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Discussion. Venkata Santosh Kumar Delhi IIT Madras. Contents. 1. Public Private Partnerships. 2. Tirupur Water Supply Prjoject – Case Study. Disclaimer : I promise to raise more questions in your mind than provide answers at the end of this discussion.

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Discussion

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  1. Discussion Venkata Santosh Kumar Delhi IIT Madras

  2. Contents 1 Public Private Partnerships 2 Tirupur Water Supply Prjoject – Case Study

  3. Disclaimer: I promise to raise more questions in your mind than provide answers at the end of this discussion

  4. Assumption: You all did not go through the case study circulated to you

  5. As promised earlier some questions….

  6. How old are PPPs?

  7. Suez Canal Concession obtained in 1850s to construct the Suez Canal

  8. What is a PPP? Public Private Partnership project delivery arrangements where the private sector takes on risks and responsibilitiesthat are traditionally accepted as belonging to the government

  9. Why PPP? Means of financing Better service Operating savings Capital Savings Expertise Need for facilities

  10. When should you prefer PPP over EPC?

  11. Why not PPP? Huge transaction costs Private sector monopoly Shift problematic responsibilities to private sector

  12. Based on the sessions so far How do you define a successful PPP?

  13. What is the best partnership you came across in your life?

  14. I hope some of you thought of Marriage!!

  15. How are marriages arranged?

  16. Projects are no different!! Project go through various iterations Be Prepared to abandon

  17. Why is project selection and shaping very important?

  18. Successful Project shaping and award are only half work done Successfully awarded projects may not be successful

  19. The case of Tiruppur Water Supply Project Every one is wise on retrospection Think from the perspective of decision maker

  20. The Tirupur Water Supply Project Tamil Nadu Tirupur

  21. Was there a need for the project? Tirupur was home to a booming textile industry Textiles are water intensive Unpredictable water supply Drought had severely impacted the industry in the early 1990s THERE WAS A GENUINE NEED FOR THE PROJECT

  22. Shaping the Project Tirupur Exporter’s Association drew the government’s attention to the water situation IL&FS – a private infrastructure financing and consulting firm was called in to consult Given the high costs, IL&FS suggested PPPs

  23. Structuring the Project Government of Tamil Nadu insisted on the following Water would be supplied at subsidized rates to Tirupur Corporation and wayside villages A sewerage treatment plant was to be constructed in Tirupur In return, industry could be charged higher rates for water IN 1996, GoTN, IL&FS AND TEA FORMED THE NEW TIRUPUR AREA DEVELOPMENT COMPANY LIMITED (NTADCL), TO IMPLEMENT THE PROJECT ON A BOOT MODEL

  24. The Agreement 28 YEAR CONCESSION PERIOD 20% IRR GUARANTEED SUBSIDIZED SUPPLY TO MUNICIPALITY AND NEARBY VILLAGES GOVERNMENT WOULD PREVENT GROUNDWATER EXTRACTION

  25. Lenders Delay Risk Mitigation Mechanisms Government Approves Government Intervenes Government Changes

  26. Successful award of the contract No major issues during construction Largely completed on schedule

  27. Global recession had affected exports TNPCB had shut down several potential customers Water efficient technologies introduced Good rains had led to smaller players extracting groundwater Demand at 30% of estimated What happened? NTADCL WAS IN CONSIDERABLE FINANCIAL DISTRESS

  28. Success at award is only the beginning of the partnership

  29. Dynamics play out through out the life of the project How many of them are you prepared for?

  30. How are PPPs different from other projects?

  31. ‘The basic physical and organizational structures and facilities (e.g. buildings, roads, power supplies) needed for the operation of a society or enterprise’ – Oxford Dictionary

  32. Society is involved Water supply to domestic users…

  33. Huge investments are involved 1023 crores in case of Tiruppur

  34. Technological challenges Can government agencies master all the technological advances?

  35. Sticky Contracts We cannot just move away from the present contract and find a new partner

  36. Contracts are incomplete on such long projects What do you do when contract does not say anything about a situation?

  37. Ultimate responsibility with the government and the public agency

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