DEVELOPMENT & MANAGEMENT OF INDUSTRIAL AREAS IN DELHI UNDER PUBLIC PRIVATE PARTNERSHIP MODEL

DEPARTMENT OF INDUSTRIES G o v e r n m e n t o f N a t i o n a l C a p i t a l T e r r i t o r y o f D e l h i DEVELOPMENT & MANAGEMENT OF INDUSTRIAL AREAS IN DELHI UNDER PUBLIC PRIVATE PARTNERSHIP MODEL FEBRUARY, 2010

PRESENTATION STRUCTURE Background Project Contours Implementation Models - Options

BACKGROUND • Dept of Industries (DoI), GNCTD & DSIIDC are the key agencies for development of Industrial Infrastructure • Delhi has 29 Industrial estates maintained by DoI / DSIIDC / MCD / other agencies • Given the ageing and usage of infrastructure facilities in these industrial estates, need for infra up-gradation and its maintenance • 4 Estates have been selected as Pilot Projects – Okhla, Patparganj, Bawana & Narela • Objective • Up-gradation / augmentation, managing, operating and maintaining of infrastructure facilities in an integrated manner • Efficient and Sustainable Operation & Maintenance of Infrastructure Facilities • Ensuring high level of performance standards • DoI has appointed Project Advisors (IDFC) who have completed feasibility study - projects structured as PPP projects

LOCATION OF INDUSTRIAL ESTATES NARELA INDUSTRIAL AREA • Narela and Bawana are similar developments • Recent Industrial Estates- Narela (1980) & Bawana (2000) - North West of Delhi • Manufacturing Industries • Managed by DSIIDC BAWANA INDUSTRIAL AREA PATPARGANJ INDUSTRIAL AREA • Okhla and Patparganj are similar developments • Older Industrial Estates- Okhla (1958) & Patparganj (2000) - South East of Delhi • Limited manufacturing and services (BPOs, IT etc) • Managed by DSIIDC OKHLA INDUSTRIAL AREA

Industrial Area INDUSTRIAL ESTATE – PROJECT COMPONENTS Infrastructure It refers to the infrastructure component of the estate such as Roads, drainage, water supply, waste water, solid waste, parking, horticulture Facilities It refers to the real estate component that can be commercially exploited, and can be used to cross subsidize the expenditure on infrastructure Provided in subsequent slides are the details of each component for Industrial estate

PRESENTATION STRUCTURE Background Project Contours - Narela Implementation Models - Options

NARELA INDUSTRIAL AREA – Status • Road • Total Length: 27488 mts; Area: 4.76 Lacs sqmt • All internal roads to be constructed – Bituminous using existing sub-grade • Sewage / Effluent Collection & Treatment • Total Length of conveyance system: 27488 mts • CETP: 22.50 MLD (Operational) • Street Lighting • Total Street Lighting poles: 916 • Combination of 150 W, 250 W, 400 W • Storm Water Drainage • Total Length of drainage network: 55000 mts • Mix of brick masonry & RCC drains • Parking • No developed parking lots • Available Plots: • Car – 55 lots, Area – 21968 Sqmt, 1080 ECS • Truck – 4 lots, Area – 17860 Sqmt, 300 Bays • Water Supply • System Designed for 11 MLD • Length of Distribution network: 32030 mts • Available total storage capacity: 3.82 ML • Source – 12 nos. tube wells • Horticulture • Large Parks: 9 Nos. (31.00 Acres) • Small Parks: 9 Nos. (6.20 Acres) • Green Belt: 25.00 Acres • Municipal Solid Waste • Total municipal waste generated / day: 20 MT

NARELA INDUSTRIAL AREA – Project Scope (1/2)

NARELA INDUSTRIAL AREA – Project Scope (2/2)

OPTIONS TO DEVELOP THE INDUSTRIAL ESTATE Government may look at 3 options to develop the industrial estates Develop through DSIIDC Develop as a JV with the private player (30 Years) Develop under a Concession Framework (30 Years) • DSIIDC will develop, operate and maintain the estate – as it has been doing traditionally • Only infrastructure would be developed ( ~Rs.139 crores) and not facilities (cost over Rs.300 crores) • Full cost of service to be recovered through industry - no possibility for cross-subsidization through revenues earned from ‘real estate’ • DSIIDC will involve the private sector for project development – Private sector brings in majority of the capital to develop the infrastructure and facilities. • Revenues from facilities to cross subsidize service to industry. • Since project is prime responsibility of DSIIDC, government participates in the form of JV – leverages private capital (74%) and efficiencies - yet maintains ‘control’ over operations • DSIIDC will involve the private sector for project development – Private sector brings in 100% capital to develop the infrastructure and facilities. • Revenues from facilities to cross subsidize service to industry. • DSIIDC grants concession to private partner – leverages private capital and efficiencies – concession governs performance PPP Options These options have been evaluated in the subsequent slides

OPTION 1: DEVELOP THROUGH DSIIDC • DSIIDC will develop estate on its own – as it has been doing traditionally • No cross-subsidization from facilities – because Government will require ~Rs.300 Crore of additional cash infusion over next 2-3 years, infrastructure will require Rs.100 Crore of cash infusion over next 2 years • Less efficiency – There is a ‘maintenance charge’ proposed to be levied from 3rd year onwards. Government’s collection efficiency would be far less then the private player, leading to more payouts from the Industry or higher ‘revenue deficit’ by DSIIDC • Precedence – DSIIDC has been developing and maintaining the estates so far; however, the sustained augmentation and maintenance of estates cannot be consistently ensured. • Provided below are financials of the project • For 12% IRR, provided below is the required maintenance charges for ‘similar’ service by DSIIDC • Total Cost of Infra – Rs. 139 Crores • Industry will not pay heavy maintenance charges, which will be essential to make the project viable if the Government opts for developing estates through DSIIDC. • e.g. in Okhla the plot sizes vary from 200 sq. mt. to 4000 sq. mt. and the Maintenance charges may vary from Rs.3000 p.m. to Rs.96000 p.m.

OPTION 2 & 3: PPP OPTIONS • OPTION 2 • BOT with 30 years concession period (for Infrastructure and Facilities) to an SPV of DSIIDC (26% equity) and Private Party • OPTION 3 • BOT with 30 years concession period (for Infrastructure and Facilities) to eligible entity – no shareholding by DSIIDC • There are 2 PPP options and can be evaluated on the following parameters • Returns for Government • Risk for Government • Bankability and Financial Viability • NO TRANSFER OF ASSETS FROM DSIIDC IN BOTH OPTIONS.

PROJECT INVESTMENTS FOR OPTION 2 & 3 • Concession Period • 30 years • Charges • User charges are levied for water (as per DJB charges), waste water and solid waste management • A maintenance charge of Rs. 10/sq m with a cap of Rs. 10,000 is levied on the industry owners. • Key Financial Parameters • Pre-Tax Project IRR of 21% by private sector • Benefit for DSIIDC/GNCTD as given below TOTAL CAPEX – Rs. 441 Crores TOTAL ANNUAL RECEIPTS – Rs 4 Crores

ALTERNATE PROJECT INVESTMENTS FOR OPTION 2 & 3 • Concession Period • 30 years • Charges • User charges are levied for water (as per DJB charges), waste water and solid waste management • A maintenance charge of Rs. 10/sq m with a cap of Rs. 10,000 is levied on the industry owners. • Key Financial Parameters • Pre-Tax Project IRR of 21% by private sector • Benefit for DSIIDC/GNCTD as given below TOTAL CAPEX – Rs. 514 Crores TOTAL ANNUAL RECEIPTS – Rs 4 Crores

IMPLEMENTATION MODEL : Option - 2 SPV with 26% shareholding by DSIIDC - gets 30 year concession Maintenance Board with members from DI / DSIIDC / Ind Assoc. / DPCC & SPV - Reviews Compliance of Agreement with the IC Dept of Industries / DSIIDC (Concessioning Authority) Empowerment of SPV to levy charges by way of Notification Appoints Concessionaire • Roles & Obligations of SPV Arrangement of Finance • Preparation of DPR for project implementation • Develops / upgrades / augments Infra as per DPR • O&M of Infra services as per performance standards defined in Con Agreement • Develops facilities in compliance to statute/CA • Payments and Compliance of all terms of CA & other Authorities / agencies • Payment of Ground Rent for facility plots (as appl.) • Rights of SPV • Collection of tariff for Water, Waste Water & MSWM • Collection of Maintenance Charges for roads, drainage, street lighting, horticulture etc • Income from leasing of facilities area • Advertisement Rights (as per MCD Policy) • Collection of Parking Fees Concessionaire forms SPV, DSIIDC holds 26% Equity DSIIDC will provide cash equity as per financial closure – thereafter maintain 26% in consideration of land / concession BID VARIABLE Net (+ or -) Financial Consideration Amount to or from Concessioning Authority (CA) as Concession fee / Annuities

IMPLEMENTATION MODEL : Option - 3 30 years concession granted to private party Maintenance Board with members from DoI / DSIIDC / Ind Assoc. / DPCC & SPV - Reviews Compliance of Agreement with the IC Dept of Industries / DSIIDC Concessioning Authority Empowerment of SPV to levy charges by way of Notification Appoints Concessionaire • Roles & Obligations of SPV • Arrangement of Finance • Preparation of DPR for project implementation • Develops / upgrades / augments Infra as per DPR • O&M of Infra services as per performance standards defined in Con Agreement • Develops facilities in compliance to statute/CA • Payments and Compliance of all terms of CA & other Authorities / agencies • Payment of Ground Rent for facility plots (as appl.) • Rights of SPV • Collection of tariff for Water, Waste Water & MSWM • Collection of Maintenance Charges for roads, drainage, street lighting, horticulture etc • Income from leasing of facilities area • Advertisement Rights (as per MCD Policy) • Collection of Parking Fees Concessionaire (can induct other partners) SPV could have PE / FDI possible BID VARIABLE Net (+ or -) Financial Consideration Amount to or from Concessioning Authority (CA) as Concession fee / Annuities

PPP OPTIONS COMPARISION • Option 2: JV • 30 year • Better control over land / operations by Govt. • Bankable project - Assured cash infusion (at-least 26%) for private party & Cheaper/easier debt, due to Govt. presence • Reward shared through dividend income • Easier to deal with industry / recovery etc. • Conflict of interest (as per MoF Guidelines dated 21st July 2009 – No.24(24)/PF-II/2009) • Multicipility of agreements and obligations • MoF guidelines - Govt. officials not to become chairpersons of the Board, unless Govt. holds 50% or more equity • Govt. provides equity plus land – shares business risk Options • Govt. does not take business risk (real estate) • There is no conflict of interest • Comparatively easier to terminate • Private players are facing liquidity crunch - may have difficulty obtaining financial closure • Option 3: • Concession • 30 year Pros Cons Analysis

OTHER KEY VARIABLES • Revenue Streams from Infrastructure and facilities: • Water Charges (Volumetric, similar to DJB tariff structure) • Sewerage Charges (Volumetric, benchmark with tariff structure of model IA) • Municipal Solid Waste Management (Flat Rate and as per plot size & usage) • Maintenance Charges (Rs 10 / sqmt / month on plot size with maximum charge rate of Rs 10,000 p.m.) • Parking Charges (similar to MCD rates) • Advertisement Revenue, as per market rate • Revenue from leasing of facilities • Revenue from developed kiosks in green / open areas) • Revenue from developed nurseries in green belts, public toilets etc. • In Case of SPV with DSIIDC, shareholder Agreement to set out terms relating to end of term ex. winding up , buyout at nominal value etc. • CA to define scope of work, performance standards for O&M of infra assets • All facilities will be leased by IDO on sub-lease format, no sale will be allowed

INVESTOR’S FEEDBACK • Lot of interest was shown in the project by the market, with a many potential investors attending the pre-bid and expressing their willingness to participate in the project • 14 Players attended the pre-bid meet • Key concerns of the investors • Mechanism of empowering the SPV to collect the charges. Developer should be given such authority, in the case of default by the industries, to recover the amounts. DSIIDC on its part, as a partner in JVC, should invoke revenue recovery act and support in recoveries in such cases • Key suggestions from the investors • SPV model shall be useful for faster implementation and better coordination of the project instead of pure BOT model • Concession period should be perpetual for 95 years or initially for 30 years and extendable up to 90 years keeping the terms & conditions unaltered • There should be a provision of review of serve fees after certain period say every 8-10 years • Providing Infrastructure status to the project for Income Tax purposes (for that the SPV will have to approach Central Board of Direct Taxes) • State support incentives to the Developer such as sales tax exemption on all inputs, exemption of stamp duty and registration fees on transfer of land and on project agreements registered in the state, waiver of land conversion charges and building plan approval fees etc

INVESTOR’S FEEDBACK • Potential investors who attended meet: • Shapoorji Pallonji & Co Ltd • Jamshedpur Utilities and Services Company Limited (JUSCO) • IVRCL Infrastructure & Projects Ltd. • Soma Enterprise Ltd • IRCON • DS Construction • Ahluwalia Contracts (I) Ltd • C& C Construction Ltd • Ramky Infrastructure Limited • Jindal Water Infrastructure Ltd. • Subhash Projects and Marketing Limited (SPML) • UEM India Limited • Omaxe • Dura-Line India Pvt Ltd

WAY FORWARD • DSIIDC to be assigned rights by MCD to further assign to the Concessionaire in Okhla and Patparganj for road side parking, advertising rights and establishment of kiosks in open areas and to maintain street lighting. • In Patparganj, the bulk charge rate of water will have to be decided between DSIIDC and DJB. • Notification of user charges by GNCTD including maintenance charges being levied. The maintenance charge is a reasonable levy to recover cost of services and is a subsidized amount. For freehold cases, levy can be done if a policy notification by GNCTD backs executive action by DSIIDC to permit such a levy. • Preparation of bid documents and conducting a transparent and competitive selection of bidder. • Approvals from the cabinet sought with regard to permitting DSIIDC to develop and operate the project under a BOT Concession with a private partner for 30 years and take a 26% shareholding in the Special Purpose Vehicle (SPV)

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PRESENTATION STRUCTURE Background Project Contours - Bawana Implementation Models - Options

BAWANA INDUSTRIAL AREA – Status • Road • Total Length: 34560 mts; Area: 5 Lacs sqmt • CC Roads are being constructed currently; contract inclusive of 5 years maintenance • Sewage / Effluent Collection & Treatment • Total Length of conveyance system: 140563 mts • 3 nos. intermediate Sewage Pumping stations • CETP: 35 MLD (Non – Operational) • Storm Water Drainage • Total Length of drainage network: 1,40,563 mts • Mix of brick masonry & RCC drains • Municipal Solid Waste • Total municipal waste generated / day: 73 MT • Parking • No developed parking lots • Available Plots: • Car – 4 lots, Area – 33600 Sqmt, 1460 ECS • Truck – 4 lots, Area – 47000 Sqmt, 1175 Bays • Water Supply • System Designed for 28 MLD • Length of Distribution network: 1,25,000 mts • Available total storage capacity: 11.35 ML • Source – 12 nos. tube wells • Horticulture • Large Parks: 24 Nos. (47.18 Acres) • Small Parks: 101 Nos. (30.14 Acres) • Green Belt: 185.39 Acres • Street Lighting • Total Street Lighting poles: 8414 • Combination of 150 W, 250 W, 400 W

BAWANA INDUSTRIAL AREA – Project Scope (1/2)

BAWANA INDUSTRIAL AREA – Project Scope (2/2)

PRESENTATION STRUCTURE Background Project Contours - Patparganj Implementation Models - Options

PATPARGANJ INDUSTRIAL ESTATE – Status • Road • Total Length: 8678 mts; Area: 0.76 Lacs sqmt • All internal roads are Bituminous; needs rehabilitation / repair • Sewage / Effluent Collection & Treatment • Total Length of conveyance system: 10000 mts • No CETP / STP, outfall in nearby drain • 2 nos. Intermediate sewage pumping stations • Storm Water Drainage • Total Length of drainage network: 19042 mts • Mix of brick masonry & RCC drains • Municipal Solid Waste • Total municipal waste generated / day: 8 MT • Parking • No developed parking lots • Available Plots: • Car – 7 lots, Area – 10264 Sqmt, 640 ECS • Truck – 1 lot, Area – 4055 Sqmt, 100 Bays • Water Supply • Current Demand: 5.45 MLD • Length of Distribution network: 10000 mts • Available total storage capacity: 2.25 ML • Source – DJB Supply (erratic) • Horticulture • Small Parks: 3 Nos. (2.73 Acres) • Green Belt: 4.84 Acres • Street Lighting • Total Street Lighting poles: 364 • Combination of 150 W, 250 W, 400 W

PATPARGANJ INDUSTRIAL ESTATE – Project Scope (1/2)

PATPARGANJ INDUSTRIAL ESTATE – Project Scope (2/2)

PRESENTATION STRUCTURE Background Project Contours - Okhla Implementation Models - Options

OKHLA INDUSTRIAL ESTATE – Status • Road • Total Length: 9200 mts; Area: 0. 61 Lacs sqmt • All internal roads are Bituminous; needs rehabilitation / repair • Sewage / Effluent Collection & Treatment • Total Length of conveyance system: 4384 mts • Connected to Okhla STP • 2 nos. Intermediate sewage pumping stations • Storm Water Drainage • Total Length of drainage network: 19000 mts • Mix of brick masonry & RCC drains • Municipal Solid Waste • Total municipal waste generated / day: 8 MT • Water Supply • Current Demand: 2.84 MLD • Length of Distribution network: 6148 mts • Source – DJB Supply • Parking • No developed parking lots • Available Plots: • Car – 8 lots, Area – 19320 Sqmt, 1080 ECS • Street Lighting • Total Street Lighting poles: 427 • Combination of 150 W, 250 W • Horticulture • Large Parks: 2 Nos. (3.35 Acres) • Small Parks: 3 Nos. (0.33 Acres) • Green Belt: 2.98 Acres

OKHLA INDUSTRIAL ESTATE – Project Scope (1/2)

OKHLA INDUSTRIAL ESTATE – Project Scope (2/2)

Government’s Contribution as Equity

Quantum of User Fee Payable

DEVELOPMENT & MANAGEMENT OF INDUSTRIAL AREAS IN DELHI UNDER PUBLIC PRIVATE PARTNERSHIP MODEL