Public Private Partnerships in Tamil Nadu:

Experiences and Outlook

CONFRONTING INDIA’s INFRA BOTTLENECK: Practical, Collaborative Solutions to Increasing Flow &
Success of PPP Projects in Gujarat, Tamil Nadu & Uttar Pradesh
 Roadmap

1. Existing Institutional Environment for PPPs

2. Recent PPP Experiences

3. Upcoming PPP Projects

4. Issues for Discussion

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 Institutional Environment - Enablers

• While there is no specific law or policy framework for PPP in

TN, private sector participation is being sought in select
sectors like SEZs, AEZs, agricultural marketing, tourism,
housing and urban services
• Drivers – GOI policies (e.g. terminal markets, viability gap
funding) and public sector capacity issues
• Institutional elements – TNUIFSL and NTADCL kind of
organizations
• Political climate – not averse to PPPs in certain areas
• ‘Mixed success’ stories – Alandur sewerage project, Tirupur
water supply project, Coimbatore bypass, East Coast Road,
SWM privatization in Chennai

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 Institutional Environment - Bottlenecks

• Absence of a specific PPP enabling law or policy

• Political indifference to PSP
• Bureaucratic distrust of private sector; unwilling to share risk, leading to
unbalanced terms
• Legacy of ‘witch-hunting’
• Lack of capacity to engage private sector (e.g. in preparing bid
documents, drafting contracts and enforcement); e.g. tourism project
• No shelf of projects; lack of clarity on how to deal with unsolicited
proposals (say through ‘Swiss-challenge’) or what PPP model to apply
• Crowding out effect of robust state finances and huge capital investments
• Propensity for grant based funding in contrast to more efficient financing
models; e.g. roads infrastructure project
• Multiplicity of agencies impinging on a project; absence of single-window
approach
• Bitter experiences of past PPP contracts; e.g. Karur toll bridge,
Coimbatore bypass

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 Recently Completed Project 1 :
Alandur Underground Sewerage

• Sector: Sanitation – Underground sewerage treatment

• Size: 12 MLD
• Location: Alandur (outskirts of Chennai)
• Cost/Value: Rs.34 cr, including STP for Rs.8 cr.
• Duration: 5 years; concession period – 13 years
• Key Players: Concessionaire (IVRCL), ULB (Alandur),
MA&WS deptt, TUFIDCO and TNUDF
• PPP model adopted: BOT for STP
• Outcome: Working, with some outstanding dispute

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ALANDUR UNDERGROUND SEWERAGE SCHEME

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 Recently Completed Project 1 :
Alandur Underground Sewerage
• Project Cost : Rs.34 cr
• Initial tariff Rs.150 per house per month
• TNUDF organized people’s participation through deposits @ Rs.5000
per house and generated Rs.14 cr
• STP bid out on BOT arrangement
• With this, tariff reduced to Rs.75 per house per month
• Crucial role of Project Champion in the form of the Chairman, Alandur
Municipality
• Support from Government
• The Alandur model is being adopted with some modifications (DBOT)
and learnings (providing h/s connections as part of project) in other
towns
• Contract structuring important (e.g. decision to entrust collection system
EPC to same BOT operator for STP)

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 Recently Completed Project 2 :
Karur Toll Bridge

• Sector: Road (Bridge)

• Size: < 1 km
• Location: Karur
• Cost/Value: Rs.16 cr
• Duration: About 2 years; Concession period 13 years
• Key Players: Concessionaire (ECCI), ULB (Karur
Municipality), MA&WS deptt, TNUDF
• PPP model adopted: DBOT
• Outcome: Failed

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 Recently Completed Project 2 :
Karur Toll Bridge
• TNUDF facilitated the first toll bridge contracted by a ULB in
India – cost Rs.16 crore under DBOT arrangement
• TN State Toll Act amended to facilitate ULB to enter into
DBOT contract – stable regulatory framework
• Predictable cash flows ensured project structuring
• However, damage to bridge approach road during rains
gave pretext to Government to terminate contract without
compensation

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 Upcoming Project 1 :
Energy-saving using ESCOs
• Sector: Energy
• Existing Situation: High energy costs in street lighting and
water pumping
• Proposed Solution: Implementation of energy-saving
measures
• Government Agencies Involved: Commissioner of Municipal
Administration, Urban Local Bodies, TNUDF
• Size: 29 towns
• Cost/Value: Indeterminate
• PPP model envisaged: DBOOT through Energy Saving
Companies (ESCOs) – Shared savings model

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 Upcoming Project 1 :
Energy-saving using ESCOs
• Structuring the project – IGA and bid evaluation criteria – a
challenge, given limited past experience (first of its kind)
• Benefit of a partner NGO (Alliance to Save Energy)
• Now a BEE manual for bid process put in place
• ULBs’ buy-in took time; several rounds of discussions
including 4 pre-bid meetings
• Contentious issues raised by ESCOs, especially on bid
evaluation parameters and baseline
• IGA may reveal non-implementability
• Complaints on performance may derail the project, despite
clear performance indicators and 3rd party oversight

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 Upcoming Project 2 :
Old Prison Land Project
• Sector: Real Estate
• Existing Situation: Old Prison land vacated and proposed to
be handed over to Chennai Metro Rail Ltd for commercial
exploitation to augment capital
• Proposed Solution: Lease out to private sector for creating
commercial complex, MLCP and public park
• Government Agencies Involved: Special Initiatives deptt,
Prison deptt, CMRL, TNUIFSL
• Size: 12 acres approx.
• Cost/Value: Around Rs.600 crore
• PPP model envisaged: DBOOT

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Old Prison Land - Chennai

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 Upcoming Project 2 :
Old Prison Land Project
• Government commitment and political support
• Competing demands from other agencies (e.g. Health
department for expansion of Govt Hospital)
• Locational factors like access to land, proximity to slums and
river/canal (CRZ, pollution)
• Market demand and bid price
• Design of project being subject to Govt clearance
• CMDA regulations under Master Plan/DDP
• Upcoming transportation projects like Chennai Metro, Port
Connectivity corridor, Central-Egmore railway link
• Competence of the concessionaire to complete project as
per schedule and market / maintain it for the duration

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 Issues for Discussion

• “What kind of a PPP model should be adopted in this case?”

• “How should this project be structured?”
• “How can we go about gathering stakeholder and political
commitment?”
• “What are the perceived bottlenecks to this project?”
• “What other international / national experiences can we draw
upon?”
• “How to ensure transparency in the bidding procedure?”
• “How to select a competent bid process manager and how to
fund its cost?”
• “ What are the safeguards that need to be built in into the project
to secure the legitimate interests of the agency and the private
sector operator / concessionaire?”

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Thank You

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