Eight steps away from 24x7 power!

                       With the closed civil nuclear deal between India and Australia, the NDA govt. of India comes up with an 8 point plan with an aim(although a very bold one!) to provide 24*7 power for all domestic, industrial and commercial purposes.

1. Rationalization of coal supplies and focus on improving productivity and efficiency of coal production. Target: coal output of 1 billion ton by 2019
2. Restructuring the coal regulatory body giving it more independent power in decision taking and its implementation
3. Steps to control of coal theft (Yes! coal theft actually amounts to around $1.5 billion)
4. Nuclear energy generation
5. Hydel plants in J&K on fast track basis
6. Faster environmental and forest clearances (cleared long-pending transmission projects worth Rs 12,272 crore)
7. More focus on green energy sources-wind and especially solar energy(solar ultra mega power plant in Sambhar)
8. Gas based energy generation of worth 24,148 MW

Merits:  Firstly the government has begun to focus on efficiency and productivity of energy reserves (from the first 3 points above). Secondly, the 8 point plan reflects that the government is determined to explore renewable and nuclear energy sources(last 5 points above).

Possible improvements: One possible area that might need serious thinking--- instead of concentrating on generation alone (which resulted in looking at it as an isolated system independent of transmission and distribution), we have to start making efforts to integrate and improve the whole process of "generation, transmission and distribution".

It is high time that we realize that 'the whole is greater than the sum of its parts' (true,even though its entirely counter-intuitive!)

VARIOUS ENERGY SOURCES

REFERENCES:

http://economictimes.indiatimes.com/industry/energy/power/how-modi-government-plans-to-provide-247-power-eight-steps/articleshow/42015299.cms

http://www.bloomberg.com/news/2014-07-29/stolen-india-coal-sold-at-black-market-in-modi-s-backyard.html

Ministers handing out infrastructure projects to please voters

On 11th August 2014, there was a news article in the Economic Times titled "Akin to railways, aviation ministers handing out airport projects to please voters" [1]. I found this interesting since this brings out the influence of politics on infrastructure projects, an aspect that is often overlooked and overpowered by financial and technical perspectives in discussions about projects. 

The articles mentioned that "Andhra Pradesh is the new focus area for the civil aviation ministry which, with a politician from the state heading it, has set the wheels in motion to develop three international airports in the state, including one to be built from scratch." I wouldn't so much focus on the particular state or minister as much as I'd like to focus on the fact that many a times, projects are unnecessarily taken up to please voters.  In this particular case, the three airports that are slated to be given international status are Tirupati, Vijayawada and Vishakhapatnam, with the former two being upgradation projects and the last being an entirely new development. 

All three of these cities face shortages of basic amenities [2] [3] and the capital and expertise invested in the construction of airports could have been channeled to tackle these fundamental problems rather than using them to construct international airports, which, in fact are not even needed. With the national carrier Air India operating out of its hubs in T3 Indira Gandhi International Airport, New Delhi and T2 Chattrapati Shivaji International Airport, Mumbai [4], what every other city needs to have is a domestic airport of international standards instead of having an international airport that is underutilised. Moreover, the presence of an international airport in the state at Hyderabad further renders the development of more airports unnecessary. A passenger travelling to the US or Europe is typically taken to one of the hubs and then flown out of the country. For short distance flights to the Middle-East or the Far-East, mid sized international airports of Hyderabad, Chennai, Bangalore etc. are more than capable of handling the present and future traffic volumes. 

A classic case of how underutilised these projects become is the Raja Bhoj airport in Bhopal, the city where I hail from, that was upgraded to handle international air traffic in 2011 but the only international flights that are operated out of the airport are the seasonal Hajj flights operated by Saudia, Bhopal being a city with a considerable Muslim population. The upgrade did instill a sense of pride among the residents of Bhopal when it happened but now it is felt that maybe those funds could have been used to speed up the implementation of the Bhopal Bus Rapid Transit System or the Narmada Pipeline which address much more fundamental issues that the city faces. 

It is obvious that these projects are taken up by politicians to please the voters in their constituency because of the mileage that association with terms such as 'international' generate. It would be interesting to see what becomes of these airports over the next few years since quite clearly, these aren't well thought out projects aimed at developmental or social gains as much as they are aimed at ensuring the continuation of political reigns. 

1. [1] http://goo.gl/JrMTf6
2. [2] http://goo.gl/DI6wuu
3. [3] http://goo.gl/wHWGWC
4. [4] http://goo.gl/QiIxm8

Mumbai Metro : (Non) Cooperation between Infrastructure Players on RTI

   After struggling through a lot of problems similar to the Mumbaikar, the much coveted Mumbai Metro finally started running on 8th June 2014.  With total 63km of lines to be laid, the first line of 11.7 km between Versova-Andheri-Ghatkopar finally became operational. This PPP had raised lot of expectations not only from commuters point of view but also as a model on which other PPPs could be formualted. May it be cost and time overruns or  Reliance claiming the Metro to be Reliance Metro this project has shown the cooperation or (lack of it) that exists among Infrastructure Players.

  Latest to top it is the secrecy that Reliance Infrastructure has been maintaining about the project. Three RTI applications to get reports by RDSO, CMRS and Railway Board have not been responded to. This is not the first time Rinfra has been unwilling to share information with the public. It has ran away from taking responsibiltiy for signal failure near Jagruti Nagar Metro Station and technical failure at Ghatkopar Metro Station as well.
  Mumbai Metro One Pvt. Ltd. is the joint venture of Rinfra, Veolia Transport and MMRDA running the operations of the Line 1 of Metro. Rinfra has a major stake while MMRDA owns only 26%. With 3 of the 8 Board of Directors being from MMRDA other from Rinfra, the latter certainly has a upper hand in decision making process. Rinfra is a private organisation and hence does not come under purview of RTI. However, RTI experts claim that since CEO of MMOPL is Metro Rail Administrator, a public servant, MMOPL should come under RTI.
  In the current grievance redressal mechanism, Mumbaikars have to direct their pleas to MMRDA for information, which then alerts MMOPL, which may or may not reply since the RTI has not been served directly to it. Hence, Rinfra stays clean and non-accountable. Steps need to be taken to make the mechanism more transparent and hold Rinfra accountable, so that same mistakes are not repeated for other phases of the project. Any suggestions and also what are the problems that we may face in implementing them?

Source : http://www.dnaindia.com/mumbai/report-dna-exclusive-is-rinfra-s-mumbai-metro-a-top-secret-project-2012706

Public Vs Private - A contradiction

Hey ! I have recently come across an article in Economic Times. I thought of sharing some of the interesting observations.
There was a comparison made between the government run Kandla port and the privately run Mundra port in Gujarat.It turns out that the Mundra Port is excelling a lot more compared to the Kandla port. Mundra loads nearly seven times more cargo compared to Kandla.
The Adani Group which owns the Mundra Port charges up to five times more compared to the Kandla Port. But still the shippers prefer Mundra, this is mainly because of the high quality of infrastructure provided by Mundra in comparison to Kandla. Mundra does charge more but it properly uses the money in improving the Infrastructure which attracts the shippers.
Anand Sharma, director, Mantrana Maritime Advisory, said that "Shippers choose to go to a port with higher charges but better infrastructure than a port that is cheaper but is saddled with poor infrastructure. A cheaper, but clumsy port would eventually make shippers pay more in total end-to-end logistics cost".
(Economic Times, August 3-2014)

So, I think low tariffs do not make a port more attractive, in fact what matters is the infrastructure of the port. The government should start looking into this, may be it should start charging more and use the revenues in modernizing the ports.
Have a good read at:
http://articles.economictimes.indiatimes.com/2013-08-01/news/40963238_1_mundra-kandla-port-trust-adani-port
http://m.economictimes.com/advantage-pvt-easier-tariff-guidelines-for-govt-run-ports-not-sufficient-to-revive-them/articleshow/39493701.cms 

Land Acquisition Act, 2013

Land is needed for all infrastructure projects. Highway projects require more land in the cities and road side (for expansion) compared to other infrastructure projects and hence Land Acquisition is the main reason stated for delay in highway projects.

In India, land is considered as a source of livelihood and identity as majority of the people are agrarian. Many argue that it would not be fair on the government to rip this resource from the poor for the sake of infrastructure development. So, there is a need to balance the objectives of development and social justice. With this aim, the government took a step to replace the 120-year old prevailing Land Acquisition Act, 1894 with the Land Acquisition Act, 2013. This act came into force on 1^st Jan 2014. 

Some of the key reforms and issues in this act are as follows.

Reforms	Issues for implementation
There is a minimum consent to sell from land owners. This is fixed at 70-80% for projects involving private players.	Lands in India are highly fragmented. It is said that 12,000 owners were there in 1,000 acres to be acquired by Tata motors for Singur plant (West Bengal). It is difficult to get consent from these many owners.
Market value of land fixed based on consent of land owners, average prices of recent transactions in the vicinity, etc.	-Effective compensation becomes 2-4 times than before. Huge concern for Investors. -Definition of recent transactions and vicinity not given. -Since consent of owners are required, they would escalate costs to high values.
Gram sabhas, Panchayat and Collector are involved in decision making process.	-Sequential time would be 48-60 months from inception to payment of award -Since more levels of approval, there is scope for misuse of powers (corruption)
These new reforms are applicable for projects of 100 acres in rural and 50 acres in urban	Rather than land area measurement, the number of people displaced would have been a better criteria

The Act is criticised to be favouring land owners and not favouring new projects in this infrastructure deficient country. This also puts a lot of pressure on the government as it promises land owners so many benefits like 4X land value, Job to family member, house of 50 sqm. plinth area etc.

Rather than giving owners all these benefits, it would be better to give Land bonds (Infrastructure bonds) as currently practised in many countries. These land bonds would reduce upfront costs of payment to owners, would be a livelihood for owners who lost land and land owners would not delay the process as they are also stakeholders of the project. 

Reference- Infrastructuretoday - LA Bill
TOI - Land Bonds

Debt Vs Equity Financing

The appropriate ratio of debt to equity is vital in financial structuring of an infrastructure project.  Debt financing means borrowing for a particular project with provisions for repayment with interest. In equity financing, the capital is either invested by the stakeholders or by raising money via selling interests in the company (stocks/bonds).

Comparison

Equity need not be paid back while debt has to be. Additionally equity ownership adds credibility to a venture while high debt projects are considered to be risky. In debt financing, the lender has no claim on the profits generated as opposed to equity owners.  And the interest on loans is tax deductible thus providing a tax shield. Furthermore, actions taken by the company need not undergo clearance from the lender as opposed to voting from equity holders for approval (Thomson Reuters, 2013). On the other hand the advantages of equity financing cannot be over emphasized. It adds to the net worth of the venture providing financial strength and preserves the borrowing capacity for future needs ( Ebi Ofrey, 2011).

Figure 1: Growth: Debt Vs Equity Financing (Sweeney, 2013)

Both debt and equity have their pros and cons. It is up to the stakeholders in the business venture to analyze and arrive at the option that best suits their needs. Figure 1  (Sweeney, 2013) gives a graphical representation of expected growth via debt and equity financing. Hence, debt financing would be appropriate for business owners who do not want to dilute ownership, have limited ability to raise equity, or share future profits  (Sweeney, 2013).

Equator principles as a hindrance to developing economies

The equator principles defines the term "Designated countries" as "those countries deemed to have robust environmental and social governance, legislation systems and institutional capacity designed to protect their people and the natural environment." The list (which can be viewed at: http://www.equator-principles.com/index.php/ep3/324) of such countries comprises of almost exclusively developed countries. I find this quite one sided, it is obvious that developed countries will have far less pollution and energy usage emenating from construction when compared to developing countries. The latter have not reached their optimum yet, and as such they obviously need to keep their economic stability first.

To put things in perspective, there are just 6 out of the 70+ lending institutions from Asia and the Middle East, and just one from India (IDFC). IDFC only joined in the earlier half of this year, so it will be quite interesting to see how this move is received.

The equator principles, if applied to institutions financing projects in these countries, would definitely hinder their growth. This is probably why we see so few institutions from Asia and the Middle East.

It is not that these principles have not been violated. There have been cases such as the Baku-Tbilihi-Ceyhan pipeline, where the principles were tossed aside because the project had to go ahead. Selectively applying them in situations can lead to all sorts of irregularities in the future, all the way up to banks strong arming the client into doing things their way in the name of these principles. 

These factors have made lending institutions of developing countries very wary of the principles as they view them as something that will just slow them down and reduce their competitiveness.

Eminent Domain and its implication for project finance

This is an interesting article regarding eminent domain that was published very recently:
http://www.theatlanticcities.com/housing/2013/10/why-eminent-domain-cant-save-broke-cities-richmond/7358/

In most cases, we see it being used to seize land for an infrastructure or construction project. This is a case where the government of Richmond, California is attempting to seize the land from the project sponsors in order to save the numerous homeowners who have defaulted on their mortgages.

This has quite a few implications for the infrastructure market, as explained by this article.

While not illegal, this is a move that brings extremely bad faith.The main implication is that banks will have to stop lending to cities willing to resort to this form of eminent domain. These cities are then likely to fall behind due to a lack of funds to pursue projects. And if this is done by every city in America with similar issues, the effect on their economy would be crushing. Creditworthiness and trust would take a huge hit, similar to what happened to India after Dabhol.

Therefore, I am inclined to agree with the author when he says that this move is somewhat suicidal to the economy of Richmond or any other city that does it.

Findings on Tirupur Project

I came across a case study which was quite contradictory to the one which we had
discussed in class. The case study which was authored by Gaurav Dwivedi stated Tirupur as a
failure in meeting its customer needs leading to a lot of slum dwellers still depending on
water vendors and other water sources due to scarcity. A lot of facts regarding the
concession like operations, shareholding, debt, revenue, expenditure and profits, remains
unavailable to the public. Also there were confidential clauses incorporated in the
concession which were against the transparency concerns. In fact the author had to move
legally against the New Tirupur Area Development Corporation Limited (NTADCL) in order to
obtain real data regarding the project.

Ref: http://www.manthan-india.org/IMG/pdf/PPP-Tiruppur_Paper_IIMB_Conference_for_Website.pdf

USD 1 trillion for Infrastructure development

According to 12^th Five Year Plan in India, infrastructure sectors which includes power, roads, ports , civil aviation etc. has a projected investment of $ 1 trillion with an equal participation of private sector. In an annual plenary meeting of IMF and WB, finance minister P Chidambaram promoted PPP and included many sub-sectors like modern storage, education, health, irrigation, etc. for VGF scheme to achieve his target (reference).

Another upcoming example of PPP is 5MJC, a company that has a vision of building five major cities in the nation of Malawi. The government of 5Major Cities (Shekinah City, Heaven’s Gate City, Zion City, Zoe City and Zeal City) has planned to provide "strong" mayor-council system. The cities governments being responsible for public education, correctional institutions, libraries, public safety, recreational facilities and sanitation, water supply and welfare services which is in line with the Mercer’s Quality of Living  which for 2012 Infrastructure is based on electricity supply, water availability, telephone and mail services, public transportation, airports and traffic congestion.

One sided nature of the MoU between the MSEB and Enron in the Dhabol Project

The World Bank commented on the MoU between Enron and the MSEB as that it was biased in favour Enron. After the WB’s comment on the MoU the GOI’s Central Electricity Authority (CEA) did their own analysis and found certain abnormalities in the MoU. The findings include:

i) no specific details of project costs were provided as per Indian Law

ii) the date of start of the contract and payments were not mentioned i.e when the electricity is available or when the contract was signed

iii) the payment structure was different from the usual norms

iv) high price of power higher than anywhere else in the country

v) no provision to scrutinize the project was made to make sure that the payment of MSEB was corresponding to the actual electricity cost

vi) while MSEB guaranteed to buy a minimum amount of fuel, the fuel supplier was not adhered to providing minimum fuel.

vii) no study of economical justification or verification of the price of fuel was done by MSEB

Even after all these findings the authoritative bodies of the GOI gave approval for the project which was immediately followed by MSEB signing the PPA with Enron. 

Still even more anomalies can be observed in the project which makes it obvious of the quantum of illegal movements which would have taken place in the project.

Article ref: http://www.atimes.com/reports/CA13Ai01.html

A new kind of infrastructure risk

We’ve spoken a bit about the factor of risk in infrastructure projects, and categorized them as well.

The article here (A New Type of Risk in Infrastructure Projects, by Maria Craciun), adds to that categorization, using a few different lines of thinking. It also talks about a kind of risk we haven't mentioned..

Please find below a paragraph from the paper of particular significance with respect to PPPs:

To the above three risks it seems appropriate to introduce a fourth one, manifested especially in the latest years: the risk of financing. The global financial crisis that affected, 2008-2010, a significant part of the world economy, including the U.S., EU or Japan, gave birth to a new type of risk, one that initiators of investment projects had not witnessed before. This risk is determined by events which can lead to loss of project funding opportunities. So far, usually, the inability to finance a project has been due for the most part, to the project itself. Either this did not meet the requirements of potential lenders or providers of capital, or was confronted with a number of risks whose costs and whose ownership was deemed too expensive.

Please note the final risk the author talks about is something that has become predominant relatively recently. This risk is the risk of a good project not being able to take off because of the lack of sufficient funds. That point really stresses on the importance of PPPs because the risk can be totally mitigated if governments really are willing to fund and support private projects and set up partnerships with them. 

Although, I am not sure how valid this kind of risk is for the Indian scenario at present.

"PPP readiness" in Latin America- A gauge mechanism

“Evaluating the environment for public-private partnerships in Latin America and the Caribbean” is a good article with regard to the “PPP Readiness” in Latin America. Bolivia doesn’t seem to be on this list though, so we can’t really gauge how they’ve changed since Cochabamba. Perhaps if this sort of an analysis had been done beforehand, things might have turned out differently for the project (or the project may even have been scrapped).

One of the key observations I was able to pull from this was that countries that are more developed seem to score higher than ones that are less developed. Economic stability is a driving factor on this list.

It also mentions that centralized states score higher. But is a single government body taking all decisions from their side really the best thing? It probably would be the best thing for the PPP to succeed, but not necessarily the best thing for all the stakeholders involved if they are represented by a single entity. While the model seems to be having success, would the pros outweigh the cons?

(To access the article, go to http://www5.iadb.org/mif/en-us/home/knowledge.aspx and search for “PPP”)

Alandur Case Study

Alandur STP (www.wabag.com)

The STP at Alandur discharges the effluent in to the Adyar River and the sludge to an open dumping site at Palliakaranai (Alandur Sewerage Project: A Success Story of PPP Arrangements by Dr. Mukesh P Mathur). As far as current status goes, the project which included the construction of the STP, pumping station and the piping network was completed by the end of 2001. The 23,000 households that paid for the connection were split and categorized into phases to be connected to the sewer system. This includes  43% of the slum dwellers who opted to pay for separate sewer connections to their houses. As of today, 100% of the community is not connected to the sewer system yet. This is due to two main reasons: (1) the number of households that were willing to pay to be connected to the underground sewer system increased with increase in time, and (2) some of the households have not connected their septic systems to the main sewer, which is regarded as the responsibility of the house owner by the municipality. The O&M of the piping system is overseen by the City ever since the expiry of the contract in 2005. The STP contract with the private sector will expire in 2019.

Alandur STP (www.wabag.com)

The VfM analysis provided at http://toolkit.pppinindia.com/solid-waste-management/module3-rocs-asp7.php?links=asp7 gives a brief overview of why this particular project has been successful so far. For instance, the graded monthly sewerage fee collected by the municipality covers both the debt repayment and the O&M costs. Also, the detailed studies performed by the municipality prior to bidding, reduced any potential for scope creep. This in combination with the payment assurance by the municipality was one of the factors that enabled the successful implementation and operation of this project. 

Follow up on Cochabamba

The paper by Geraldine Dalton discusses the causes for failure of the Cochabamba project where private sector financing was used as a tool to carry out the project. While, the issues which led to the project being scrapped such as the water tariff hikes, terms of privatization, etc were discussed by the author, the passing of Law 2029 boggles my mind. According to Law 2029, the water was made into a State commodity and was exclusively licensed over to ADT. This not only meant people cant draw water from their own private wells, but also cannot collect rain water without a license. In September of 2001, the residents of Cochabamba took control of SEMAPA through La Coordinadora (La Coordinadora de Defensa del Agua y la Vida). The new SEMAPA has so far reduced the water tariffs, built a community water tank in Alto Cochabamba, installed 800 new water connections and connected 400 communities abandoned by the old company to water supply network. I have included an excerpt from the paper regarding the newly formed SEMAPA.

 As an institution, SEMAPA is a model participatory organisation. The company is run with full support and inclusion of its workers and its community rather than by ‘corrupt politicians’ (Shultz, 2001, Harden, 2001). This is achieved through the institutional focus of neighborhood citizens meetings that use local knowledge to prioritize local needs and to help solve water supply problems. Similarly, public hearings are used to define how SEMAPA should develop, and on a weekly TV show the SEMAPA Director Dr. Jorge Alvarado, answers the public's questions and hears their concerns (Barlow, 2001). This approach enables SEMAPA to optimize the financial resources available to it in order to meet social objectives in water provision and maintain and popular support for its operations.There are some constraints on SEMAPA’s continued success. Despite popular support, its affiliation with La Coordinadora has ruled out support from Cochabamba’s political and business elite. They have boycotted the organisation and refused to pay water tariffs (Harden,2001). Apart from loss of revenue, lack of support from this community is detracts from 16 SEMAPA’s institutional credibility. Although progress has been made, Cochabamba’s problems have not been solved. Jorge Cuba, a Bolivian journalist has noted that the city has no more than 5 hours of water a day and only 40% of the farmers in surrounding areas have access to clean water (Cuba, 2000). The true measure of ‘new’ SEMAPA’s potential as an organisation is its capacity to raise finance and address future as well as current water requirements.

Source: Private sector finance for water sector infrastructure: what does Cochabamba tell us about using this instrument? by Geraldine Dalton, Occasional Paper No 37, Water Issues Study Group, School of Oriental and African Studies (SOAS), University of London, September 2001

Increasing share of PPPs in JNNURM

I read this in ET today..... its good news.

The government plans to increase the funding for projects that are carried out via PPP mode under the JNNURM scheme. This is what we were discussing in class the other day- there was earlier little to incentivize the projects via the PPP mode.

Kamal Nath (Urban Development minister) has himself emphasized on the importance of PPP projects in India. Quoting him:"In our next urban renewal mission program, we propose that the central share in the case of PPPs will be enhanced by 20%".

This will be rolled out in phase-2 of the JNNURM. Although it does not guarantee better projects, in my personal view it will lead to increased capital inflows and better employment of technical knowledge. 

Urban Infrastructure: - Special Economic Zone in India

Urban Infrastructure: - Special Economic Zone in India

Special economic zone is geographical region which is designed for export goods and creating employment. SEZ comprises of free trade zone, industrial park, free economic zone, urban enterprise zone etc.

The objective of SEZ is

        i)            generate additional economic activity

       ii)            Promotion of export of goods and services.

     iii)            Promotion of investment from domestics and foreign resources.

     iv)            Creation of employment

      v)            Development of infrastructure.

SEZ Act 2005

SEZ act bill was passed in May 2005 and it came into effect in Feb 2006. This bill provide partial or complete exemption in custom/excise, income tax, dividend distribution tax, central sales tax and service tax for developer and operating unit. For operating unit, 100% tax exemption for first 5 years, 50% for next five year, and 50% of ploughed back profit for next 5 year. Ploughed back means it enables these units to reinvest profit into their business without paying the taxes. While for developer, they will continue to get 100% income tax exemption for 10 year in block period of 15 years.

It also has provision for Single Window Clearance Mechanism. It is trade facilitation idea which enables traders to submit regulatory document at single location or single entity. Such documents are typically custom declaration, import export permits and other certificates.

Indian Scenario

In India 143 SEZ are currently operating in our country (till June 2012).   And as of June 2012, 634 SEZ are approved by Indian Government. It results in tremendous increase in export which is shown in table.

Year	Export
2009-2010	INR 2.20 Trillion
2010-2011	INR 3.16 Trillion
2011-2012	INR 3.64 Trillion

In year 2010-2011, SEZ created 840,000 jobs in country. SEZ comprises of 23% of total India’s Export.

India and China: Scenario compared

ü  In India, apart from land grabbing exercise, SEZ is completely led by private sector. While in China, public sector is too involved in it.

ü  China has Command Economy, which means there is no other way for foreign traders or investor to enter into the country. While in India it is not which makes its importance a little.

ü  China has world class infrastructure, more liberal labor environment, and more attractive tax exemption which give chance for SEZ to grow properly, while in India there is always dirty political interference and buckling pressure from left parties which doesn’t facilitate SEZ and leads to some corruption scam.

ü  The only advantage which India has from China is that we have advantage of large English speaking workforce and better knowledge based industry.

Areas of Concern

ü  Role of State Government: - As every state doesn’t have capacity to build their own SEZ and can have different political Constraint, therefore central Govt. should take care of it.

ü  Conversion of Agricultural land to SEZ: - Though land used for SEZ in India is not much (75000 acres) which is .0025 % of agricultural land. But proper rehabilitation and reimbursements should be given to farmer who loses their land. For this Ministry of Rural development has formulated a comprehensive resettlement and rehabilitation policy.   

ü  Losses in Tax Revenues: - Because of various tax exemption, India is losing INR 75,000 Crore per year. But if we are able to get more profit out of it like creating employment, increase in economic activity etc... It’s not a bad deal!!

REFERENCES

Wikipedia,

Indian Infrastructure Report 2008,

Article by Amit Abhayankar  (Mumbai based Lawyer)

Time to review our PPP policy?

          Recent article in ET about The government's plans to 'overhaul' PPP framework came at right time when we were going through our module 1. We all must be agree on the presence of PPP practice in almost all sectors of infrastructure. sometime i wonder whether governments ( central & states) are thinking as if this is the only option. Though we must acknowledge the contribution of this system in overall infrastructure development in India, there is need to take review on this.
   Planning commission is going to undertake study on PPP with case studies ,  two infra projects and two power sector projects possibly come up with some new recommendation in coming months. This has a background of few PPP projects are felling apart and many still struggling to even start.(Recently FM has cleared projects almost 1-lakh crore)
  I have few questions ;
1. Why the companies like GMR,GVK, Reliance Infra are pulling out of such important projects worth almost 16,000 crores after allotment?
2. Who will be responsible for the delay in the projects and will it end in increasing the concession  period which ultimately burden on common people (e.g. case of Toll collection on highway)?

    There is one more example I would like to share. In Kolhapur dist ( Maharashtra state) PWD completed intra city road  work through PPP. Toll rates had been fixed. But the concept of paying toll even inside your city brought ire among the citizen and they got united over not to pay toll in any case. fortunately all political parties were united in this decision! so nobody is paying toll as on date. Now matter is still pending with State govt.
 In this case where is the 'PUBLIC' partnership? how will govt settle this issue? what if same episodes will occur in other projects?
As it is assurance from government to recover money invested by the private player, in such cases, government has to take the burden of repay. ( that too with interest)
Then what is the purpose of bringing private player in if government has to empty his own pockets ?
Do we need to restrict PPP model upto certain sectors? ex. power, railway, ports
Is it possible to try for actual public partnership in some projects where they are directly in contact i.e. water, waste, road,.?

Method of money flow from ECA to domestic company

Export credit agencies use the following methods to provide funds, loans and insurance to a domestic company for its international activities:-

(1)   Direct Lending – Various multilateral export credit agencies like Asia – Asian Development Bank, lends money directly to the domestic organisation (importing entity) in absence of any financial intermediary. Based on the credit rating agencies preferably Standard & Poor’s, Moody’s or Fitch Group which categorizes countries to be stable or not to repay its bond obligation.

(2)   Financial Intermediary Loans – In this method import – export bank like ECG (Export Credit Guarantee Corporation of India) provide funds to a commercial bank of that country and later channelizes the money to the deficit company. This converts the risky investment into relatively risk – free ones because the risk is spread among multiple borrowers.

(3)   Interest rate equilization – the borrower company gets a loan at below market interest rates from a commercial lender and the difference of rate compared with the commercial rate is compensated from the export credit agencies.

Portal to help developers highlight hurdles stalling large infra projects

This was something I came across while I was browsing on the web. I think this is a very good initiative to clear the red tape bottle necks as soon as possible.

"This would mark the first such neutral interface for firms that are usually left to 'manage' their paperwork with ministries and state governments directly. This is a critical component of an investment revival blueprint outlined by the special cell created in the cabinet secretariat last week to expedite pending projects.

Finance Minister P Chidambaram had said the cell would strive to expedite 241 projects worth Rs 7 lakh crore, out of total stalled investment plans of Rs 10.5 lakh crore. If all goes to plan as per the new approach mooted by the cell, around Rs 1 lakh crore of investments could get off the ground over the next three months, officials hope.

"For each stalled project, the devil lies in the details," said a senior government official, aware of the cell's deliberations. "Around 15% of projects are held up for very simple last-mile issues such as one nod from a state or central department nod. If we get those fixed in the next two months, it will infuse confidence in the process," he said.

Cabinet Secretary Ajit Seth has urged state governments to co-operate in the endeavor, Additional secretary Anil Swarup, who heads the cell, is learnt to have proposed that instead of discussing each project with multiple departments as per the traditional approach, the cabinet secretariat would facilitate intensive and focused tripartite discussions involving the ministry 'sponsoring' a project and the one whose nod is necessary for its implementation.

A working group, set up with senior officials from 13 ministries, has agreed to this approach and formed four sub-groups to focus on the ministries seen as the source of most delays - environment, coal, defence and home. The working group would evolve a protocol for resolving problem areas, while the sub-groups will try to settle specific issues. All ministries have been asked to assign a nodal officer of the rank of joint secretary or above to co-ordinate with the cell.

Tardy environment clearances hold up a majority of projects, while coal supply linkages have thwarted several power projects. The defense and home ministries often red-flag investments, citing security concerns. The sub-groups on coal and environment are slated to meet every week - given the plethora of affected projects.

"The CCI can take policy decisions or issue directions to ministries, but there's a lot of spadework needed to figure out the nuanced problems facing individual projects. If a problem cannot be resolved through discussions or arises out of a larger anomaly in policy, the Cell would escalate the issue to the CCI," said an official.

The link to the actual article can be found here