Infrastructure Development Corporation Limited

ASCI – World Bank Institute Program onStrengthening Urban Management in India – Unlocking Potential of

Indian Cities

Urban Service Delivery through PPPIssues and Perspectives

Dr. Anand ChiplunkarVice President

IL&FS Infrastructure Development Corporation

January 19, 2004

Infrastructure Development Corporation Limited

SECTION A

MUNICIPAL INFRASTRUCTURE ISSUES

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Municipal Challenges

Demand for good/better municipal services is

growing

– water and sanitation

– traffic management - flyovers, roads, bus-stands,

parking areas

– solid waste management

– commercial properties

– health and education

Infrastructure Development Corporation Limited

Initiatives GoI Budget 2002 - to develop municipal sector

– Urban Reform Incentive Fund - Rs. 500 crores linked to

reforms (rent control, stamp duty, revision of municipal

laws, levy of realistic user charges, initiation of PPP)

– City Challenge Fund -Rs. 500 crores (fund transitional costs

to develop viable projects)

– Pooled Finance Development Scheme

Use of such funds to develop viable charges and

leverage investments from the market

Reality – these are yet to take off

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Issues

Lack of finances - municipal level and State government

Weak institutional delivery mechanism– technical

– managerial

– systems and processes

– record-keeping

Increasing awareness about need for– Investment

– Efficiency

– Better management practices

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Financing Projects

PROJECTS

RECOVERY Capex and Opex

REFORMS

FUNDINGMunicipal

FundsState Funds

Multi-lateral agencies

LIC, HUDCO

Capital MarketCAPEX

OPEXBudgetary Allocation Project Revenues

Taxes Cost

ReductionEfficiency

GainsUser

Charges

Administrative Political Will Community Participation

Policies, Accounting Practices, Asset Inventory, Capacity Building,

Project Identification

Project Development

Project Development

Funds

Govt. guarantees

Infrastructure Development Corporation LimitedFocus Areas

for Municipal Services Improvement

Cost Reduction Measures

– Improve efficiency in operations

Financial Strengthening– revenue enhancement - increase efficiency in billing

and collection

– improving accounting practices

– taking an assets inventory

– rationalization of taxation

– rating municipalities

– raising municipal bonds

Infrastructure Development Corporation LimitedFocus Areas

for Municipal Services Improvement

Institutional Strengthening– Capacity building and on-job training

Investment in viable projects– project development and structuring

– leveraging municipal/govt. funds for induction of private capital

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SECTION B

Visakhapatnam Municipal Corporation Projects

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VMC-IL&FS IDC Partnership

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Partnership between VMC and IIDC

Vizag Municipal Corporation and IIDC entered

into an agreement in July 2003

– Plan for integrated municipal services

– Projects in urban infrastructure

• Financial Strengthening including Municipal Bonds

• Water Supply and Sewerage

• Road maintenance

• Central Business District

• School Upgradation

• Tourism and Recreation – municipal park,

convention center, resort and golf course etc.

Infrastructure Development Corporation LimitedManaging and Strengthening

of Water Supply System through PSP

Scope Benchmarking the performance

of the existing system and identifying interventions and investments required for improving the efficiency of the system

Upgrading the distribution system with investments through PSP using an appropriate long term contract such as Concession or lease

Infrastructure Development Corporation LimitedAugmentation and

Strengthening of Sewerage Through PSP

Scope Component 1: Management of

sewage collection & pumping + STRF on BOO/BOT basis through PSP for identified zone

Component 2: Management of collection and treatment for existing system through PSP

Component 3: DBOT for new system covering 70% area– Total investment Rs. 100

cr.

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Corporation creates & maintains assets from annual budget normally through separate Contractors for:

–Road: Laying road, Overlaying road–Amenities/ Services

• Civil works (manholes, central median); Electrical poles and lighting (could be in-house)

Assessment of Intervention– Road & pavements - Quality and Pedestrian area– Amenities - Street Furniture, Signage, Parking, Foot-bridges, Info-kiosks / E-Seva Counters–Facilities - Police Stations, Bus Shelters, Toilets and Green area–Road Lighting – Energy Audit & Savings Strategy

Management and Strengthening of Roads through PSP

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Cost Centers– Road Pavements

Pedestrian areas – Police Stations– Foot-bridges– Energy efficient

lighting

Revenue Centers Billboards Installations Parking Tickets Info-kiosks / E-

Seva Counters Bus Shelters Toilets

Savings from: New Technology

for road relaying Energy efficiency

savings

Business Plan for PPP

Optimized Funding from VMC

Proposed Road Management Model

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Objectives:

To create a sustainable and replicable model for upgrading and maintaining municipal schools

School Upgradation

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Present Condition of Schools

Municipal schools lack: Proper sanitation facilities Provisions for drinking water Basic facilities inside classrooms –

fans, lights, benches etc. Quality physical infrastructure Security to protect physical assets And above all provisions for its

maintenance

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Proposed Model

Selection Criterion

Select 10 of ~100 schools in city as a pilot Schools would be selected in a cluster in a

locality where opportunities exist

Up-grade & maintain through PPPP or annuity format

– CAPEX by VMC + NGO+Corporates– O&M contracted to private sector on

predefined performance-related parameters– Put assets to increased utilization by

allowing their use beyond school hours and thereby earn revenues

– Monitoring through Citizens Committee

Description

Model

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Central Business District

Town Center: Garden

s

Retail Space:

Jewellery

IMAX/ Multiplex

Science Park

Art Gallery

Food Court

Business Centre

ApartelsOffice Space:

Logistics, Aquaculture, Energy City

Jewellery Mfg

ITES

Retail : Lifestyle

& Fashion

•Concept driven by discussion with Pvt. Players in target segments

•Detailed studies being initiated

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Central Business District

Space Utilisation15%

15%

15%15%

30%

10%

Tower 1: Gems & JewelleryTower 2: Fashion Lifestyle Store/ITESTower 3: Offices/Service Apartments/ HotelTower 4: Town Hall/ Art GalleryGreen SpaceRecreational Space

Total : 27 acreSuper Built up: 10 lakh sftEstimated Project Cost: Rs 120 cr

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SECTION C

WAY FORWARD

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Opportunities for Change

Large captive market - create good investment

climate – sufficiency in revenues for works through taxation

– demonstration of service delivery followed by and reasonable charges for services

Develop viable projects and leverage investments

from the market

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Approach Plan for integrated municipal infrastructure

development

– identify areas for change

– procure expertise for specialist services / detailed

studies

– strengthen finances (rating municipalities, raising

municipal bonds etc.)

– induct private sector as appropriate to the activity to

bring in efficiency, best practices and investments

Infrastructure Development Corporation LimitedProject Development Process

Manage the intensive processes involving

– sector focus

– project scoping

– site identification

– demand assessment

– master planning

– policy and operational framework

– environment and social management plan

– financial and legal assessment

Infrastructure Development Corporation Limited

Enabling Environment for PPP

In order to attract private sector, the ULBs must demonstrate / show commitment to professional management of services

In order to reduce initial tariff rise, ULB can provide cross-subsidy from surplus revenues generated from other activities

In the long run, the investments must be serviced through revenues generated by the project itself

Involvement of all stakeholders and addressing the risk perception of each is essential to sustain the PPP process

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THANK YOU