The Tamil Nadu Government (“TN Government”) has introduced The Tamil Nadu Infrastructure Development Act, 2012 (“the Act”) effective from June 15, 2012 to promote infrastructure projects including projects under the Public Private Partnership (“PPP”) mode. The Tamil Nadu Infrastructure Development Rules, 2012 (“Rules”) have been notified from November 7, 2012 for implementing the Act. The Act provides for State support in the form of equity, subsidies etc and levy of cess and user fees.
Objective
The objective of the Act is as follows:
·
To provide for an enabling and facilitating environment in the State for financing, design, construction, maintenance and operation of infrastructure projects also through private sector participation
· To provide for an institutional framework for identification, prioritization and implementation of infrastructure projects and connected matters
Applicability
The Act applies to infrastructure projects of a value exceeding INR 500 crores (including through private sector participation). The Act empowers the TN Government to extend the applicability of the Act to any public-private partnership (“PPP”) project of less than INR 500 crores.
By a recent notification, The TN Government has brought all PPP projects of over INR 10 crores under the ambit of the Act.
Infrastructure
Infrastructure means provision of assets or services in any one or more of the following sectors:
1. Industrial estates including industrial parks and special economic zones
2. Power generation, transmission and distribution systems
3. Gas and gas works
4. Roads, bridges, including rail over and under bridges and by-passes
5. Ports (other than major ports) and harbours thereof
6. Irrigation including dams, irrigation structures, canals
7. Drinking and industrial water supply systems, desalination plants
8. Waste water, sewerage treatment systems
9. Solid waste management
10. Housing including slum development and development of satellite towns
11. Urban transportation system, bus terminals, multi level parking facilities
12. Inland waterways other than national waterways
13. Development of minor minerals
14. Information and communication technology related projects
15. Education related infrastructure
16. Health infrastructure
17. Sports & recreation infrastructure
18. Tourism and hospitality projects
19. Agriculture infrastructure including marketing and post harvest infrastructure
20. Fisheries
21. Land reclamation projects
What is PPP?
PPP means an arrangement between a public agency and a private sector participant for the provision of infrastructure through investment made or through design, development, construction, maintenance or operation undertaken by the private sector participant, where risks are allocated between them such that the private sector participant takes on the risk beyond the stage of design and construction and the payment for the services are performance linked, in the form of user charges, annuities or unitary payment.
The concession agreements can be in various models viz Build-Operate-Transfer (BOT), Build-Own-Operate (BOO), Build-Own-Operate-Transfer (BOOT), Build-Transfer-Operate (BTO), Design-Build-Finance-Operate-transfer (DBFOT).
An annual or periodic contract consideration (“Annuity”) is payable by the sponsoring agency to the private sector partner for delivery of services under the concession agreement and where the user charges are levied, collected and retained by the sponsoring agency.
State Support
The Act provides for State support to a concessionaire including the following:
· Subsidy or capital grant not exceeding such proportion of the cost of the project, as may be prescribed in the Rules;
· Equity;
· Loans;
· Guarantee by the Government;
· Opening and operation of escrow account;
· Conferment of right to develop any land;
· Exemption from payment or deferred payment or refund or loan in lieu of payment of cesses, royalties, siegnorage or other statutory levies;
· Right to trade any specially created development rights on land or property (TDRs); or
· Any other incentive that the Government may specifically notify.
The State support for a project in the form of subsidy, capital grant and equity participation during the period of construction of the project shall not exceed 20% of the total project cost.
The total public financial support for a project in the form of subsidy, capital grant, equity participation, net present value of operation grants, loans and the net present value of quantifiable tax incentives shall not exceed 40% of the total project cost.
The ceiling shall not include any annuity payable to the concessionaire under the concession agreement.
Cesses & charges
The Act provides for levy of cesses and charges etc including (i) infrastructure cess, (ii) user charges on the users of the infrastructure facility, (iii) abuser charges on any concessionaire for abuse of rights accorded in the concession agreement and (iv) fees for services rendered
Administration
The Tamil Nadu Infrastructure Development Board (“Board”) has been constituted. The Board will act as a nodal agency for development of the infrastructure sectors in the State. The Board, either on its own accord or on a study or survey caused to be conducted or based on inputs received from a third party, may identify or conceptualize a project to be developed, managed and operated in the State and perform other functions. A sponsoring agency is designated by the Board to implement a project through PPP.
Tamil Nadu Infrastructure Development Fund (“Fund”) will be constituted with an initial corpus of a prescribed amount (Rs. 1,000 crore has been said to be allocated for 2012 – 2013). A project preparation fund is also proposed.
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