: The Authorization Agreement would be signed between
GOK and the preferred bidder/ developer.
(Department of Tourism, Kerela & IL&FS)
PROJECT BRIEF OF CONVENTION CENTRE

TABLE 7.8
S.No. Key Details
Information
1. Project Title International Convention Center Complex
2. Nodal Department of Tourism, Government of Kerala
Department of
GOK
3. Project • Convention & Exhibition Center (C&EC) with
Components plenary hall (1500 capacity), hi-tech hall (500
capacity) and meeting/ exhibition halls.
• Hotel/ Resort (min 150 keys- 3 star or above)/
Service apartments
• Retail/ Entertainment/ Entertainment based Theme
Park
356
==============Implementation Frameworkfor the
S.No. Key Details

Information
4. Project Cost About Rs. 140 crores
5. Implementation Public Private Partnership
Format
6. Institutional Special Purpose Company (SPC) under
Structure Company's Act 1956 with Government and
Developer Equity
Government 26%
Equity Amortised Lease Rental @ 10% of the land value
and escalation @10% every tenth year
Land Value: Rs. 20 Lakhs/ Acre
If GOK Equity of 26% < Amortised Lease Rental,
then GOK will put cash equity, else. Operator will
pay to GOK upfront lease rental surplus of 26%
equity
8. Authorization Build Own Operate Transfer (BOOT)

Format
9. Authorization 90 years along with Construction Period
Period
10. Construction 3 years
Period
11. Bid Envelope 1: Capability Statement
Submissions Envelope 2: Technical Bid
Envelope 3: Price Bid
12. Envelope 1: Financial:
Qualification Lead member to have 26% equity in the Project
Requirement Lead member or Consortium of financially
for the Bidder significant members (with at least 10% equity in
the SPC), to have Net worth of Rs. 35.00 crores or
more OR armual turn over of Rs. 100 crores or
more (averaged over last 3 years)
Technical:
Construction and Operation Experience in similar
Projects
13. Envelope 2: Concept Plans based on Development Guidelines
Technical Bid and Technical Specifications
Environment Management Plan (EMP)
Implementation Schedules
14. Envelope 3: Price Bid Letter quoting land value over and above
Price Bid Rs. 20 lakhs per acre
Commitment to pay Project Development
Expenses and Performance Security
Business Plan with detailed financial statements
15. Bid Parameter Land Value above Rs. 20 Lakhs per acre
357
S. No. Key Details

Information
16. Government Returns Project Development Expenses
Equity Returns
Revenue Share as per the table below:
Revenue Share
S. Period %of
N (Yr.of Annual
0. Operation Turn Over
)
1 00-10 0.00%
2 11-15 0.50%
3 16-20 1.00%
4 21-30 1.50%
5 Year 31 5.00%
onwards
17. Development • Development Guidelines:
Guidelines & o Site development: Minimum Water Cover, Tree
Technical cover, minimum area provisions
Specifications o Development control: No construction on slope,
CRZ regulations
o Norms and Standards for site services and safety
requirements
o Kerala Municipal Building Rules
• Technical Specifications for C&EC facilities
18. Bid Evaluation • Envelope 1: Pass/Fail

• Envelope 2: Compliance with Technical
Specifications & RFP Requirements
• Envelope 3: Highest land value (Above Rs. 20
lakhs per acre)
19. Bid Security Rs. 1.50 crores
20. Project Development Amount: 1.25% of Landed Project Cost

Expenses payable by Payable within 15 days of issue of Lol, else
the Successful Bidder Bid Security to be encashed by GOK to recover
the expenses.
21. Signing of Within 15 days of issue of Lol

Authorization Precondition: Project Development Expenses are
Agreement paid
22. Performance Security
358
S.No. Key Details

Information
A. Construction Period Rs. 5.00 crores (Payable within 15 days of signing
Performance Security of Authorization Agreement)
B. Operation Period Rs. 2.00 crores, subject to escalation (linked to

Performance Security WPI) once in two years. .^_^„=
Source: IL&FS, New Delhi.
7.4 Public- Private Partnership (PPP) Scenario in Himachal Pradesh
The State of Himachal Pradesh is amongst the front runners in capitalizing upon
the PPP model in the most critical sectors of its economy i.e. Power and Tourism. The
State was able to recognize quite early that besides the primary sector of agriculture and
horticulture, power generation and development of tourism would form the backbone of
the economic development of the State. Himachal has successfully attracted high scale
investment and technical and managerial expertise for tapping the vast hydel potential of
the State. Now the State is moving very systematically in attracting private investment in
the tourism sector with the objective to make Himachal as the most preferred destination
in India not only for domestic tourists but also for international tourist arrivals.
Tourism, as we know is the fastest growing industry in the world, and the global
trends clearly indicate that the sector would continue to grow at a healthy rate in the
times to come. Tourism is growing at slightly above 7% nationally, the State of
Himachal has been consistently registering a growth rate of above 10% during the last
decade. The policy and the commitment of the State Government are now geared at
attaining a minimum growth rate of 15% for the next five years.
One of the primary objectives of the new tourism policy, stated upfront in the
policy document is "to encourage a strong and sustainable private sector participation in
creation of tourism infrastructure, especially through Public Private Partnership." The
State has been very consciously implementing its policies to disperse tourism
geographically, thematically and across the seasonal boundaries. Himachal is no longer
merely a summer resort or a place where you can frolic in the snow. It is, now, a
destination for all seasons. To expand it further, it is not merely a destination to escape
359
from the heat of the plains or a weekend leisure or pilgrimage or honeymoon trip, we
also cater to adventure seekers, wild life enthusiasts, students of heritage and history,
sports lovers, and not the least the business tourists. Himachal of today is a tourist
destination for all seasons and for all reasons. There was a time when tourism in
Himachal was restricted to Shimla and KuUu-Manali. The conscious decisions and
persistent efforts of the Government has led to the development and opening up of new
areas spread across the geographical spectrum of the State. Dharamshala, Chamba,
Dalhousie, Kinnaur, Lahaul and Spiti have also emerged as very attractive and preferred
destinations. Further, within the districts too, tourism is not restricted to urban centres
but has spread to rural areas thus providing much needed employment and economic
development.
The State has some of the very successful examples of Public Private Partnership
in tourism as mentioned below in the table 7.9. Himachal is the only State in the country
which has developed and provided a platform to private hoteliers for online booking
along with a payment gateway. The beauty of this model is that neither the Government
nor any individual hotelier has made any investment in creating the required
infrastructure for this service. Only very nominal transaction cost is paid by the hoteliers
on each transaction. This cost is much less than the commission he otherwise has to pay
to travel agents. Similarly, a 24-hours toll free tourist information service is being
operated through private participation and operation of Tourist Information Centres
located away from the main stream destinations through community participation is a
another example.
The Eco-tourism policy and strategy of the State works on the PPP Model either
through individual or community participation. The Potters Hill Eco-Tourism Resort is
a shining example of the success of this strategy. A passenger ropeway system-cum-Ski
project is coming up at Solang through private partnership. State Government has also
signed an agreement for setting up a world class Ski Resort near Manali. This project,
called the Himalayan Ski Village, is proposed at an estimated investment of US $ 135
million in the first phase and this investment is likely to go up to US $ 300 million in the
subsequent stages. Government is encouraging private investment in projects that have
the potential to boost tourism can be gauged from the fact that we remained unfazed
360
despite needless controversies and persistent efforts by certain vested interests to derail
the project. One of the reasons contributing to this success is the policy of organizing
different events throughout the year to attract tourists. Events such as Paragliding,
Rafting, Angling, Mountain Biking, Apple festival, Raid-de-Himalaya, Golf etc. have
proved to be immensely popular with the tourists. The organization of all these events is
done through government support and professional management by private bodies or
associations. Thus, the PPP Model is fairly vibrant in the state.
While seeking to leverage the PPP Model to develop a synergy between the
diverse tourism resources of the State and private capital and entrepreneurial skills, the
State Government wishes to promote only " responsible tourism"; tourism which
addresses the environmental concerns, tourism which respects the socio-cultural ethos of
the State, tourism which promotes love for the rich heritage and history of the State, and
above all tourism which contributes to an equitable socio-economic development of the
State while conserving its rich biodiversity and environment.
Before concluding, I must express my concern and give a word of caution in
blindly following the PPP model irrespective of the demand and circumstances of the
situation. A private investor would always look for assured and quick returns on his
investment, whereas the primary concerns of the Government are development and
welfare of the citizens. One must welcome private investment in tourism projects, but
one also wishes this investment to come up in the lesser developed and lesser known
areas. Investment must also accompany a commitment to the development and growth of
the unchartered territories. Even now the maximum proposals the State get for tourism
projects are restricted to the already saturated areas of Shimla, Manali, and Kasauli etc. I
have no hesitation in mentioning that the primary credit for development and dispersal of
tourism all over the State must go to the Government of Himachal Pradesh which created
the basic infrastructure of tourism units through the Himachal Pradesh Tourism
Development Corporation in different locations with a view to ensuring that the benefits
of this fast growing sector reach to all people. The State Tourism Development
Corporation continues to be the only presence and support for tourists in several such
pristine and beautiful locations. Himachal is now being talked in the same breath like
other States in the country as an attractive investment destination. (Extract-FHRAI.06)
361
Table 7.9
Tourism Projects in PPP in Himachal Pradesh
Nature of the Name of the Project/Event Implemented Agency
activity
On line Booking of Hotels Department of Tourism and
Tourism
M/S Shoghi Communication
Ltd.
24 Hours Toll Free Services Department of Tourism and
M/S Shoghi Communication
Ltd.
Operation of Tourist Information Department of Tourism and
Centre Andretta Pottery Society
Ski Centre cum Ropeway Project, Department of Tourism and

Solang M/S A Power Himalaya Ltd.
Camping Resort, Potter Hill Department of Forest and

Private entrepreneur
Paragliding Pre World Cup at Bir- Department of Tourism and
Billing, Raid de Himalaya, concerned Associations.
Mountain Biking, White Water
Rafting Cup at Satluj Apple Festival,
Shimla, Naldehra Golf Tournament,
Angling Competition
Source: Department of Tourism, H.P.
Tourism projects in PPP in the State in pipeline
Department of Tourism & Civil Aviation has recently invited proposals from the private
sector (Public Private Partnership) for investment in Tourism activities in the State on long
term basis under Built, Operate and Transfer. The details of the sites are mentioned below in
the table 7.10. Scanned copy of advertisement issued by the Department of Tourism for
these sites is also attached below the table.
362
==-====== = = = = =ImplemerHation Framework for the
Table 7.10
Tourism Projects in the pipeline under PPP
Nature of the Name of the Project Implementing

activity agency
Tourism Golf Course Baragaon. Kullu Department of

Tourism
Golf Course Baddi
in association with
Resort at Shoja Private
company/firm
Health Resort at Jhatingri. (Public Private
Craignano Amusement park project Partnership)
Hotel and wayside amenities at

Bilaspur
Department of
Ti- I
Himalayan oi • Village
Ski WI1 Proiect.
n • » District
!-»•*• . ^Tourism and A
^ ^ Power Himalaya
Kullu. Ltd.
Source: Department of Tourism. HP.
363
======^=== ==== Implementation Framework for the
Picture 7.1
Advertisement Notice issued by the Department of Tourism for inviting Tourism

investment proposals
HIMACHAL TOURISM
mysîcftiv InvHes HIKAACHAI-
Expression of I n t e r e s t TOURISM
For
S e t t i n g up of Tourism P m l e c t s on Build,
Opsrsto & Transfer b a s i s
Dooartmcmi or Tourism A Ctvil Aviaiion(D(ii|.(;o«onniwi'" ol Mimatdai PindoBti is mo nouui aoeicy (nHconsiuie
ir promoiian and aauGiopmoni ft( tnuriBm in tlm Statu DOT iniencM M> InvKBs prtvuio s«ctoi
rmK'cumpanivtt/tocJtvlduBle (or «ny oU>9r J«gal p^raoti caMvd tii« ciAfqoii hencsforth) for Jnvî^tmnnt tr\ lounsrti
ctlvitias In ttiH State on tons Ittrtn basla undsr auitt O p e ' * ' * onf TiHnsIm hiimr. ai itio tnllowing localtons wliore
tna MovBiiabia wnnine U07
<.N. 1 n a e « ~ r * * » • hi BlgtMW Acttvlly Proposad
B»ddl.Dtott. S<il«n 379-19 GoW Coijrs«-cum -f»BBort
i » Vmam B—-—•on, Man •u otan. Kuitii 102'13" GoW Coursfl-cum -Oeoort
J h B l l o y l . O t m t . Wn"dt
AtTiu«»nnnT» **arfc
Stwta, Ulstl.KulHt Resort
BH««pur z-o« H D M I CompMx/WiWaMP MitMnHMM
Th« oroiKisQcj i<i,iiv^tv iiiHiiiiDiitKl atxnie la only indioWw* and ttia promutei csn concutve snci auooaM an
altomMlva activity oasaa on ine icmrtsm potential n< me location.
Tna lulecastad parties may visit ttis lociiiions wnoitiv[;r i iîiiiirnii The Departmam snali ndlpmem in audi vlott
on prior notlcs.
TTie interostaO persons may eubmft Itiulr offtHs incorpnraling trtc lollcjwtn^ Liirutnâium Inter-alla:
AprotJiuor ttiepnraonBlona^mexpe'ienco in tourism or roiataij lialds.
The naiura and acopo of davoiupinam and autlvlty ff>a pecacai propoaos lo ufidartaka.
A dsacrftiflon of tt\n concept and pnofacl oroms. tmvtriMty. wrtfi respoci to Pfoiiwiltot antf ilavafopmsnt of
tourism In tlio Stale
AoapuralBtôpoaal lor revenuasharino wfth ttiu Govt, .iincl 1inrint;iHl model Itie person proposes
Animal Turnowat olttio person
Net ôrtfi cif ttit! pniBon/Compary
The EOl. In a sealed covsr. nlx)ijld r<mci> ttiis (jrtic^r of lli*: Cncnmisfilonar. roi^rtem &Cjvll AvUtrlon, BlocK
4D:2S.SDA Complex. Kaaompati, snimla - I ?1009,HP on oi twIorH asHi Fabruary 2007 upto *.OOPM.Tne l-OI
Ihoiild claarly irKjicata .EUl tortName of ttia ProJ<ict)on tna cover. The data of opanino or tOI will ne Intormad
leparatoly after the raoaipt of t t n ECM'a .Ortce EOl nta bcw< raoelveo, an opan preouallficalion prOI^KSE WUI be
dartahen and perôr>n shull PA short llstad on the basis of Itt^follov^jngattrlbuteA
r—itiiiB 11111111111*
Sustn In ability anil i-nu'r<-,nmenl filenitly uioiecl.
AtiiBcttno nigri value and buooei class tourist
Paientlal or stiowcsMng Hlmachal
ContrHHition of local aoonuiny &afnpioyment-
Soclal benefits.
• TWoreacliviliHsprui'iistHt in II i« iinii.
UpsiMtva atUibuta:
• The projects propnSad ^ntclf ars either nol connsc:t(fd vrimTbudain In any rnanner or ar^ Hrwlronmanlally nol
Bustalnablaor uastheticully m l r:onoanlalcould b« Oropped
• Company havlna no toorlani rrlalrjri experfence.
• liAiinuîi ruinovor iind the net wortt! of ma indtvldual(s) Companies/Ilrmsof a conetHtkimatnrma (cointMnac
of all in o con sort] urn membarsof tilddars as tha case may be) does not support ttwlnvaatnwnTrMlulred.
Tnle «vlll ba followud by invitation for Idc ttn lea I and Finar^ciai bins form ilia sltort llaled parsons
PanartiwMit n« T*nrtM»i •• CHiy jhrt—cin u p reserves ttifT n n n i in i l l T l un t DC oil Urn E(H v f M n j M n m u t
MHrinnaoB Mm m—Mih
For detalla. PlB*a« cont««i:
Dopaitmain of louriam & Civil Aviation Block No zfl, SDA. Complex. Kasumpati. Shimla t 7KMM. Pli; 0177~
2625S6-*. 2BZS92d. 2B2Sfil 1 Fax- 2625884. 2825884. b-Mall: tminammjn-lftp^'''**' ' " websllB
fittp :y/hlmactialtour lu m. n Ic. I n
Source: Times of India, dated 13/1/2007.
During the study information about the other projects were also collected which are also
being offer to the private sector on Public Private Partnership basis. These projects are
directly not linked with the tourism but indirectly have a close association for the promotion
364
======= = " - = ^=Împlementation Framework for the
of sustainable tourism infrastructure in the State, The information about these projects is
mentioned below in the table 7.11.
Table 7.11
Other Projects in PPP in Himachal Pradesh
re of the activity Name of the Project Implementing agency
R ral n ' I t Operation and maintenance of the Central

Rural Development
Gramin Himachal Bhandar at Pandoh. and
Project Feedback venture
BOT Project
^ . ,^ , Construction of the Subzi Mandi Urban Development
Commercial Complex „ i r i * cu i A nr^-r n • .
Commercial Complex at Shimla under BO I Project
PPP.
Construction of Parkins Lots in Shimla Urban Development

Parking lot cum
BOT Project
Shopping Plazas
Projects on integrated Waste to Energy Department of Power
Power Projects
Facility BOT Project
Upgradation of physical infrastructure in Finance Department

Development of
Baddi Barotiwala area. BOT Project
Infrastructure
Source: infrastructure Development Board, H.P.
365
= = === = = = = = = = = Împlementation Framework for the
7.4.1 A Role Model of the Tourism Project through Aerial Ropeway-cum- Ski Centre
at Solang, Distt. Kullu, HP
Background
Solang near Manali is one of the major tourist attractions in the entire State of
Himachal Pradesh. It is located at a distance about 15 kms. From Manali in Kullu District
and offers best of the Himachal's Ski slopes. Looking at the tourism prospectus in Solang
valley, Department of Tourism (DOT), Govt, of HP is interested in positioning this valley as
a year round tourism destination.
Aerial Ropeway-cum-Ski Centre at Solang Nallah, near Manali.
a) Concept: Presently Solang Manali attracts large number of tourists during Summer due
to scenic beauty of the slopes, valley and to enjoy Paragliding, River rafting and other
adventurous activities. The tourist volume decreases during winter season because of little
available activities. With an objective to increase both summer and winter tourism in this
region, DOT, HP proposes to commission Aerial Ropeway-cum-Ski Centre at Solang
Nallah, near Manali. The ropeway would serve as a passenger Ropeway system during
summer where as during winter it would facilitate the skiers reaching upper point of ski
slopes.
b) Government of Himachal Pradesh Role: The Government is acting as a facilitator to
develop this project.
c) Scope of Project: The Scope of the Project includes design, construction, management,
operation and maintenance of the following components for the authorization period of 40
years w.e.f 18-1-2003.
Ropeway Project components .• The Aerial Ropeway Project component would
broadly includes lower terminal station, upper terminal station, ticket counters, parking at
lower terminal. Restaurant at Lower and upper terminal. Workshop , Generators, Rescue
Safety equipments. Store room and public utility services.
Ski Centre: Ski equipments such as Skis, snow boots, snow glasses, helmets, sticks,
snow scooters, tire game operators. Bar lift etc.
Area Management Plan: The promoter of the project will undertake following
activities for the development of the area:-
366
• Provide utilities and public convenience facilities within the project site.
• Improve the drainage from the slopes so as to avoid water pooling at the bowls.
• Implement the Environment Management Plan.
Nodal Agency
a) Department of Tourism, HP
The Project is being developed by Government of HP through Department of Tourism
which is the nodal department of the Government for the project.
b) Strategic Advisors: IL&FS Infrastructure Development Corporation (IIDC)
IL&FS is an investment banking company set up in 1988 to promote commercialization of

infrastructure projects in the country. IL&FS under the 'Project Development & Promotion
Partnership' (PDPP) agreement with DOT, HP, is strategic advisor to the State Government
in infrastructure project for this project development by way of, structuring and bid process
management.
Implementation Strategy
The Project has been structured as an institutional cum tourism project keeping in view the
commercial viability aspects. Government is committed to provide adequate support for the
project including off-site infrastructure and policy framework. The main features of
Implementation framework are as follows:
a) Authorization: The Developer would enter into an Agreement with the Government
jointly on Build, Own, Operate and Transfer basis to manage the Project for the
Authorization for a period of 40 years.
b) Institutional Structure: The Project is proposed to be implemented by an M/s A Power
Himalaya Ltd. incorporated under the Indian Companies Act, 1956.
c) Developer's Role: The Promoter would be required to Design, Construct, Finance,
Operate, Maintain and Manage the Project for the Authorization Period in line with
conditions laid forth in the RFP document and in the Authorization agreement signed on 18-
1-2003 with Govt, of HP.
367
===^^^ = =======Implementation Framework for the
d) Minimum assured return to the Govt, of HP: The Govt, of HP will get a lump
sum annual license fee from the promoter for a period of 40 years from the date of
commercial operation of the project. The annual fees proposed by the bidder for the first 5
years from the date of the commercial operation is Rs. 30 lakhs with an increase after five
year.
Selection of Private Sector Party
a) Bidding Process: The bidding was a single stage process wherein the interested bidders
would obtain the Request for Proposal (RFP) and submit their capability statement, technical
and financial bids within the stipulated time.
b) Selection Criteria: The preferred bidder was selected through the transparent two stage
competitor bidding (having met the eligibility criteria and have quoted the net highest
present value of the annual license fee) for the grant of authorization of the project
c) Authorization Agreement: The Authorization Agreement was signed between Govt, of
HP and the preferred bidder/promoter on 18-1-2003 (Department of Tourism, HP & IL&FS)
PROJECT BRIEF
TABLE 7.12
S. No. Key Information Details
1 Project Title Aerial Ropeway -cum-Ski centre at Solang Nallah near

Manali, HP
2 Nodal Department of Department of Tourism. Government of HP
Govt, of HP
3 Project Components • Ropeway.
• Ski centre
• Restaurants
• Public utility services
• Area Management Plan
4 Project Cost Rs. 12 crores
5 Implementation Public Private Partnership

Format
6 Institutional Promoter structure M/s A Power Himalaya Ltd.

Structure Incorporated under Company Act, 1956.
7 Authorization Format Build Own Operate Transfer (BOOT)
368
=-^=^==^=== = = = Implementation Framework for the
S.No. Key Information Details
8 Construction Period 2years from the date of all clearances.
9 Bid Submissions • Envelope 1: Expression of interest

• Envelope 2: Technical Bid
• Envelope 3: Price Bid
10 Envelope 1: Financial:
Qualification a Annual turn over of the lead firm shall not be less
Requirement for the than Rs. 10 crores during each of the last two
Bidder operating years.
• Net worth plus cash accruals both averaged over the
past two operating years, of the lead firm shall not be
less than Rs.l5 crores.
Technical:
• Should have commissioned at least two Ropeway
Projects of capital cost not less than Rs. 10.00 crores
during last 10 years
• Should have commissioned at least one Ropeway
Project in India during last 10 years
• All the commissioned projects should have complied
with relevant standards in the country of execution.
11 Envelope 2: • Concept Plans based on Development Guidelines

Technical Bid and Technical Specifications as provided in section 3
and annexure -7 of RFP.
• Environment and Area Management Plan.
• 2 % project Success development fee of the total

cost of the project. Bank Guarantee
12 Envelope 3: Price • Price Bid quoting a lump sum annual license fee to
Bid the Govt, of HP for a period of 40 years payable
from the commercial operation of the project.
13 Government Returns A sum of Rs. 30.00 lakhs to be paid annually to the state
Govt, for a period of 40 years from the date of commercial
operation of the project with an increase after every 5 years
14 Development • Development Guidelines:
369
S.No. Key Information Details
Guidelines & Site development: Minimum Water Cover, Tree

Technical cover, minimum area provisions
Specifications Development control: No construction on slope, HP
regulations
Norms and Standards for site services and safety
requirements
HP Municipal Building Rules
Technical Specifications for Aerial Ropeway
facilities as per the RFP document and
instructions issued from time to time.
15 Bid Evaluation Envelope 1: Pass/Fail
Envelope 2: Compliance with Technical
Specifications & RFP Requirements
Envelope 3: Highest annual fee to the Govt, of HP
16 Bid Security Rs. 5 lakhs
17 Project Development 2% Project development success fee of the total project

Expenses payable by cost payable to
the Successful Bidder Govt, of HP and IL & FS 1 % each.
Payable within 15 days of issuance of Letter of Intent.
18 Signing of Within one month of issue of Letter of Intent.

Authorization Precondition: 2% Project Development Expenses is paid.
Agreement
19 Performance Security
A. Construction Period Rs. 20 lakhs (Payable within 180 days of signing of

Performance Security Authorization
Agreement)
B. Operation Period Rs. 20.00 Lakhs,
Performance Security ^ ^
Source: Department of Tourism, HP
Conclusion
How will the development of infrastructure for tourism be realized? For some
services, only public or private investment is feasible, whereas a public - private partnership
can be used to achieve other objects. Sustainable tourism planning must look ahead to
infrastructure needs and priorities - timelines must be set - then funding perused. The public
sector must anticipate infrastructure needs from private developments, otherwise capacities
370
==============Impleinentation Framework for the
will be exceeded and both private and public sector will suffer. The government should
develop implementation mechanism to ensure public and private partnership cooperation.
The government may seek to identify specific zones within the country/area where tourism -
related public and private investment is encouraged in order to reduce poverty. Specifically
these zones should have the following characteristics:
• Governments seeking to encourage tourism development and cross economic
linkages.
• Conditions where tourism can contribute to the local economic growth.
• Situations where environmentally friendly forms of tourism can contribute to cultural
and natural resource preservation, conservation and sustainable use.
• The existence of a well - developed human resource development strategy.
Hence government should encourage private business organizations to support the
implementation and development of sustainable tourism infrastructure. The private sector
can play a number of roles, at times contributing a certain percentage of their profit to
community improvement projects and developing sustainable tourism infrastructure in ways
that profit not only private sector tourism development but provides for the needs of the
larger community.
371
=== =========== Implementation Framework for the
References
Akintola (EDT) Akintoye, Matthias (EDT) Beck, Cliff (EDT) Hardcastle, May 2003, Public
Private Partnerships.
Alain Fayard, 1999, Paris, Overview of PPP experience.
Author: Mark Dutz, Clive Harris, Inderbir Dhingra, and Chris Shugart, dated: 09/11/2006.
Department of Tourism Kerala, IL&FS Infrastructure Development Corporation (IIDC),
New Delhi.
Extract of the paper submitted by the Tourism Dept. H.P. during the FHRAI Convention
held at Chandigarh from lO'*' Dec.06 to \f" Dec.06.
Indian Infrastructure, volume 9, August,2006.
Mark Dutz, Clive Harris, Inderbir Dhingra and Chris Shugart, 09/11/2006.
Private Participation in Infrastructure Projects Database, Mailstop H3-300, 1818 H St.
NW, Washington, DC 20433.
rru.woridbank.org/Documents/Toolkits/Highways/l_OVERDIAG/l 1/112.htm.
The Tribune, P-19, dated 8.12.06, Expression of Interest, Municipal Corporation, Shimla.
www. Infrastructure.gov.in.
372

IMPLEMENTATION FRAMEWORK FOR THE TOURISM Through PPP

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IMPLEMENTATION FRAMEWORK FOR THE TOURISM Through PPP

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CHAPTER - 7

IMPLEMENTATION FRAMEWORK FOR THE TOURISM

7.1 Concept of Public Private Partnership

Need for the Public Private Participation

Options for Public Private Partnership

Benefits from Public-Private Partnership

Private sector more efficient than the Public sector

7.2 World wide Scenario of the Public Private Partnership

7.3 Public Private Partnership Scenario in India

A Role Model of the Tourism Project through PPP- International

7.4 Public Private Partnership Scenario in Himachal Pradesh

A Role Model of the Tourism Project through PPP- Aerial Ropeway-cum-

7.1 Concept of Public Private Partnership (PPP)

Although the idea that private provision of infrastructure represented a way of

Initially, most Public-Private Partnerships were negotiated individually, as once-off

"A Public-Private Partnership is a contractual agreement between a public agency

Typically, a private sector consortium forms a special company called a "Special

A typical PPP example would be a hospital building financed and constructed by a

Chart 7.1 PPP PROJECT GENERIC LIFE CYCLE

Decision to explore PPP solution

Appoint project Terms of reference for

Prepare a feasibility study v/hich:

• Prepare a request for proposals (RFP) document and

• Issue RFP to pre-qualified parties

• Negotiate contract with preferred bidder

7.1.2 Need for the Private Sector Participation

• Make the sector more responsive to consumers' needs and preferences.

All forms of private sector participation can be designed so as to improve technical

7.1.3 Keys to successful Public Private Partnership

Public Sector Involvement

A Well Thought - Out Plan

A Dedicated Income Stream

Communication with Stakeholders

Selecting the right Partner

6. Public-Private Partnerships are a necessary and important part of the process.

7.1.4 Options for Public Private Sector Participation

Spectnun of public-private partnersliip options

Management Leas( Concession

Spectrum of public - private partnership options

Source: World Bank

The range of options

Increasing level of delegation, risk irreversibility

Source: World Bank

Option Asset Operation Capital Commercial Duration

Service Public Public and Public Public 1 -2 years

Management Public Private Public Public 3-5 years

Lease Public Private Public Shared 8-15 years

Concession Public Private Private Private 25-30 years

BOT/BOO Private and Private Private Private 20-30 years

Divestiture Private or Private Private Private Indefinite

Source: World Bank

Service contracts—simple, but with limited benefits

Although relatively simple, service contracts must be carefully specified and

Management Contracts- a good first step

Management contracts transfer responsibility for the operation and maintenance of

Specifying clear and indisputable targets is often difficult; especially when

Management contracts-a step toward greater private sector participation

• The country lacks a good track record in public-private partnerships.

• The government faces difficulties in getting key stakeholders to agree to long-term

In such conditions a management contract can provide a window of opportunity for

Where lack of information about the system is a problem, a requirement to collect

Leases-a way to pass on commercial risk

Concessions-a route to full-fledged private participation