India to raise $1.9 bn debt for building highways

November 28, 2011

India will soon raise Rs.10,000 crore ($1.9 billion) through a public debt issue for funding its ambitious national highways project, union Road Transport and Highways Minister C.P. Joshi said Wednesday.

“The finance ministry has allowed us to raise Rs.10,000 crore through debt bonds for funding construction of highways across the country,” Joshi told reporters on the margins of a trade event.

The state-run National Highway Authority of India (NHAI) will raise the fund through tax-free infrastructure bonds within a month. “The proposed fund-rising will be sufficient for the highway projects under execution. We will raise more funds as we go for more such projects,” Joshi said after unveiling the sixth international construction equipment industry trade fair Excon 2011 on the outskirts of this tech hub.

In the budget for this fiscal (2011-12), Finance Minister Pranab Mukherjee made a provision for the first time to allow NHAI to raise funds as government’s share of financing the roads sector.

Though the highway authority planned to raise the amount through private placement earlier, rising interest rates had forced it to opt for the public issue.

The proposed fund will be used to partly finance highway projects to be executed on build, operate and transfer (BOT) basis and for viability gap funding through which the government pays to make the projects viable financially.

Under the BOT model, the winning bidder will build the highways and the government will pay in installments.

The authority has awarded till date 59 projects covering a distance of 7,994 km that is estimated to cost a whopping Rs.60,000 crore (Rs.600 billion).

“To achieve the target of building 20 km of road a day set by the prime minister (Manmohan Singh), the highway authority has to award 7,300 km for every three years consecutively,” Joshi pointed out.

Admitting that only 4,600 km was awarded during this fiscal, Joshi said the target of 20 km per day would be met by 2014.

“We have not been able to achieve 20 km per day but we are confident of doing it before the next general elections,” Joshi added.

Written by ITW Editor · Filed Under Highway, Transport

Experts push PPP to fund GCC transport solutions

October 24, 2011

CPCS vice president Sean McDonnell speaks on ‘Investment opportunities and PPP in the transport and railway sectors’ as Yusuf Saeed, Anil Bhandari, Khalid al-Ghalib and Moazzam Mekkan look on. PICTURE: Jayan Orma

By Ramesh Mathew/Staff Reporter

GCC states have been urged to avail of an array of options to finance their massive rail, port and road infrastructure projects.
At a session on ‘Investment opportunities and private-public-partnership (PPP) in the transport and railway sectors’, experts asked government planners and decision makers to identify potential investment opportunities for the private sector.
The speakers also deliberated on the roles to be played by financial institutions and multilateral development institutions, which they said could co-ordinate various segments involved in developing major projects.
Speaking on the modes for financing projects, some of the speakers also made presentations on the successful PPP projects, implemented in different countries.
Initiating the discussions, International Financial Corporation (Dubai) Infrastructure Advisory Services manager Moazzam Mekan said there is a great level of misunderstanding among governments and people on the issue of private participation in the execution of mega projects.
The senior infrastructure policy professional said private participation in projects simply means transferring risk element in a major ‘build operate and transfer’ (BOT) project by government to private entrepreneurs.
“No private investor willingly bears the risk to get involved in the development of a public utility unless he is convinced of reasonably good returns on its completion,” said Mekan. This could perhaps be one of the main reasons why PPP projects are still in the infancy even today in most GCC states, he said.
For successful implementation of PPP projects, the speaker argued for the participation of different players at different levels of building and operating.
The GCC states has at hand rail, port and other transport infrastructure projects worth $142bn to be executed over the next decade, said Qatar National Bank senior manager (syndications) Yusuf Saeed.
Of these, the GCC railway network alone would cost approximately $25bn and the first phase of Qatar’s Metro and GCC line network would cost approximately $35bn.
Financing options that Saeed mooted included deficit financing, direct borrowing, GCC syndicated lending, GCC bonds, equity reserves, project specific borrowing, government grants, joint ventures, and private participation.
The QNB official said along with the international banks, inquiries could also be entertained from the regional banks and local banks as well depending on the size of the projects. The speaker also felt that infrastructure funds have a major role to play in coming years.
National Commercial Bank of Saudi Arabia senior executive vice president (Corporate Banking) Alsharif Khalid al-Ghalib shared the concerns of Mekan on the issue of PPP as a mode of financing the key projects.
Insisting that the entire GCC is fast emerging as the global transport hub with a series of economic activities, the speaker said the six GCC states together have close to 30mn vehicles on their roads.
Highlighting the necessity of strengthening the public transport network through the GCC rail and building of major highways, al-Ghalib said PPP is still to make any headway in the region.
He cited the formation of government-backed financial bodies on the lines of the KSA’s Public Investment Fund (PIF) to finance major transport projects.
The official said there is so much for the GCC to learn from the successful PPP experiences in Europe in recent years, especially in the transport sector. Out of the over 30bn PPP investments made by the European companies in 2008, more than 20% were to strengthen the transportation networks elsewhere, he said.
Canada Pacific Consulting Services vice president Sean McDonnel and Dubai-based Ab International CEO Anil Bhandari made presentations on the PPP projects in railway in Canada, Hong Kong and Nigeria.
The success of the railway projects in Nigeria including the three-lane mass transit metro in Abuja showed how the best could be derived from the available choices and resources, said Bhandari.
The $3.3bn 1315 Lagos-Kano line is one of such successful examples of the private participation that GCC states could try to emulate, said Bhandari.
McDonnel said the Canada Pacific Railway Company is carrying approximately 1.6bn passengers a year in their Hong Kong Metro project and the stakeholders are getting sufficient returns on their investments, said McDonnel.

Source: www.gulf-times.com

Written by ITW Editor · Filed Under Road, Transport

Multiple financing for Mumbai infra projects

September 12, 2011

While agencies look at diverse sources to meet huge fund demand, experts say more innovation needed to attract investment

In order to improve the growing transport needs of India’s financial capital, the authorities are looking at various ways, sources and methods to fund infrastructure projects

The third phase of the Rs 47,000-crore Mumbai metro rail project is now proposed to be a fully underground stretch, from Colaba to Bandra and the airport. The cost has escalated to Rs 18,000 crore. Says Dilip Kawathkar, spokesperson of the Mumbai Metropolitan Region Development Authority (MMRDA): “Japan International Cooperation Agency is likely to provide 40 per cent of the funds.” He says the World Bank had also shown interest, though no formal proposal or presentation had been made to their officials.

The Rs 10,000-crore Mumbai Trans-Harbour Link (MTHL) project, to connect Sewri in Mumbai and Nhava Sheva in Raigad district, is likely to see some new incentives for prospective bidders. Metropolitan commissioner Rahul Asthana said MMRDA planned to compensate the build-operate-transfer (BOT) operator of the MTHL project in case the toll collection is lower than projected (in case of higher toll collection, the operator would have to share the benefit with MMRDA).

A long-tenure soft loan is proposed for the BOT operator; in addition, to encourage more bids (earlier tenders had to be called off due to lack of enough parties), it is proposed to compensate the second and third-lowest bidders for the costs they incurred in doing so.

Phase-II of the Mumbai Urban Transport Project is underway, to improve suburban railway services. This is being jointly implemented by MMRDA and Maharashtra State Road Development Corporation. The phase has 11 projects worth Rs 5,300 crore, with a World Bank loan for Rs 1,910 crore.

Says Sudip Mozumder, advisor, World Bank: “The Bank remains committed to support the (state) government’s efforts to reduce some of Mumbai’s infrastructure gaps.”

He noted that the funds required for Mumbai’s infrastructure were huge, but Bank funds are limited. “It is critical, therefore, that the Bank funds are deployed in projects that have a transformative role, and can help leverage more funds. The government of India, government of Maharashtra and the Bank are currently exploring such opportunities. Discussions are underway but no decision has been taken,” he said.

Says Arvind Mahajan of consultancy major KPMG: “The basic formula for financing complex infrastructure projects is a mix of government and private funds. Also, several projects are linked with each other. . The Navi Mumbai International Airport project, for example, is closely linked to MTHL. A public-private partnership (PPP) is the best method for funding, (so) the project should be structured in a way that the private sector can participate.”

Says consulting economist Sunil Bhandare, “Long-term financing of projects by the private sector needs a viable corporate debt market. This is not so in India and the major corporates are struggling to manage investment, battling with global uncertainty, inflation and high interest rates. This might dissuade financiers from investing further in such projects. What is needed is finality in scope, content and policy, so that the prospective investors are encouraged to fund the projects.”

Arun Mokashi, a transport specialist, says, “In transport infrastructure projects, unanimity is required among all the institutions. There are several instruments —PPP, BOT, viability gap funding, etc. What is needed is the will to harness this sort of a financial arrangement into the system for infrastructure projects.”

Source: http://www.business-standard.com

Written by ITW Editor · Filed Under Mumbai, Transport

Transport Department seeks control of CNG bus project

September 12, 2011

The Sindh Transport Department wants a say in major transport infrastructure issues of the metropolis following the disbandment of local government, according to official sources and documents obtained by The News on Wednesday. It seeks control over the CNG bus project on the pattern of other provinces while lamenting that the City District Government Karachi had never consulted it on the transport sector projects.

The Transport Department has floated a summary to the chief minister Sindh regarding the CNG buses and a host of transport sector projects. Subsequently, a high-level meeting was held at Sindh Secretariat to deliberate on these issues in detail and take decisions.

About CNG bus project, the meeting was informed that this project was taken up at a cost of Rs 5,000 million under the federal government-funded scheme for 10 mega cities including Karachi, Hyderabad and Sukkur of the Sindh province. The meeting was told that since the funds had been released for the purpose of purchasing buses, the operators of CNG buses be entertained as per the approved credit policy.

Informed sources said that the Transport Department wanted to take over the project implementation unit for launching the CNG bus scheme in true spirit and in line with the other provinces.

The meeting was informed that the Karachi Mass Transit Project was being managed by the CDGK but the Sindh Transport Department was never involved or consulted in any aspect of the project. The participants were told that since the CDGK now stands abolished, it would be advisable that this important project concerning major transport infrastructure issues of Karachi should be entrusted to the Transport Department.

Regarding the shifting of oil terminals from Shirin Jinnah Colony to Zulfikarabad on National Highway, the meeting was informed that the Sindh government had decided on June 30, 2008 to establish truck terminals at three gateways i.e. Super Highway, National Highway and RCD Highway in order to reform and promote an integrated and sustainable modernization of the trucking sector through efficient management of road freight sector. It was decided to entrust two out of three terminals to the Transport Department which was directed to make a request for the land allotment to Member (Land Utilization), Board of Revenue.

Subsequently, a committee constituted by the chief minister for resolving the transport-related problems held a meeting on July 27 and decided that in pursuance of the orders passed by the Supreme Court of Pakistan in suo moto case (No. 10-K) the oil terminal having modern facilities should be established at Zulfikarabad.

The committee also supported the proposals of the Transport Department contained in the summary that was submitted to the chief minister.

The Transport Department had proposed that in order to establish the facility for trucks, buses and tankers on 250 acres at two separate sites, it should be allowed to commence construction activity at Zulfikarabad and Hub River Road at the cost of Rs 313 million. However, the land could be insufficient for the purpose and the committee may also consider this aspect in view of the increasing number of oil tankers.

It was suggested in the summary that 200 acres land on each site may be allotted to the Transport Department along with the funds of Rs 150 million for each site for land levelling/earth filling and providing electricity, water, sewerage and roads etc. The sheds and other facilities will be arranged by the stake holders on BOT basis.

Regarding the construction of truck terminal at Hawksbay, the meeting was informed that 500 acres land was proposed in the year 2003 for the establishment of truck terminal. Although the payment challans for 150 acres land were issued, the establishment of the terminal could not materialize.

This matter was also referred to the said committee which decided that the terminals should be established on BOT basis under public/private partnership. It was also decided that such terminals should be established/administered by the Transport Department following the disbandment of the CDGK. The committee supported the allotment of land to Transport Department free of cost for the construction of the said terminals.

About the conversion of two-stroke rickshaws into four-stroke/CNG-dedicated vehicles, it was told that the Supreme Court had directed in its order of June 30, 2009 that “we would make it clear to concerned authorities that they should not adopt a procedure/measures which will render rickshaw drivers unemployed because they have to support their families”.

In compliance with the above orders, the chief secretary held a high-level meeting on October 12, 2009 wherein it was decided that in order to convert 500 two-stroke rickshaws of not beyond five years old a subsidy of Rs 30,000 would be given per rickshaw under a pilot project. The said decision of the meeting, however, could not be implemented as the schemes were held up owing to the devastating floods of last year.

The committee decided to move a summary on the subject to the chief minister for approval as well as preparing and submitting PC-I for the allocation of funds.

With regard to paying compensation for damaged/burnt vehicles, the meeting was informed that this mater has been taken up by the Home Department and it was under process with the Relief Commissioner. The transport associations had been approaching the Transport Department for the compensation of the losses that they sustained during the last one-and-a-half years.

Informed sources said that Chief Secretary Sindh Raja Muhammad Abbas had recently directed DCO Karachi Syed Muhammad Hussain to present a detailed report on these matters.

Source: http://www.thenews.com.pk

Written by ITW Editor · Filed Under Default, Transport

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