Delhi International Airport

Ltd.

Submitted By:
Debasis Senapati
Madhura Modi
Hilak Patel
Priya Agarwal
Pulokesh Ghosh
 Project Transaction Risk Social Economic Details of
Introduction PPP Financials Conclusion
Overview Document Management Impact Impact Financing

INTRODUCTION
 Project Transaction Risk Social Economic Details of
Introduction PPP Financials Conclusion
Overview Document Management Impact Impact Financing

PUBLIC PRIVATE PARTNERSHIP IN INDIA

India has had 881 PPP projects worth more than INR5.4 trillion in awarded/underway status (i.e., in operational, construction
or in stages where at least construction/implementation is imminent) as per data available till August 2012.
• Roads dominate the PPP scenario in India, accounting for 52 of all PPP projects.
• There is a need for mainstream PPPs in several areas, such as power transmission and distribution, water supply and sewerage,
and railways. These are sectors where there are significant resource shortfalls, and a need for efficient delivery of services.
• There is also a need to focus on social sectors, especially health and education, which currently accounts for only 3.7 of PPP
projects in India.
 Project Transaction Risk Social Economic Details of
Introduction PPP Financials Conclusion
Overview Document Management Impact Impact Financing

PUBLIC PRIVATE PARTNERSHIP IN INDIA

The Draft Public Procurement Bill (2011)
The Draft Public Procurement Bill 2011 is also expected to impact the regulatory landscape of PPPs by introducing
competitive dialogue and negotiations in government contracts. The Bill provides a framework for procurement of
goods and services through PPPs.

Prominent features of the bill for P P P

• A grievance resolution mechanism for private bidder facing issues related to procurement
• Audit of the concessionaire’s books of accounts by the Comptroller and Auditor General of India, upon the
request of the procuring entity

Regulatory initiatives
• The GoI has a progressive financial support system for PPP projects. Some of the key initiatives include
India Infrastructure Project Development Fund (IIPDF), Viability Gap Funding (VGF), resources for annuities/
National P P P policy (2011) and Draft P P P Rules (2012) availability-based payments, long-tenor lending, re-financing facility, infrastructure debt funds, etc. The GoI
In the light of growing PPP trends and policy/institutional intervention, the GoI had felt the need to have a broad will provide legislative and policy support to develop equity, debt, hybrid structures and appropriate credit
policy framework in place. The Ministry of Finance drafted a National PPP policy for soliciting suggestions in 2011. enhancement structures.
Subsequently, it came out with a comprehensive set of draft PPP rules in 2012. The draft policy proposes to focus
• The GoI is expected to undertake capacity building interventions to develop organizational and individual
on assisting Central and State Government agencies and private investors by: capacities for the purpose of identification, procurement and managing of PPPs.
• Undertaking PPP projects through streamlined processes and principles • The PPP Cell in the Department of Economic Affairs will have professionals who provide technical support to the
• Ensuring the adoption of value-for-money approach through optimization of risk-return allocation in project ministries and other authorities developing PPPs.
structuring Financial initiatives
• Attaining adequate public oversight and monitoring of PPP projects • Bank loans to earning-based PPP infrastructure projects under concession agreements are to be treated as
• Developing governance structures to facilitate competitiveness, fairness and transparency secured advances. This is expected to boost infrastructure financing, particularly for BOT roads projects and
power sector projects. 3
Prominent features of the policy
• ECB norms have been relaxed to help infrastructure companies raise more funds from overseas markets 4
• The GoI plans to formalize PPPs as preferred implementation models. It has laid down strong procedures to
procure a PPP project. In order to instill transparency in the PPP process, it will publish separate mandatory • Infrastructure companies are allowed to raise bridge finance from overseas market under the automatic
disclosures and fair practices, set up a dedicated dispute resolution mechanism, develop new market-based route. Earlier, the companies were required to seek permission from the RBI in order to raise bridge finance.
products (e.g., pre-bid rating) and explore possibilities of setting up a web-based PPP market place.
• ECB limit has been increased for NBFC-IFCs (non-banking finance companies classified as infrastructure
• The PPP process should comprise four phases: finance companies) under the automatic route from 5 0 to 7 5 of their owned funds, and hedging
requirement for currency risk has been reduced from 1 0 0 of their exposure to 7 5 .
 Project Transaction Risk Social Economic Details of
Introduction PPP Financials Conclusion
Overview Document Management Impact Impact Financing

PUBLIC PRIVATE PARTNERSHIP IN INDIA

Challenges of PPP in India
Project development activities are not given adequate importance by
concessioning authorities in India. Risk allocation among the sponsoring agency
and the developer is not appropriate, which makes it difficult to attract
Project structuring
developers for bidding. The absence of adequate project development leads to
reduced interest by the private sector, mispricing and, many a times, delays at
the time of execution.

The PPP program in India lacks a comprehensive database of the projects/

studies to be awarded under PPP. An online database, comprising all the project
Lack of information
documents, including feasibility reports, concession agreements, and status of
The government has envisaged a total private investment of various clearances and land acquisitions will be helpful to all bidders.
approximately INR6.5 trillion during 2012–2017 in these four sectors.
Land acquisition is a major roadblock in development of infrastructure projects
under PPP. There is generally a considerable difference between the registered
• Private sector investment in roads to increase by 3.3 times in value offered and the actual market value, which results in disputes and
Land acquisition
the Twelfth FYP litigation. Amendments to the Land Acquisition and Rehabilitation &
• Private sector investment in railways to increase by nearly 11 Resettlement Bill (LARR) are under discussion to ease the process of land
acquisition and reduce the number of litigations.
times in Twelfth FYP
• The Planning Commission estimates the cargo traffic to reach Several highways and ports projects have been delayed in recent years due to lack
Environmental of environmental and forest clearances. Delays in conducting environment
1.8 billion ton by 2019 — an increase of almost 50% during the clearances appraisal meetings and in constituting State-level Expert Appraisal Committees
Twelfth FYP (SEACs) slows down the project approval process.
• In the Twelfth FYP, the Planning Commission has projected an
investment of INR877 billion for the airports, which is The private sector depends on commercial banks and equity markets to raise
financing for PPP projects. With commercial banks reaching sectoral exposure
• approximately 142% more than what was projected in the limits, and large Indian infrastructure companies being highly leveraged, funding
Financing constraints
Eleventh FYP the PPP projects is becoming difficult. Equity markets are also not favorable for
financing projects because of uncertainties in the global economy and due to long
regulatory requirements that limit exit options.
 Project Transaction Risk Social Economic Details of
Introduction PPP Financials Conclusion
Overview Document Management Impact Impact Financing

PUBLIC PRIVATE PARTNERSHIP IN INDIA

Key upcoming PPP projects
• Hyderabad Metro Rail Project: The project is under construction on PPP mode (DBFOT), with a total cost of INR164.8
billion. It is the single-largest private investment in a PPP project in Railways with a viability gap funding of INR14.6 billion
• Dedicated freight corridors project: DFCCIL awarded the contract worth INR33 billion for a 343-km section of the eastern
corridor to a JV of Tata Projects Limited and Spain-based Aldesa
• Seven greenfield airports in Andhra Pradesh: New airports will be developed through the PPP mode and will entail a private
investment in the range of INR10 billion–INR20 billion each. The Government will also offer concessions, including land, water,
power and approach roads
• Six greenfield airports in Maharashtra: The Government plans to build one international airport at Ckan (INR71 billion) and five
domestic airports at Solapur (INR3.1 billion), Amravati (INR2.8 billion), Shirdi (INR2.6 billion) and Jalagaon (INR2.6 billion) on
PPP basis
• International airport in Uttar Pradesh: The Government of Uttar Pradesh plans to develop an international
airport at Kushinagar worth INR3.5 billion through DBFOT
• International airport in Mopa, Goa: The Government of Goa plans to develop its airport with an investment of INR30 billion
over the next four years on PPP basis
• Greenfield international airport at Navi Mumbai: The new airport is being built through PPP and the cost of the
project is estimated to be between INR32 billion and INR40 billion
 Project Transaction Risk Social Economic Details of
Introduction PPP Financials Conclusion
Overview Document Management Impact Impact Financing

PPP IN DIAL – TRANSACTION DOCUMENTS

 Project Transaction Risk Social Economic Details of
Introduction PPP Financials Conclusion
Overview Document Management Impact Impact Financing

PPP IN DIAL – TRANSACTION DOCUMENTS

OMDA
 On 4 April 2006, in the capacity of the state promoter, AAI signed an Operation Management Development Agreement (OMDA) with DIAL.
 The AAI handed over IGI airport, Delhi to DIAL on 3 May 2006 on ‘as is where is' basis and granted DIAL the exclusive right to undertake functions of operations, maintenance,
development, design, construction, modernization, finance and management of the Airport
 In case a second airport was to be considered within a 150 km radius of the airports given to the JVC; by following a competitive bidding process, the JVC could also participate if it
wished to exercise its Right of First Refusal (RoFR).
 The JVC was required to charge for aeronautical services at rates as specified by the GoI for the first three years and thereafter determined by AERA/GoI as the case may be under the
SSA. Non-aeronautical services would be provided at rates fixed by the JVC in a competitive manner

State Support Agreement

 On 26 April 2006, State Support Agreement was signed between The President of India (on behalf of The Government of India) and Delhi International Airport Private Limited.
 The JVC (DIAL) undertook that in order to expedite the grant of Clearances, it will, in a diligent and timely manner, (i) prepare and file applications, which are in full compliance with the
Applicable Law, with the concerned authorities; (ii) follow-up the aforesaid applications with the concerned authorities; and (iii) respond in a timely manner to all requests for further
information and clarifications.
 GOI shall, throughout the Term, provide, or cause to be provided, at the Airport the Reserved Activities (other than air traffic control and air navigation services) (hereinafter referred to
as the “GOI Services”).

Airport Operator Agreement

 An agreement was signed on 1 May 2006 between DIAL and Fraport AG Frankfurt Services Worldwide to provide airport services.
 The agreement contractually sets out the role, responsibilities, accountabilities and financial arrangements between the AO and DIAL.
 Project Transaction Risk Social Economic Details of
Introduction PPP Financials Conclusion
Overview Document Management Impact Impact Financing

PPP IN DIAL – TRANSACTION DOCUMENTS

Shareholders Agreement
 On 4 April 2006, Shareholders Agreement was signed between:
 Airports Authority of India
 Delhi International Airport Pvt. Ltd.
 GMR Infrastructure Ltd.
 GMR Energy Ltd.
 GVL Investments Pvt. Ltd
 Fraport AG Frankfurt Airport Services Worldwide
 Malaysia Airports (Mauritius) Private Limited
 India Development Fund
 The agreement specifies the shareholding of each equity partner, their rights and obligations in the Joint Venture. The agreement also specifies the composition of Management Board
and its functions

Lease Deed Agreement

 Lease Deed Agreement was signed on 25 April 2006 between the Airport Authority of India and DIAL to provide support services to the project
 The Lease Agreement leased out the Demised Premises to the DIAL and granted the rights, privileges and benefits of the property throughout the term of 30 years and is extendable for
another 30 years in case DIAL renews the contract in accordance with the terms specified in OMDA
 In consideration for the lease, Delhi International Airport limited is liable to pay the lease rent of Rs. 100/year to the Airport Authority of India at the beginning of the financial year