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No takers for Karnataka Roads PPP - what happened?

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Infrastructure

Newspapers had reported last week, but a public notice from KRDCL today provides the confirmation. Looks like there were no takers for GoK's ambitious state-wide road building program via PPP. Back in March, we were informed that there was "good response to this Mega PPP". Quoting Business-Standard, March 2009:

  • 30 companies ... have shown interest in the pre-bid meeting held on Saturday
  • The Karnataka highway project also has goodies ... not offered by the NHAI. “... award of land pockets to the developer to set up roadside amenities ... a source of ancillary revenue to the company,”...

The reality we learn today is that nobody may have come forward for 10K + 10K Km worth or Roads that were put up. So, what happened? Reports quoted some officials saying that market conditions are not good for infrastructure projects. Well, compared to late 2008 (when this PPP was conceived and unveiled), macroeconomic conditions seem to have only gotten better.

Goals of this Mega PPP Road building plan are good - quality connectivity throughout the state. Tier-2 cities, spreading Bangalore's prosperity around the state - all this needs good connectivity, so we should watch, track and support projects like this. I have been watching KRDCL as well as IDD (Infrastructure Development Department) websites once in a while to check after this project. No real information yet on how this will be re-tuned and relaunched.

All the roads in question are detailed in this sheet - look for 51 packages towards the end of this sheet: http://idd.kar.nic.in/Inf...

And go to KRDCL site (http://krdcl.co.in/html/T...) to find this note:

The Bids for 51 Packages notified during January 2009 for Development of State Highways & Major District Roads on Public Private Partnership are hereby Canceled.

AttachmentSize
PPP_Roads_List_Jan_09.xls125 KB

Comments

RKCHARI's picture

Every Coin has Two Sides!

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Hi Suhas,

Have you seen the tenders floated seeking PPP from International Bidders for road reconstruction? They specify "A" , "B" and "C" grade contractors as being elicible! Which self respecting foreign company would want to demean itself by registering with the authorities on those conditions?

Moreover, tenders have only been called for traditional asphalting of roads. No invitation to providers of ecologically sustainable roads using newer technologies et al!

I suggest we should seriously take up the issue of throwing open all tenders to ALL bidders irrespective of whether they have "x" turnover in the last three years or irrespective of their technology being 'different'. Only then will we get worldwide participation.

And I seriously think Government should institutionalise corruption. Why not be like Gen. Suharto in Indonesia? He openly told every foreign supplier, please include 10% as official commission for the President's family. But he ensured the suppliers of goods and services supplied and provided the very best of material. In India, since quantum demanded could be anything from 0.5% to 25% of contract value, the foreign companies are simply flumuxed and are unable to quote the correct price. Then there is this corus about foreign goods and services being too expensive!

How can honest foreign companies do business with Government departments in India? Anybody with genuine, workable idea, please let me know. I will ensure an award is given to that person in recognision of the yeomen service he has provided to all foreign companies operating in India!!!

RKC

swamy's picture

Why so much stress on "foreign"?

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Corruption gyaana and all that is ok, what is this foreign and india company item?

silkboard's picture

Some questions

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Okay, so you are leading this towards corruption talk, I thought structure of this PPP (land based) and state's reputation with PPP is where this could have gone.

But anyway. Some questions on this stat: "since quantum demanded could be anything from 0.5% to 25% of contract value"

  • Hearsay, or from experience? I have heard the 20% figure, but from 3rd parties, not from bidders directly
  • How much is this quantum abroad? I have 'heard' around 7-10%. Don't tell me its zero, just can't be, not possible

The solution will perhaps play out like this:

  • Transparency and better behavior from bidding businesses themselves. How will we all know this 20-25% numbers unless one of you speaks out and expose this? I know, its a risk - can ruin our business's government vertical, but only you can bell the cat.
  • More volume, as in more projects. If there are lot more projects happening, the percentage "cuts" will reduce. Make small money on more transactions (it will add up big) as opposed to making big money on few transactions - hope I convey the point.

Anyway.

rs's picture

Is this really surprising ?

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Given what happened to NICE - ten years and still not over - and endless litigation and fighting and corruption on all sides - why would anyone want to subject themselves to this ?

 

RKCHARI's picture

Responding to Comments on this debate

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Dear Suhas,

To answer your questions, let me clarify:

1. My comments on percentages are from hard core experienc!. You are right 20% is the norm, but these days the rate has been upped! And the range from 0.5% to 25% applies to across the board all strata of officers, politicians etc!

2. 5% to 7.5% in the US and elsewhere around 10 to 12.5%

3. How to speak up when everything is demanded and supplied in cash? No proof except for those who actually fork out the amounts. Foreign business folks are not ready to go to Lok Ayukt to "trap" the officials red handed. Too much trouble and not worth their time & effort. And of course you are right, why should businesses want to ruin their chances once and for all by going out of their way to book a piddly little Executive Engineer?

4. More volume does not necessarily come from same Department. In fact the best way to reduce the "burden of percentages being doled out" is to dole it out without demur. In fact over a period of time you are known amongst the corridors of power as a "safe" provider of butter and jam for their bread and then the rates come down as a matter of their patronage!! Unfortunately, believe it or not that is how the cookie crumbles!

Actually I had no intention of turning this into a debate on the depths of corruption, but since you asked how come there was inadequate response from foreign companies against tenders for PPP model for re-doing the roads, I had to give you the real reason. Let us now take the debate back to the PPP model concept per se.

In my solution offered for solving SW drains problem, I have offered to do it on BOOT basis in an absolutely transparent manner and with as much public participation as possible. No response till date except for a couple of meetings with senior bureaucrats who all nod approval but shove the concept out of their mind with the very next coffee and vada break!

And then there are some vocal do-gooders who claim to be "young enough to lead India" but who are lost in the semantics of their own foreign stints and the lure of power! They spoil the broth by adding their own two penny worth using more lung power and gift of their gab than talking from real knowledge and experience!!

Sorry to leave you with such depressing thoughts,

Regards,

Chari

RKC

silkboard's picture

SWD and Land based PPP

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Since you did it twice in a row - this is Pranav, not Suhas, though I will love to have some of his enthu and focus on Road design manuals!

Mr Chari - based on what I read, your depressing thoughts seem to come more from your frustrations pushing your SWD solutions. Land based Road upgrade/building PPP may not be the same. And BTW - these PPPs were not aimed at Foreign companies. Foreign companies can anyway not come and bid for these unless they have India subsidiaries with certaiinl mandated local public holdings.

While corruption is a constant everywhere, just a bit higher here, and it will not reduce unless businesses like yours start taking it up (and not wait for mere citizens or some other business to do it), I still believe that this PPP initiative failed due to structural and reputation problem.

Have you read the full documents for this KRDCL tender? I have not, don't know where they are. Possible to share how PPP aspect was described there? Land lease based - around the road? Was there any land acquisiition involved and promised by the state/KRDCL? Were all of these roads tolled?

RKCHARI's picture

Responding

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Hi Pranav,

Agree, my comments do smack of general frustration dealing with Government Departments in connection with our primary offer to attend to SWDs.

We are of course aware that only an Indian registered Company can participate in a government tender. We do have such a Company with requisite pedigree which does the implementation of our foreign Principal's solutions. In fact they collect the order and pass it on to our foreign Principals to provide solution and products - almost like sub-contracting work.

SWD's remodelling in intimately connected with ecological road building and maintenance, that is why we were interested in the first place. But when we saw the conditions of participating, we baulked and decided to give up on that score.

No I jhave personally not seen the KRDCL myself, but I believe our boys in our office had examined it and pointed out the problems in our weekly meetings. I will try and have a look myself, now that you mention it and find answers to your queries.

Regards,

Chari

RKC

ssheragu's picture

no takers for road developmnet in Karnataka

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ssheragu

as silkboard has pointed out, it is a pity that there are no takers for road development in Karnataka; may it is because of the problems associated with the NICE project 

my suggestion would be to make an RTI and get the correct picture, as to why there were no takers; subsequently, this could be used as a golden opportunity to invite foreign players from Japan, Korea and probably other developed countries to bid and participate in road development in Karnataka. they could be asked to submit bids for road development on par with roads in their own country

many thanks

Srinath Heragu

silkboard's picture

why so much stress on foreign?

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Wonder why people stress so much on 'foreign" companies. KRDCL itself has built some wonderful roads in our state. Indian builders too are doing good job at so many places. Go see some roads in Gujarat, or even AP.

The need is more for investment than technology. Right climate for investments will automatically bring in the right technology.

Anyway - back to the topic - I am guessing that reason for lack of interest would be one of these

  • Unclarity on land acquisition norms
  • Planning authority and rights on land adjoining the road
  • Too many 'un-profitable' roads in the package
  • Too many packages (over-fragmentation?)

Something is certainly amiss I bet. Apparently the project details were conceived after consulting with private parties who were likely candidates to partner for this PPP.

What went wrong? Can't just be the 'bad economic climate'.

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