The Fortune

for

the Bottom of Pyramid : PURA – A Template in PPP for Sustainable and Inclusive Growth of Rural India

By: Dr.D.S.Gangwar IAS Joint Secretary Ministry of Rural Development Government of India

India lives in its villages

"The true India is to be found not in its few cities, but in its seven hundred thousand villages. If the villages perish, India will perish too." - Mahatma Gandhi

Outline of the Presentation

SECTION 1 : Laying the Foundations for Sustainable and Inclusive growth SECTION 2: Co-creating Fortune

for

Bottom of Pyramid  PURA the

SECTION 1:

Laying the Foundations for Sustainable and Inclusive Growth

Mission of Min. of RD Our Mission

Sustainable and inclusive growth of rural India through a multi-pronged strategy for eradication of poverty and improvement of quality of life in rural India.

Our Theory of Change: The Multi-pronged Strategy EMPLOYMENT GENERATION :

1.

2.

Direct attack on Poverty by providing livelihood opportunities to Below-Poverty Line (BPL) households.

Enhancement of livelihood security by guaranteeing 100 days of wage employment to every household in a year

INFRASTRUCTURE DEVELOPMENT:

3.

4.

All-weather road connectivity to unconnected rural habitations and up gradation of existing roads.

Providing basic needs and amenities like housing, drinking water and sanitation to rural households.

SOCIAL SECURITY:

5.

Providing Social assistance to the elderly, widow and disabled persons.

SUSTAINABLE DEVELOPMENT OF NATURAL RESOURCES :

6.

Natural resource development for strengthening the livelihood base of the poor

National Level Implementation of the Programmes Department of Rural Development

- Formulates policies and programmes - Provide funds

State Governments

- Implementation through its agencies - Monitoring of Programmes

District Administration

- Preparation of district perspective plans - Implementation of the programmes

Panchayati Raj Institutions

- Plan at the grass root level - Select works/beneficiaries and implement the projects

INDIA

• 35 States/UTs • 619 Districts • 6484 Blocks • 2,55,000 Village Panchayats • 593731 villages •7,42,490639 Rural Populn (2001) • 54.290 million BPL Households

An iIllustration of investments in a typical village of 1000 population 1.

2.

3.

4.

5.

6.

7.

8.

9.

Guarantee of 100 days manual work in an year to all the households All-weather road connectivity Investments for increasing land productivity: watershed development, water harvesting ponds, check-dams and field channels, social forestry Organization of BPL persons into Self Help Groups’ Micro enterprises: assistance for finance, technology, skills training and marketing of produce Placement linked skills development project Houses for homeless BPL persons Land/homestead for landless persons Drinking water supply and sanitation latrines Social Safety Net : Pension for elderly, widows and disabled persons

Major programmes of other ministries for rural areas

1. Bharat Nirman

for rural infrastruture (US$ 34.84 billion)

2. Agriculture and allied sectors

e.g. dairy, poultry, fisheries; Minimum Support Prices for procurement

3. Public Distribution System

4. Promotion of handlooms, handicrafts, food processing and

village industries

;

5. Education:

Sarva Shiksha Abhiyan (Education for All), Mid-day Meal scheme in schools;

6. Health:

National Rural Health Mission (US$ 3 billion)

7. Rural Electrification 8. Banks:

billion ), Credit and Debt-waiver for farmers (US$ 13.86

9. IT

: Common Service Centers -1,00,000

Increased Purchasing Power in rural areas

Impact Analysis

Annual investments Rs.72000 crores in rural areas ($14 billion) Rural economic Growth (Rural economy $425billion) Improved Living condition Rejuvenation of natural resource base Increased sale of FMCG, auto, Pharma, TV, radio, mobile Food Inflation!!

Stronger linkages with Urban economy: Decreased migration to urban areas

Impact Analysis

Rural demand - the driver of economic growth in India:

• Major structural shift taking place in rural economy: Contribution to rural household income: • from agriculture • from services • from industry 43% 36%, 21%.

• By 2017, Rural economy is estimated to surpass urban market

SECTION 2: Co-creating the Fortune

for

the Bottom of Pyramid (BOP)



PURA

Need for a paradigm shift : Financial Capitalism  Inclusive Capitalism “ Why is it that with all our technology, managerial know-how, and investment capacity, we are unable to make even a minor contribution to the problem of pervasive global poverty and disenfranchisement?

Why can’t we create inclusive capitalism?

” - C.K. Prahalad ( The Fortune at the Bottom of The Pyramid)

Co-creating the Fortune

for

the Bottom of Pyramid (BOP) • • • Rural economy is estimated to increase from $220 billion in 2004-05 to about $425 billion in 2010-11 at a CAGR of 12%.

The next stage in economic evolution of Rural India:

Wealth creation for the BOP

The challenge is how to design a system for involving the private sector for rural development and enabling dignity and choice through Markets.

Co-creating the Fortune

for

the Bottom of Pyramid (BOP)

A. Initiatives in the Private - Private sphere:

Innovations in the business models for BOP

B. Initiatives in the Public- Private sphere

:

Public-Private-Partnership (PPP) for infrastructure creation and provision of services in rural areas.

1.

2.

3.

Common Services Centres by Min. of IT National Rural Livelihood Mission (MoRD) PURA- (MoRD)

A. Initiatives in the Private- Private sphere

:

• • • • • • •  Case studies abound of innovations in the BOP business models, technology, products and services: Amul business model of co-operatives network as a firm ITC e-Choupal HUL Shakti women village entrepreneur Tata Kisan Kendra DCM Shriram Hariyali Kisaan Bazaar SEWA (Self Employed Women’s Association) BASIX

B. Initiatives in the Public- Private sphere

:

• • • • •

1. Common Services Centres (CSCs)

100,000 Common Services Centers in 600,000 villages. Objective: to develop a platform that can enable Government, private and social sector organizations to align their social and commercial goals for the benefit of the rural population in the remotest corners of the country through a combination of IT-based as well as non-IT based services. Total cost of Rs 5742 Cr. over 4 years Implementation through a Public Private Partnership (PPP) in a 3-tier structure: – – the CSC operator (Village Level Entrepreneur or VLE); Service Centre Agency (SCA), responsible for a division of 500-1000 CSCs; – State Designated Agency (SDA) for managing the implementation over the entire State. SREI Sahaj e-Village Ltd.: 15,000 CSCs in 6 states provide G2C & B2C services through village entrepreneurs

B. Initiatives in the

• • • • •

Public- Private sphere

:

2. National Rural Livelihood Mission (NRLM)

Universal coverage of BPL families under Self Help Group (SHG) network Formation of Community Based Organisations (CBOs) and their federations Rural Self Employment Training Institute (RSETIs) in every district in partnership with banks Linkages of SHGs’ micro-enterprises with Corporates Placement-linked skills development through partnership with private players

B. Initiatives in the Public- Private sphere

:

The PURA Scheme – A Template in PPP for Sustainable and Inclusive Growth of Rural India

VISION OF PURA : President Dr. Abdul Kalam's address on the eve of Republic Day - 2003 “Knowledge Powered PURA

• The

vision of transformation

realized if we launch to a ‘developed’ India can only be

a mega mission for empowering the rural people

.

• Creation of

leading to Physical, electronic and knowledge connectivities economic connectivity

in villages. Such a model of establishing a circular connectivity among the rural village complexes will accelerate rural development process by empowerment.

• • The PURA has to be

managed by a business proposition entrepreneurs, local

economically viable and

people and small scale industrialists.

Government’s support

should be in the form of empowering such management agencies, providing initial economic support and finding the right type of management structure and leaders to manage and maintain.

” 20

The ecosystem for wealth-creation in rural areas Micro-consumer/Micro-producer/Micro-innovator in 600000 villages Rural Entrepreneurs Economic Connectivity with formal economy: A network of market-based business system Fortune for the Bottom of Pyramid

PURA Mission Statement

“Holistic and accelerated development of compact areas around a potential growth centre in a Panchayat (or group of Panchayats) through

Public Private

Partnership (PPP) by providing livelihood opportunities and urban amenities improve the quality of life in rural areas.

” to

22

PURA Strategy

• Implementation of the scheme through PPP • PPP between Gram Panchayat (GP) and Private Sector partner • Core funding from PURA scheme of MoRD • Additional support through convergence of Central Govt Schemes • Private sector to bring in investment and operational expertise • Project based and risk sharing among stakeholders • Twinning of rural infrastructure development with economic activities generation 23

Urban Amenities to be provided under PURA

Under MoRD Schemes: • Water and Sewerage • Village streets • Drainage • Solid Waste Mgt • Skill Development • Development of Economic Activity Under Non MoRD Schemes : • Village Street Lighting • Telecom • Electricity distribution, etc.

Schemes such as SGSY, NRDWP, TSC, etc will be converged in CAPEX provision of PURA Add-on Projects i.e. Revenue earning projects (Indicative) : • Village linked Tourism • Integrated Rural Hub, Rural Market • Agri – Common Services Centre, etc .

• Any other rural economy based project 24

The Business Model • • • • • • • • Leveraging public funds with private capital & management for creation & maintenance of rural infrastructure. Due to thin revenue base, most of the CAPEX from Govt schemes. Community Development schemes ordinarily included. O&M of assets and services for 10 years. Private Developer to have flexibility in choosing PURA project area & revenue generating projects as add-ons.

Capital Grant

upto

35%

viability gap. of project cost for meeting

Cost of each PURA project

upto

Rs. 120 crores

. Actual Capital Grant to vary from project to project. 25

Land for the PURA Projects • • For the public amenities, Gram Panchayat / State Govt to provide land free of cost. o For the Add-on activities: Revenue sharing between GP and Private Partner if land provided by GP / State Govt. o o Such add-on facilities to revert back to GP / State Govt at the end of concession period. In case the private developer has to purchase the land from open market, cost of land not to be included for the estimation of capital grant. 26

State Support Agreement

 Tripartite Agreement between Central Govt, State Govt and Private Developer.

 Support from the State to include: • Co-operation and facilitating the Concessionaire and GP in discharging their obligations under the Concession Agreement • Commitment for core facilities like roads, water and power to the PURA area • Providing access to the site required for project • Assist and facilitate in obtaining approvals and clearances required for implementing the project • To waive its sovereign immunity

Concession Agreement … 1

• • • • • • Between GP and Private Developer. Will include minimum service level standards, performance guarantees etc.

Concessionaire to procure, finance, improve and undertake design, engineer, construct, redevelop, operate & maintain project facilities at its cost during concession period Concession period 13 years (including construction period) Concessionaire to complete construction within 3 years as per the pre-determined project milestone schedule Access and license to the land for the urban amenities to be provided by GP and at its discretion may provide land for the add-on facilities.

All urban amenities and those add-on facilities for which the land is provided by GP to be transferred to GP on termination/expiry.

Concession Agreement … 2

• • • • Concessionaire would have the right to collect user charges from the users of add-on facilities.

Grant to be disbursed to the Concessionaire through an Escrow Account set up for the same at DRDA Concessionaire would also be eligible to utilize the funds available under other existing MoRD schemes and on tap from other Ministry schemes Dispute if any to be settled as per alternate dispute resolution mechanism agreed between the parties

Monitoring & Evaluation

• •

Concept Plan & DPR

Screening Committee at MoRD for reviewing the Concept Plan & DPR prepared by the developers Baseline information provided in the DPR shall be vetted by the Independent Engineer whose cost shall be financed under PURA • •

Construction and O&M

Independent Engineer shall supervise & monitor activities and performance of developer during project life cycle: – Check for compliance of performance standards set out in the Concession Agreement – delay/ quality GP would also monitor the performance of the private developer during the Concession Period

An Indicative PURA Project …

E F Figures in Rupees Million I A II B C D Urban Amenities MoRD Schemes

1 Water and Sewerage 2 Road (Village) 3 Drainage 4 Solid Waste Mgt 5 Skill Development 6 Lead Economic Activity

SUMMARY OF BLOCK COSTS FOR TYPICAL AMENITIES PROPOSED FOR PURA PROJECT Sources of Funding Target Size Unit Capex Opex p.a.

RD Other PURA

80%

Sub total

100 lpd 16.75

5 mlpd km 16.75

km 5 pits 5000 persons 1000 persons 71.45

23.45

13.07

1.87

75.00

50.00

5.72

2.35

0.48

234.84

8.54

80% 100% 100% -

Private Name of Scheme

14.29

23.45

13.07

0.37

Swajaldhara Scheme Special SGSY Special SGSY

Non MoRD schemes

7 Village Street Lighting 8 Telecom 9 Electricity

Sub total ADD ON PROJECTS (Revenue Earning People Centric Projects)

10 Village linked Tourism 11 Integrated Rural Hub 12 Educational institution

Sub total Independent Engineer to be appointed for PRI Support

840 lights 5 kiosks 1 MW 16.38

0.38

80.00

96.76

0.82

0.82

6.00

16.38 0.38

10.00

12% Return on investment (ROI)expected 25% Deficit % on ROI expected

100.00

100.00

3.00

3.00

150.00

350.00

4.50

10.50

16.39

70.00

100.00

100.00

150.00

MNES DIT, CSC Scheme MNES

G Return to Developer

i Management fee (% of Capex on Projects sub-total E Below) ii ROI for Category A Infrastructure Total figure in Rs mn) 137.57

(Includes project listed against Categegory A- nos. 1,2,3,4 , 7 and 9)

Sub-total of Projects

1% 12%

681.59

Viability Gap Funding 9% (This figure is the NPV of the Annual Operating Expenses/Deficit on Returns over a 20 year period.

This amount has been discounted at the rate % shown above)

Total Project Costs (E + F) Capex + VGF

% of Total Project Costs

997.24

32% 6.82

16.51

49.18

315.65

316

167

17% 31

27

3%

316

32%

488

49% PURA 31

• • • • • • •

The Selection Process

Through open competitive bidding process.

Expression of Interest from reputed Infrastructure Companies.

No financial bidding for pilots; evaluation based on technical capability and pre-approved evaluation methodology.

Short listed bidders to be invited to pre-bid conference.

Emphasis on rural development priorities as well as developers perspective on an economically viable project.

DPR to form the basis of determining capital grant admissible. To be vetted by Independent Engineer.

Inter Ministerial approval committee to approve final cost and capital grant.

32

Implementation Framework

Issue of Expression of Interest Pre-bid Meeting / Bidder’s Conference to obtain suggestions on the draft RfP & CA from those Bidders who meet the qualification criteria. Issue of Request for Proposal document Preparation of DPRs by private developers and approval by MoRD Execution of contracts between the private developers and participating Gram Panchayats and State Support Agreement Project Execution by private developer Submission of Proposals including a broad Concept Plan from interested Bidders Evaluation of Proposals by MoRD / Technical Committee Issue of “Letter of Award” to first eight private developers for preparation of DPRs O&M of Project facilities by private developer Handover of Project facilities to the Gram Panchayats at the end of the Concession Period

Next Steps…

• • • • • • Scheme Guidelines have been issued Notice for Expression of Interest issued.

Commencement of the selection process for private sector partners.

Preparation and approval of DPRs Signing of SSA and CA Scaling up after experience of pilot phase 34

35 35

Let’s join hands in the Business of Building India!

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