Report on the Status of

Public Private Partnership (PPP) Projects in

Andhra Pradesh
July 2010

PPP Projects Status in Andhra Pradesh

In Andhra Pradesh there are around 190 PPP projects under various stages of
development, which includes initiation & bidding stage, construction stage and
operation stage. The combined estimated project cost is around Rs 71,894 crores.
Under initiation & bidding stage there are around 63 PPP projects with an estimated
project cost of Rs 37,325 crores. Under construction stage there are around 58 PPP
projects with an estimated project cost of Rs 13,391 crores. Under operation stage
there are around 69 projects with an estimated project cost of Rs 21,178 crores.

Summary of the Status of PPP Projects in Andhra Pradesh

Rs Crores
Sn Sector Initiation & Under Under Total
Bidding Construction Operation
1 Airport 1 0 1 2487 2 2478
2 Animal Husbandry 1 100 1 100
3 Education 1 25 2 143 4 901 7 1069
4 Energy & Power 1 0 3 1371 4 1371
5 Forest 0 0 6 308 1 1 7 310
6 Information Technology 2 145 2 317 4 26 8 488
7 Medical & Health 4 56 5 1051 9 1107
8 Ports 1 16000 1 15900 3 11006 5 28596
9 Roads 13 4951 16 3038 16 226 45 8214
10 Science & Technology 0 0 1 386 1 386
11 Tourism 7 192 20 763 12 168 39 1123
12 Urban Development 25 15786 10 6846 18 3477 53 26109
13 Water & Sanitation 6 0 2 464 8 464
14 Others 1 70 1 70
Grand Total 63 37325 58 13391 69 21178 190 71894
Note: 1. Data is as per AP PPP Cell website www.ppp.ap.gov.in, Data is taken as on 22.05.2010.

Road Sector dominated the PPP projects in the state in terms of number of projects
with a total of 45 PPP projects with an estimated project cost of Rs 8,214 crores.
Tourism sector comes second with a total of 39 PPP projects with an estimated project
cost of Rs 1,123 crores. In terms of value, Port sector dominates the PPP projects in
the state with an estimated project cost of Rs 28,596 crores with 5 projects under
various stages of development.

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Positive Steps taken by the State Government in Promoting PPP Projects
The State has taken several positive steps to promote PPPs in the State. The series of
positive steps have enabled the State to undertake 190 PPP projects with an estimated
investment of Rs 71,894 crores. Several private sector developers have shown much
enthusiasm in participating in the State PPP projects. Some of the important State
initiatives in mainstreaming PPPs in the State are illustrated below.
- Enactment of A P Infrastructure Development Enabling Act, 2001
AP is one of the first States to enact Andhra Pradesh Infrastructure
Development Enabling Act, 2001 (APIDE Act). This act came into effect from
August 2001. The act applies to all Infrastructure Projects implemented in the
State. The act gives guidelines for process of the selection of the developer.
Under the act Infrastructure Authority and Infrastructure Projects Fund
operates. The act also illustrates about various PPP types. The range of State
support extended to infrastructure projects is also illustrated in the act.
- Setting up of various Institutions to develop and promote Infrastructure
The State has promoted the following institutions to develop infrastructure in
the State.
• Infrastructure Corporation of Andhra Pradesh (INCAP) primary
thrust is on projects that are of critical
importance for the State’s progress; projects that drive
the transformation of the State as a preferred business
destination worldwide. The projects which are undertaken by INCAP
are Development of Krishna Godavari Gas Network, Development of
Inland Water Ways and Development of District Central Library at
Visakhapatnam.
• Andhra Pradesh Industrial Infrastructure Corporation (APIIC)
provides estates infrastructure for the development of industrial areas. It
also includes IT parks, Food processing zones and Special Economic
Zones (SEZs).
• AP Invest is a proactive nodal agency, to promote Andhra Pradesh as
the best Business State in the Country and thereby attract investments
into the State from other States and overseas.
• AP Tourism Development Corporation (APTDC) provides tourism
infrastructure in the State to attract tourist inflow both from within the
State and outside.

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 • AP Road Development Corporation (APRDC) takes up various road
projects in the State. Many of the road projects are taken up through
BOT Annuity and BOT Toll under PPP mode
• AP Urban Finance and Infrastructure Development Corporation
(APUFIDC) provides Financial Assistance by way of loans and
advances, technical or any other assistance and guidance to the Urban
Local Bodies, Municipal Corporations, and Urban Development
Authorities.

- Extension of State Support to PPP projects

The State is providing the following support for the development of
infrastructure projects in the State.
• Administrative support is extended for getting State level and Central
level clearances, undertake rehabilitation & resettlement, provide power
and water at project site, and acquire land necessary for the project.
• Asset based support is extended in providing Government owned land at
concessional lease charges, providing linkage infrastructure to projects.
• Exemption is provided in terms of sales tax, stamp duty and seigniorage
fees.
• Government provides guarantee of receivables and provides off take
guarantee. Direct financial support is also provided in the form of States
share of Viability Gap Funding (VGF) along with Government of India
(GOI) to promote the economically viable projects.

- Setting up of PPP Cell to support the State PPP Initiatives

To actively promote PPP projects in the state PPP Cell was created in Finance
Department in April 2007. The scope of work of PPP Cell is:

• Nodal agency for processing all PPP projects in the State;

• Serve as the repository of all information relating to PPPs in the State,

including best practices, guidelines, schemes, etc.,
• The relevant Departments / agencies of the State will coordinate with
the PPP Cell at all stages of project development.
• Advise the relevant Departments / agencies in project preparation, based
on the policy framework to be developed by the PPP Cell in DEA

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 • All proposals forwarded to GOI for any assistance from the TA Project
will be routed through the PPP Cell.

• The PPP Cell in the State Government will interact with PPP Cell in
DEA in identifying bankable projects.
Asian Development Bank (ADB) has provided ADB team which includes one
PPP Expert and one MIS Expert to provide advisory technical assistance under
ADB Technical Assistance Project. This arrangement is as per the
Memorandum of Understanding (MOU) signed between Department of
Economic Affairs (DEA) and the State Government.
ADB team has given technical assistance to around 47 PPP project proposals
which are referred to PPP Cell. It has interacted with several departments like
Health department, Education department, Greater Hyderabad Municipal
Corporation (GHMC), AP Urban finance and infrastructure development
corporation (APUFIDC), Hyderabad Metro Water Works Board (HMWWB) to
mainstream PPPs. It has brought to the notice of the Government, various PPP
developments taking place in other States. It has compiled PPP guidelines
manual for the usage of the departments. It has also given assistance in
conducting PPP Workshops, Seminars to upgrade the PPP skill. The assistance
of Indian School of Business (ISB), Administrative Staff College of India
(ASCI) and other institutes are taken in this regard. It has assisted in
developing PPP website (www.ppp.ap.gov.in). It’s a comprehensive website to
serve as the repository of all the information relating to PPP projects in the
State. It’s also assisting in the development of a web-enabled integrated MIS
system to facilitate proper record keeping and online monitoring of the overall
progress / status of all PPP projects in the State.
- Utilisation of Government of India (GOI) Support
Various departments of the State Government are continuously utilizing the
financial and technical support extended by the Government of India in taking
up Infrastructure projects on PPP mode. The details are given below.
Viability Gap Funding (VGF): Seven road sector projects have sought
support from VGF scheme of GOI. The total project cost of the seven
road sector projects are Rs 5,550 crores and the amount of VGF sought
is Rs 2,103 crores. The projects are under various stages of
development.
India Infrastructure Project Development Fund (IIPDF): AP Urban
Finance and Infrastructure Development Corporation (APUFIDC) has
sought support to the extent of Rs 4.00 crores under the IIPDF Scheme
from Department of Economic Affairs (DEA) for development of urban

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 infrastructure projects like Foot Over Bridges, Pay Use Toilets, Street
Lighting, Parks etc.
Pilot Project Initiative: Hyderabad Metro Water Works (HMWW)
department has sought assistance for its 24/7 water supply projects in
Hyderabad. Assistance under the scheme are jointly provided by GOI
and ADB.
Transaction Advisers empanelled by DEA: Various departments in
AP are utilizing the services of Transaction Advisors empanelled by
DEA.
The above illustrated support extended by the State Government and the Government
of India has attracted many private sector developers to partner with State
Government in developing 190 PPP projects with investible funds to the extent of Rs
71,893 crores. Going forward many more PPP projects are expected come up in the
State with huge private sector investment.

Major Important PPP Projects under implementation in the State

The following are some of the major important PPP projects under implementation in
the State.
• Hitech City: Hitech City is the first major PPP project in the State developed
by Larsen & Toubro (L&T) and APIIC in 1996. The Hitech City project
consists of Cyber Towers, Cyber Gateway, Cyber Pearl and other companies.
The project is developed in an area of 158 acres with a project cost of Rs 600
crores. The total built up area of the project is 2.8 million sft. The State is
having 11% equity in the project. The project provides state of the art facilities
with a dedicated power supply. More than 100 MNCs are operating from the
project. The project provides employment generation to more than 65,000
persons.
• Rajiv Gandhi International Airport: It is one of the major PPP projects in
the State. It is established in Hyderabad city and commenced operations from
March 2008. The total project is established in an area of 5495 acres with a
project cost of Rs 2478 crores. The project is on Build Own Operate Transfer
(BOOT) format. The concession period is 30 yrs and extendable by another 30
yrs. It shares 4% of gross revenue annually to GOI.
• Gangavaram Port: It’s the green field sea port established near
Visakhapatnam with a project cost of Rs 2000 crores on a Build Own Operate
Transfer (BOOT) format and commenced the operation from July 2009. Its
world class multipurpose port to handle ships up to 2,00,000 DWT. It’s the
deepest port in India with a depth of 21 meters. The concession period is 30
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 yrs and extendable by 20 yrs. The State Government has spent Rs 174 crores
on land, road connectivity, water supply, power supply, R&R package, Hill top
road, fish landing center, nallah diversion, etc..
• Krishnapatnam Port: The project is developed near Nellore on Built Operate
Share and Transfer basis (BOST) with a project cost of Rs 1350 crores and
commenced the operation from March 2009. The contract period is 30 yrs with
a further extension of 20 yrs. Lease rentals are 2% of the fair market value
with a yearly escalation. The concession fee is 2.6% of the Gross Income. The
State Government has spent Rs 220 crores on four lane approach road, power
supply and R&R.
• Hyderabad International Convention Center & an Integrated Township:
The project consists of an integrated township, 18-hole international golf
course, a convention centre with 6000 seating capacity and a business hotel.
The convention center and business hotel commenced operation from 2006.
The project is jointly promoted by APIIC Ltd and EMAAR Properties with
equity of 26% and 74% respectively. The Hyderabad International Convention
Centre is built on an extent of 15 acres. The Golf Course is developed on an
extent of 235 acres. The assets of Convention Center and Golf Course will
revert back to the Government after 66 years of lease without any
encumbrances. Besides equity, APIIC receives 2% and 3% respectively of
Gross Annual Revenue as lease rentals.
• Social Sector – Health and Education: In health sector, 108 Mobile
Emergency Response Service and 104 Mobile Health Service undertaken
through Operation and Management mode of PPP. In Education sector,
Industrial Training Institutes (ITI), Schools Computer Education Programme
are under operation.
• Tourism Sector: In tourism sector the important PPP projects under operation
are Food Courts, Family Entertainment Centers, Water Sports, Multiplexes,
Resorts, Ethnic Restaurants, Snow World, Beach Resorts. The projects are
undertaken by both the Tourism Department and A P Tourism Development
Corporation (APTDC).

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Upcoming Important PPP Projects in the State
The following are some of the Upcoming important PPP projects under various stages
of development in the State.
• Metro Rail Project in Hyderabad: The process of selection of bidder is just
completed. The project is awarded to M/s Larsen & Toubro Limited, vide
G.O.Ms No.340 dated 6th August 2010, who sought lowest grant of Rs 1458
crores as viability gap funding. The estimated Project Cost is Rs 12,132 crores.
• Part of the Outer Ring Road around Hyderabad City: The project is under
construction.
• Major Bridge across River Godavari at Rajahmundry: The Project is
awarded to M/s Gammon India Ltd, Mumbai. Work is under progress.
• Diagnostic Centers in four major Hospitals at Vishakapatnam, Kurnool,
Kakinada and Warangal: The process of selection of developer is just
completed. The project is awarded to M/s Wipro-GE consortium, who quoted
the lowest amount for conducting Diagnostic Studies.
• Machilipatnam Port at Machilipatnam: The project is under construction.
• Bus Rapid Transit System (BRTS) in Hyderabad and Vijayawada: The
project is under initial stage.
• Development of Greenfield airports: The airports are expected come up at
Nellore, Ongole, Tadepalligudem, Kurnool, Kothagudem, Ramagundam and
Nizamabad: The project is under initial stage.

Experience of Departments in handling PPP Projects

The departments have a varied experience in undertaking PPP projects. The
departments are handling very small PPP projects in tourism sector to very large PPP
projects in Airports, Sea Ports and Metro Rail. The departments are also handling
entire spectrum of PPP projects, starting with Operation & Management contracts to
Built Operate Own and Transfer type. Many projects are utilizing the State support in
the form of administrative support, asset based support, foregoing revenue streams,
guarantees and financial support. The departments are also utilizing the support given
by Government of India in the form of viability gap funding, project development
fund, transaction advisors and the pilot project initiative. The departments are also
utilizing the support given by the PPP Cell in the Finance Department in the form
technical inputs for the proposals, project advisory support, capacity building
programmes, etc.

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Brief details about the PPP project experience of the departments are given below.
Kakinada Deepwater Port has got additional berths through PPP. The handling
costs of the cargo has come down substantially. Gangavaram Port has set new
bench marks in discharge rates and loading rates. There is a huge savings to
the customers due to faster and mechanized handling system. Due the
Government support the land acquisition has happened faster and the project is
completed in 3 years time. Krishnapatnam port is commissioned in a record
time of 18 months. The port also set a record in handling the cargo. The
District Central Library which is being developed on PPP on Government land
at Visakhapatnam is going to give required space to the Library and additional
revenue to the Government. Greater Hyderabad Municipal Corporation is
planning to develop an Integrated Municipal Solid Waste Management Project,
first of its kind in the country by giving an integrated solution to Municipal
Solid Waste Management. The experience of Metro Rail is mixed. The
contract with the successful bidder was terminated due to non compliance of
submitting performance guarantee in due time. The bid process was again
undertaken by the department to identify a new bidder. The process of
selection of bidder has just been completed. The project is awarded to M/s
Larsen & Toubro Limited; vide G.O.Ms No.340 dated 6th August 2010, who
sought lowest grant of Rs 1458 crores as viability gap funding. The estimated
Project Cost is Rs 12,132 crores.

Issues and Challenges in Implementation of PPP projects

The following are the issues and challenges faced by the public sector and also by
both the public and private sector in implementation of the PPP projects.
- At Public Sector Level
• Capacity and Awareness in State Govt departments to handle PPP Projects
successfully.
• Failure in submission of performance guarantee by the developers after award
of the project.
• Failure in achieving financial closure by the developers.
• Lack of dissemination of information and best practices from other States for
project replicability.
• Submission of fudged audited balance sheets and incorrect documents
supporting qualifications criteria during the process of selection of the
developer.
• Name lending by some of the consortia members for meeting qualification
criteria and not for serious participation in the project.

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 • Lack of availability of experienced developers.
• Under-pricing of the bids to get the project and later requesting for change in
scope of work and seeking more concessions.
• Service expectation and delivery from private sector after awarding of the
project at times is far from satisfactory.

- At Public and Private Sector Level

• Land Acquisition, R&R issues and Project Right of Way.
• Development of bankable PPP projects acceptable to Government, bidders and
lenders.
• Lack of Model Concession Agreements (MCA) in all fields like health,
education, etc.
• Identifying of risks and sharing of risks equally between the public and private
parties.
• Lack of quality service delivery by Transaction Advisors.
• PPP is still a relatively new area. Both sponsoring as well as private
developers lack capacity and do not have competent man-power in sufficient
number.
• Need for documenting case studies, processes at all India level to facilitate
sharing of experiences.

• Requirement of proper monitoring mechanism to avoid litigations.

• Risks arising out of unexpected levels of traffic projection.
• Issue of charging lease rental whether on basic value or at market rate of
Government land.
Expected Support from Government of India
The following support is expected from Government of India by the State Government
in accelerating the pace of Infrastructure development on PPP mode.
• Capacity Building: There may be support from GOI for capacity building to
the extent of 50% of the cost of the training.
• Viability Gap Funding (VGF): The VGF contribution of GOI may be
increased to 30% from the present level of 20% in the areas of Health,
Education, Water & Sanitation and Urban Infrastructure sectors.
• India Infrastructure Project Development Fund (IIPDF): GOI may
provide grant to the States in setting up similar funds in the States.

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 • Long Term Funding: GOI may set up a separate Financial Institution for
direct lending of long term finance matching with the concession period.
• Support for conducting Investor Meets: GOI may extend financial support to
the States in conducting national and international investors meet in the State.
• Support for linkage infrastructure: GOI may extend financial support in
providing linkage infrastructure in big infrastructure projects like Airports,
Metro Rail, Sea Ports, etc.
• Insurance for Traffic Numbers: Insurance products may be developed to
guarantee minimum traffic numbers to the developers.
• Model Infrastructure Act or Model PPP Policy: This may help the States to
come out with State Specific Act or Policy on the lines of the model document.
Conclusion
Andhra Pradesh State is one of the leading states in India in developing infrastructure
projects on PPP mode. There are around 190 PPP projects with a project cost of Rs
71,894 crores under various stages of implementation. The State is one of the pioneer
in enacting AP infrastructure Development Enabling Act 2001, to implement the PPP
projects. The State has promoted various institutions to take up infrastructure
projects. The State has conducted various capacity building workshops, seminars to
upgrade the PPP skills. The State is providing administrative support, asset based
support and extending various exemptions to further the cause of fast infrastructure
development. A comprehensive website is developed to disseminate the PPP
information. The State is utilizing the support given by Department of Economic
Affairs, Government of India, in the form of Viability Gap Funding, India
Infrastructure Project Development Fund, Transaction Advisors and Pilot Project
Initiative. Going forward more infrastructure projects are expected to be undertaken
on PPP mode. More and more private sector developers are expected to invest in the
State PPP projects.
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