The Fortune The Fortune forfor the Bottom of Pyramid the Bottom of Pyramid : :

PURA – A Template in PPP for PURA – A Template in PPP for Sustainable and Inclusive Growth of Sustainable and Inclusive Growth of

Rural IndiaRural IndiaBy:By:

Dr.D.S.Gangwar IASDr.D.S.Gangwar IAS

Joint Secretary Joint Secretary

Ministry of Rural DevelopmentMinistry of Rural Development

Government of IndiaGovernment of India

India lives in its villages

"The true India is to be found not in its few cities, but in its seven hundred thousand villages. If the villages perish, India will perish too."

- Mahatma Gandhi

Outline of the Presentation

SECTION 1 : Laying the Foundations for Sustainable and Inclusive growth

SECTION 2: Co-creating Fortune for the Bottom of Pyramid PURA

SECTION 1:

Laying the Foundations for Sustainable and Inclusive Growth

Mission of Min. of RD

Our Mission

Sustainable and inclusive growth of rural India through a multi-pronged strategy for eradication of poverty and improvement of quality of life in rural India.

Our Theory of Change:The Multi-pronged Strategy

EMPLOYMENT GENERATION :1. Direct attack on Poverty by providing livelihood opportunities to

Below-Poverty Line (BPL) households.2. Enhancement of livelihood security by guaranteeing 100 days of

wage employment to every household in a yearINFRASTRUCTURE DEVELOPMENT:3. All-weather road connectivity to unconnected rural habitations

and up gradation of existing roads.4. Providing basic needs and amenities like housing, drinking water

and sanitation to rural households.SOCIAL SECURITY:5. Providing Social assistance to the elderly, widow and disabled

persons.SUSTAINABLE DEVELOPMENT OF NATURAL RESOURCES :6. Natural resource development for strengthening the livelihood

base of the poor

Department of Rural Development- Formulates policies and programmes - Provide funds

State Governments- Implementation through its agencies- Monitoring of Programmes

District Administration- Preparation of district perspective plans- Implementation of the programmes

Panchayati Raj Institutions- Plan at the grass root level- Select works/beneficiaries and implement the projects

INDIA• 35 States/UTs

• 619 Districts

• 6484 Blocks

• 2,55,000 Village Panchayats

• 593731 villages

•7,42,490639 Rural Populn (2001)

• 54.290 million BPL Households

National Level Implementation of the Programmes

An iIllustration of investments in a typical village of 1000 population

1. Guarantee of 100 days manual work in an year to all the households2. All-weather road connectivity3. Investments for increasing land productivity:

watershed development, water harvesting ponds, check-dams and field channels, social forestry

4. Organization of BPL persons into Self-Help Groups’ Micro-enterprises: assistance for finance, technology, skills training and marketing of produce

5. Placement linked skills development project6. Houses for homeless BPL persons7. Land/homestead for landless persons8. Drinking water supply and sanitation latrines9. Social Safety Net : Pension for elderly, widows and disabled persons

Major programmes of other ministries for rural areas

1. Bharat Nirman for rural infrastruture (US$ 34.84 billion) 2. Agriculture and allied sectors e.g. dairy, poultry,

fisheries; Minimum Support Prices for procurement3. Public Distribution System4. Promotion of handlooms, handicrafts, food processing

and village industries;5. Education: Sarva Shiksha Abhiyan (Education for All),

Mid-day Meal scheme in schools;6. Health: National Rural Health Mission (US$ 3 billion)7. Rural Electrification8. Banks: Credit and Debt-waiver for farmers (US$ 13.86

billion ),9. IT: Common Service Centers -1,00,000

Impact Analysis

Annual investmentsRs.72000 crores

in rural areas($14 billion)

Increased Purchasing

Power in rural areas

Rural economic

Growth(Rural economy

$425billion)

ImprovedLiving condition

Rejuvenation of natural resource

base

Increased sale of FMCG, auto,

Pharma, TV, radio,mobile

Food Inflation!!

Decreased migration

to urban areas

Stronger linkages with

Urban economy:

Impact AnalysisRural demand - the driver of economic growth in India:

• Major structural shift taking place in rural economy: Contribution to rural household income:-• from agriculture- 43%• from services- 36%, • from industry- 21%.

• By 2017, Rural economy is estimated to surpass urban market

SECTION 2:Co-creating the Fortune for the

Bottom of Pyramid (BOP)PURA

Need for a paradigm shift :Financial Capitalism Inclusive Capitalism

“ Why is it that with all our technology, managerial know-how, and investment capacity, we are unable to make even a minor contribution to the problem of pervasive global poverty and disenfranchisement? Why can’t we create inclusive capitalism?”

- C.K. Prahalad

(The Fortune at the Bottom of The Pyramid)

Co-creating the Fortune for the Bottom of Pyramid (BOP)

• Rural economy is estimated to increase from $220 billion in 2004-05 to about $425 billion in 2010-11 at a CAGR of 12%.

• The next stage in economic evolution of Rural India:

Wealth creation for the BOP

• The challenge is how to design a system for involving the private sector for rural development and enabling dignity and choice through Markets.

Co-creating the Fortune for the Bottom of Pyramid (BOP)

A. Initiatives in the Private - Private sphere:

Innovations in the business models for BOP

B. Initiatives in the Public- Private sphere:Public-Private-Partnership (PPP) for infrastructure creation and provision of services in rural areas.

1. Common Services Centres by Min. of IT2. National Rural Livelihood Mission (MoRD)3.3. PURA- (MoRD)PURA- (MoRD)

A. Initiatives in the Private- Private sphere:

Case studies abound of innovations in the BOP business models, technology, products and services:

• Amul business model of co-operatives network as a firm

• ITC e-Choupal• HUL Shakti women village entrepreneur• Tata Kisan Kendra• DCM Shriram Hariyali Kisaan Bazaar• SEWA (Self Employed Women’s Association) • BASIX

B. Initiatives in the Public- Private sphere:

1. Common Services Centres (CSCs)• 100,000 Common Services Centers in 600,000 villages. • Objective: to develop a platform that can enable Government, private

and social sector organizations to align their social and commercial goals for the benefit of the rural population in the remotest corners of the country through a combination of IT-based as well as non-IT-based services.

• Total cost of Rs 5742 Cr. over 4 years• Implementation through a Public Private Partnership (PPP) in a 3-tier

structure:-– the CSC operator (Village Level Entrepreneur or VLE); – Service Centre Agency (SCA), responsible for a division of 500-1000

CSCs; – State Designated Agency (SDA) for managing the implementation over

the entire State.

• SREI Sahaj e-Village Ltd.: 15,000 CSCs in 6 states provide G2C & B2C services through village entrepreneurs

B. Initiatives in the Public- Private sphere:

2. National Rural Livelihood Mission (NRLM)• Universal coverage of BPL families under Self Help

Group (SHG) network• Formation of Community Based Organisations

(CBOs) and their federations• Rural Self Employment Training Institute (RSETIs)

in every district in partnership with banks• Linkages of SHGs’ micro-enterprises with

Corporates• Placement-linked skills development through

partnership with private players

The PURA Scheme – The PURA Scheme –

A Template in PPP for Sustainable A Template in PPP for Sustainable and Inclusive Growth of Rural Indiaand Inclusive Growth of Rural India

B. Initiatives in the Public- Private sphere:

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VISION OF PURA :President Dr. Abdul Kalam's address on the eve of Republic Day - 2003

“Knowledge Powered PURA• The vision of transformation to a ‘developed’ India can only be

realized if we launch a mega mission for empowering the rural people. 

• Creation of Physical, electronic and knowledge connectivities leading to economic connectivity in villages. Such a model of establishing a circular connectivity among the rural village complexes will accelerate rural development process by empowerment.

• The PURA has to be a business proposition economically viable and managed by entrepreneurs, local people and small scale industrialists.

• Government’s support should be in the form of empowering such management agencies, providing initial economic support and finding the right type of management structure and leaders to manage and maintain. ”

The ecosystem for wealth-creation in rural areas

Economic Connectivity with formal economy:A network of market-based business system

Fortune for the Bottom of Pyramid

Micro-consumer/Micro-producer/Micro-innovatorin 600000 villages

PhysicalConnectivity

FinancialConnectivity

Information / KnowledgeConnectivity

Rural Entrepreneurs

PhysicalConnectivity

FinancialConnectivity

Information / KnowledgeConnectivity

PhysicalConnectivity

FinancialConnectivity

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“Holistic and accelerated development of compact areas around a potential growth centre in a Panchayat (or group of Panchayats) through Public Private Partnership (PPP) by providing livelihood opportunities and urban amenities to improve the quality of life in rural areas.”

PURA Mission Statement

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PURA StrategyPURA Strategy

• Implementation of the scheme through PPP• PPP between Gram Panchayat (GP) and Private

Sector partner• Core funding from PURA scheme of MoRD• Additional support through convergence of Central

Govt Schemes• Private sector to bring in investment and operational

expertise • Project based and risk sharing among stakeholders• Twinning of rural infrastructure development with

economic activities generation

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Urban Amenities to be provided under PURA

Under MoRD SchemesUnder MoRD Schemes:-:-• Water and SewerageWater and Sewerage• Village streetsVillage streets• DrainageDrainage• Solid Waste MgtSolid Waste Mgt• Skill DevelopmentSkill Development• Development of Economic Activity Development of Economic Activity

Under Non MoRD SchemesUnder Non MoRD Schemes:-:-• Village Street Lighting• Telecom• Electricity distribution, etc.

Add-on ProjectsAdd-on Projects i.e. Revenue earning projects (Indicative) :- i.e. Revenue earning projects (Indicative) :-• Village linked Tourism• Integrated Rural Hub, Rural Market• Agri – Common Services Centre, etc .• Any other rural economy based project

Schemes such as SGSY, NRDWP, TSC, etc will be converged in CAPEX provision of PURA

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The Business Model

• Leveraging public funds with private capital & management for creation & maintenance of rural infrastructure.

• Due to thin revenue base, most of the CAPEX from Govt schemes.

• Community Development schemes ordinarily included. • O&M of assets and services for 10 years. • Private Developer to have flexibility in choosing PURA

project area & revenue generating projects as add-ons. • Capital Grant upto 35% of project cost for meeting

viability gap. • Cost of each PURA project upto Rs. 120 crores. • Actual Capital Grant to vary from project to project.

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• For the public amenities, Gram Panchayat / State Govt to provide land free of cost.

• For the Add-on activities:

o Revenue sharing between GP and Private Partner if land provided by GP / State Govt.

o Such add-on facilities to revert back to GP / State Govt at the end of concession period.

o In case the private developer has to purchase the land from open market, cost of land not to be included for the estimation of capital grant.

Land for the PURA Projects

State Support Agreement Tripartite Agreement between Central Govt, State

Govt and Private Developer. Support from the State to include: • Co-operation and facilitating the Concessionaire and GP in

discharging their obligations under the Concession Agreement

• Commitment for core facilities like roads, water and power to the PURA area

• Providing access to the site required for project

• Assist and facilitate in obtaining approvals and clearances required for implementing the project

• To waive its sovereign immunity

Concession Agreement … 1

• Between GP and Private Developer. Will include minimum service level standards, performance guarantees etc.

• Concessionaire to procure, finance, improve and undertake design, engineer, construct, redevelop, operate & maintain project facilities at its cost during concession period

• Concession period 13 years (including construction period)• Concessionaire to complete construction within 3 years as

per the pre-determined project milestone schedule• Access and license to the land for the urban amenities to be

provided by GP and at its discretion may provide land for the add-on facilities.

• All urban amenities and those add-on facilities for which the land is provided by GP to be transferred to GP on termination/expiry.

Concession Agreement … 2

• Concessionaire would have the right to collect user charges from the users of add-on facilities.

• Grant to be disbursed to the Concessionaire through an Escrow Account set up for the same at DRDA

• Concessionaire would also be eligible to utilize the funds available under other existing MoRD schemes and on tap from other Ministry schemes

• Dispute if any to be settled as per alternate dispute resolution mechanism agreed between the parties

Monitoring & EvaluationConcept Plan & DPR

• Screening Committee at MoRD for reviewing the Concept Plan & DPR prepared by the developers

• Baseline information provided in the DPR shall be vetted by the Independent Engineer whose cost shall be financed under PURA

Construction and O&M

• Independent Engineer shall supervise & monitor activities and performance of developer during project life cycle: – Check for compliance of performance standards set out in the Concession

Agreement – delay/ quality

• GP would also monitor the performance of the private developer during the Concession Period

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An Indicative PURA Project …Figures in Rupees Million Sources of FundingA Urban Amenities Target Size Unit Capex Opex p.a. RD Other PURA Private Name of SchemeI MoRD Schemes

1 Water and Sewerage 100 lpd 5 mlpd 71.45 5.72 80% 14.29 Swajaldhara Scheme2 Road (Village) 16.75 km 23.45 2.35 23.45 3 Drainage 16.75 km 13.07 - 13.07 4 Solid Waste Mgt 5 pits 1.87 0.48 80% 0.37 5 Skill Development 5000 persons 75.00 - 100% - Special SGSY6 Lead Economic Activity 1000 persons 50.00 - 100% - Special SGSY

Sub total 234.84 8.54

II Non MoRD schemes7 Village Street Lighting 840 lights 16.38 0.82 16.38 16.39 MNES8 Telecom 5 kiosks 0.38 - 0.38 - DIT, CSC Scheme9 Electricity 1 MW 80.00 - 10.00 70.00 MNES

Sub total 96.76 0.82

B ADD ON PROJECTS (Revenue Earning People Centric Projects) 12% Return on investment (ROI)expected25% Deficit % on ROI expected

10 Village linked Tourism 100.00 3.00 100.00 11 Integrated Rural Hub 100.00 3.00 100.00 12 Educational institution 150.00 4.50 150.00

Sub total 350.00 10.50

C Independent Engineer to be appointed for PRI Support 6.00

D Return to Developeri Management fee (% of Capex on Projects sub-total E Below) 1% 6.82

ii ROI for Category A Infrastructure Total figure in Rs mn) 137.57 12% 16.51 (Includes project listed against Categegory A- nos. 1,2,3,4 , 7 and 9)

E Sub-total of Projects 681.59 49.18

F Viability Gap Funding 9% 315.65 - 316 PURA(This figure is the NPV of the Annual Operating Expenses/Deficit on Returns over a 20 year period.This amount has been discounted at the rate % shown above)

G Total Project Costs (E + F) Capex + VGF 997.24 167 27 316 488 % of Total Project Costs 32% 17% 3% 32% 49%

SUMMARY OF BLOCK COSTS FOR TYPICAL AMENITIES PROPOSED FOR PURA PROJECT

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The Selection Process • Through open competitive bidding process.

• Expression of Interest from reputed Infrastructure Companies.

• No financial bidding for pilots; evaluation based on technical capability and pre-approved evaluation methodology.

• Short listed bidders to be invited to pre-bid conference.

• Emphasis on rural development priorities as well as developers perspective on an economically viable project.

• DPR to form the basis of determining capital grant admissible. To be vetted by Independent Engineer.

• Inter Ministerial approval committee to approve final cost and capital grant.

Implementation Framework Issue of Expression of Interest

Pre-bid Meeting / Bidder’s Conference to obtain suggestions on the draft RfP & CA from those Bidders who meet the qualification criteria.

Issue of Request for Proposal document

Submission of Proposals including a broad Concept Plan from interested Bidders

Evaluation of Proposals by MoRD / Technical Committee

Issue of “Letter of Award” to first eight private developers for preparation of DPRs

Preparation of DPRs by private developers and approval by MoRD

Execution of contracts between the private developers and participating Gram Panchayats and State Support Agreement

Project Execution by private developer

O&M of Project facilities by private developer

Handover of Project facilities to the Gram Panchayats at the end of the Concession Period

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Next Steps…

• Scheme Guidelines have been issued• Notice for Expression of Interest issued.• Commencement of the selection process for

private sector partners.• Preparation and approval of DPRs• Signing of SSA and CA• Scaling up after experience of pilot phase

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