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Ļ¯ೇಷ ªಾಜÍ ಪĦÎೆ

PROCEEDINGS OF THE GOVERNMENT OF KARNATAKA

Sub:

Revised “State PPP Policy for Infrastructure Projects – 2025”

Read:

1. G.O. No. IDD 01 UIP 1997 dated: 26.12.1997.

2. G.O. No. IDD 32 IDM 1997 dated: 16.07.2007.

3. Corrigendum Order No. IDD 59 ITS 2009 dated: 31.05.2010 &

16.08.2010.

4. Govt. Notification No. IDD 59 ITS 2009 dated: 01.06.2010 &

02.06.2010.

5. G.O. No. IDD 07 ITS 2010 dated: 08.08.2011.

6. Govt. Notification No. IDD 59 ITS 2009 dated: 19.05.2012.

7. G.O. No. IDD 07 ITS 2013 dated: 30.10.2015.

8. G.O. No. IDD 14 ITS 2018 dated: 17.03.2018.

Preamble:

The State Government introduced a separate Infrastructure Policy for Infrastructure

Development in 1997, vide G.O. read at (1). This policy was revised vide G.O. read at (2), (7)

and (8). ln the current scenario, with the updated guidelines by the Department of Economic

Affairs, Government of India and considering developmental trends in the market, the need

for formulating a new policy with a revised institutional framework and other relevant updates

has become essential.

Karnataka has embarked on an infrastructure-led development strategy. Recognizing the need

to develop high quality infrastructure as a means to achieve rapid economic growth and

considering the current economic scenario, the Government of Karnataka (GoK) has

formulated a comprehensive and well-designed "State PPP Policy for Infrastructure Projects

– 2025".

All the previous PPP policies will be superseded by the current PPP Policy in the State of

Karnataka, "State PPP Policy for Infrastructure Projects – 2025"

¨sÁUÀ – 1

Part – I

2025

1946)

BENGALURU, MONDAY, 24, MARCH, 2025 (CHAITHRA , 03, SHAKAVARSHA, 1946)

. 184

No. 184

The key objectives of the Karnataka "State PPP Policy for Infrastructure Projects – 2025"

includes the following:

4.1.

To improve the quality and quantity of infrastructure by executing a comprehensive multi-

year infrastructure agenda.

4.2.

To foster high growth and promote equity by recognizing and embracing the key role of

Public-Private Partnerships (PPP) in advancing infrastructure development.

4.3.

To empower Government Agencies as catalysts and facilitators for harnessing the

transformative power of PPPs to drive sustainable socio-economic progress.

The salient features of the Karnataka "State PPP Policy for Infrastructure Projects – 2025"

includes the following:

5.1.

Operational Guidelines for the implementation of PPP Projects are incorporated to provide a

clear understanding of the PPP project life cycle, process flow, and the activities to be carried

out during the entire project life cycle.

5.2.

The PPP Policy shall govern infrastructure projects for all sectors & sub-sectors.

5.3.

The Departments through their Internal PPP Cell, shall:

5.3.1. Develop an annual action plan for PPP projects.

5.3.2. Develop a strategy and prepare multi-year road map for individual sectors for

infrastructure development in the State.

5.3.3. Undertake training and capacity building programs for Department officers in their

respective sectors for developing and managing projects implemented on PPP mode.

5.3.4. Identify and prepare a comprehensive list of all existing assets which could be

examined for monetization or recycling.

5.3.5. Review the incentives that may be proposed for the project. All such incentives

applicable under sectoral policies, schemes, or guidelines have to be approved by the

concerned Department and the Finance Department.

5.4.

To assist IDP&IWTD, the PPP Cell will setup a Public Private Partnership Appraisal

Committee (PPPAC) to make recommendations to review, approve, or disapprove project

proposals based on Value-for Money and other considerations.

5.4.1. The PPPAC will be chaired by the Director of the PPP Cell and shall comprise of

multi-disciplinary experts with relevant expertise, including technical, economic,

financial, and legal expertise relevant to the industry (sector / project proposal)

concerned.

5.4.2. The PPP Cell may procure or avail the services of experts / specialists from academia

and sector specific industries to the PPPAC, Performance Review Unit.

5.5.

The Departments need to send the PPP proposals availing KVGF support to Finance

Department, GoK, for seeking approval through IDP&IWTD.

5.6.

PPP proposals from all Departments involving land need to follow the due procedure of

seeking approval from the Finance Department, GoK, and Cabinet.

5.7.

KSIIDC will set up a suitably designed information management system to seek information

and monitor progress regarding implementation of PPP projects. Departments / Government

Agencies shall update the progress of PPP projects in the information management system on

a quarterly basis and compile the aforesaid quarterly reports.

5.8.

The Government Agency or implementing authority may ensure availability of 90%

unencumbered land at the time of tender. However, this may be relaxed on a case-to-case basis

by SLSWA (State Level Single Window Agency) / SHLCC (State High Level Clearance

Committee).

5.9.

IDP&IWTD will act as a nodal agency to the Government in the development of all

infrastructure projects in the State taken on PPP mode and Asset Monetization mode.

5.10. All PPP projects to be implemented in the State by various Departments, Government

Agencies and State Corporations will be sent to PPPAC through IDP&IWTD for vetting and

advise.

5.11. The Infrastructure Project may avail the applicable incentives from the respective sectoral

policies and other applicable policies adhering to the due approval process.

5.12. Roles and responsibilities of Internal PPP Cell of Administrative Departments, KKRDB PPP

Cell and District PPP Committees are defined in the revised policy. Roles and responsibilities

of KSIIDC (Karnataka State Industrial Infrastructure Corporation Ltd.) are also revised.

The proposal for a revised “State PPP Policy for Infrastructure Projects – 2025” for the State

of Karnataka has been examined and hence this order.

Government Order No. IDD / 30 /ITS/ 2021

Bengaluru dated: 24.02.2025

Under the circumstances explained in the preamble, the Government of Karnataka is pleased to

announce the Revised “State PPP Policy for Infrastructure Projects – 2025” as detailed in Annexure

– I to this order.

State PPP Policy for Infrastructure Projects – 2025 contains the following Schedules:

Evaluation of Risks & Risk Mitigation Measures

II.

Institutional Roles & Responsibilities

III.

Incentives for Project Development

IV. Applicable Sectors

Asset Monetization

VI. PPP Projects: Concept Note Template

VII. Timeline for Developing PPP Projects in the State

The detailed scope of services of the IDP&IWTD as nodal agency for PPP projects in the State

is stated in Schedule II (Institutional Roles and Responsibilities) of the “State PPP Policy for

Infrastructure Projects – 2025” at Annexure – I.

The detailed scope of services of the Administrative Department’s Internal PPP cell is stated

in Schedule II (Institutional Roles and Responsibilities) of the “State PPP Policy for

Infrastructure Projects – 2025” at Annexure – I.

The Concession Period for PPP Projects shall be determined based on the project’s feasibility

and financial viability assessment. (In the past, it is observed that some of the PPP projects

where not attracting Private Sector Participants for Concession Period of 30 years. Hence for

such projects to make it financially viable, Concession Period shall be increased from 30 years

to 45 years.)

This order is issued in concurrence with the approval of Finance Department vide

endorsement no. FD 222 Exp-1/2024 dated 05.07.2024 and Cabinet approval no. C - 41/2025

dated 30.01.2025.

By order and in the name of the

Governor of Karnataka

(Shaila R. Gorwar)

Under Secretary to Government-1

Infrastructure Development Ports & Inland

Water Transport Department

State PPP Policy for Infrastructure Projects 2025

Government Order No: IDD 30 ITS 2025 Dt: 24.02.2025 (Annexure-1)

Government of Karnataka

State PPP Policy for

Infrastructure Projects – 2025

Infrastructure Development, Ports &

Inland Water Transport Department

State PPP Policy for Infrastructure Projects 2025

VISION

The Government of Karnataka envisions fostering strong Public Private Partnerships in

infrastructure to drive high growth and promote equity. By fostering private investments in

infrastructure, we seek to facilitate sustainable development and achieve socio-economic

progress for the people of Karnataka. By adhering to international best practices, we aspire to

establish Karnataka as a global role-model for infrastructure development, driving inclusive

growth and long-term prosperity for present and future generations.

MAIN OBJECTIVE

The PPP Policy for Infrastructure Projects, 2025 aims to improve the quality and quantity of

infrastructure in Karnataka by executing a comprehensive multi-year infrastructure agenda.

Rooted in our vision of fostering high growth and promoting equity, this policy recognizes

and embraces the key role of Public-Private Partnerships (PPP) in advancing infrastructure

development. With a focus on empowering government agencies as catalysts and facilitators,

we are committed to harnessing the transformative power of PPPs to drive sustainable socio-

economic progress across Karnataka.

TOUCHSTONE PRINCIPLES

Efficient use of assets and allocation of resources – Maximize asset utilization while

allocating resources effectively for optimal infrastructure outcomes

Fair payment for services – Ensure fair compensation mechanisms aligned with

service delivery and project performance that encourage participation

Equitable contractual structures – Establish contracts that uphold fairness and balance

between parties involved in PPP projects

Transparent procurement process – Conduct procurement openly and transparently to

foster trust, integrity, and accountability among stakeholders

Balanced regulatory frameworks – Develop regulations that strike a balance between

fostering innovation and safeguarding public interest

Enabling institutional framework – Establish institutional structures and mechanisms

to facilitate effective implementation and governance of PPP projects

Incentives for project development – Promote fiscal and non-fiscal incentives that that

encourage private sector participation aligned with long-term infrastructure

development goals

State PPP Policy for Infrastructure Projects 2025

Table of Contents

PART I.

PREAMBLE ........................................................................................................7

PART II.

OBJECTIVES & BENEFITS ..........................................................................10

PART III. APPLICABLE SECTORS ...............................................................................11

PART IV. TOUCHSTONE PRINCIPLES .......................................................................12

EFFICIENT USE OF ASSETS AND ALLOCATION OF RESOURCES ......... 12

FAIR PAYMENT FOR SERVICES ................................................................... 13

EQUITABLE CONTRACTUAL STRUCTURES ............................................. 14

TRANSPARENT PROCUREMENT PROCESS ............................................... 15

BALANCED REGULATORY FRAMEWORK ................................................ 18

ENABLING INSTITUTIONAL FRAMEWORK .............................................. 18

INCENTIVES FOR PROJECT DEVELOPMENT ............................................ 22

PART V.

MONITORING AND EVALUATION OF POLICY ....................................23

PART VI. DURATION AND REVIEW OF POLICY ....................................................24

PART VII. SECTORAL STRATEGIES ............................................................................24

PART VIII. SPECIAL THRUST TO DEVELOPMENT OF INFRASTRUCTURE IN

KALYANA KARNATAKA REGION DEVELOPMENT BOARD,

KALABURAGI .................................................................................................25

PART IX. MODEL BID DOCUMENTS, POLICIES AND RULES FORMULATED

BY GOVERNMENT OF INDIA .....................................................................25

PART X.

SCHEDULE.......................................................................................................26

SCHEDULE I – EVALUATION OF RISKS & RISK MITIGATION

MEASURES ....................................................................................................... 26

SCHEDULE II – INSTITUTIONAL ROLES & RESPONSIBILITIES ............. 30

SCHEDULE III – INCENTIVES FOR PROJECT DEVELOPMENT ............... 35

SCHEDULE IV – APPLICABLE SECTORS .................................................... 37

SCHEDULE V – ASSET MONETIZATION ..................................................... 41

SCHEDULE VI – PPP PROJECTS: CONCEPT NOTE TEMPLATE ............... 44

SCHEDULE VII – TIMELINE FOR DEVELOPING PPP PROJECTS IN THE

STATE ................................................................................................................ 48

State PPP Policy for Infrastructure Projects 2025

ABBREVIATIONS

BLT

Build-Lease-Transfer

BOLT

Build-Own-Lease-Transfer

BOO

Build-Own-Operate

BOOST

Build-Own-Operate-Share-Transfer

BOOT

Build-Own-Operate-Transfer

BOST

Build-Operate-Share-Transfer

BOT

Build-Operate-Transfer

Build & Transfer

Concession Agreement

DEA

Department of Economic Affairs, Ministry of Finance, Government of

India

EPC

Engineering Procurement Construction

Finance Department, Government of Karnataka

GDP

Gross Domestic Product

GSDP

Gross State Domestic Product

GoI

Government of India

GoK

Government of Karnataka

IDC

Inter-Departmental Committee

IDP&IWTD

Infrastructure Development, Ports & Inland Water Transport

Department, Government of Karnataka

IIF

Infrastructure Initiative Fund

IIPDF

India Infrastructure Project Development Fund

Information Technology

KIPDF

Karnataka Infrastructure Project Development Fund

KSIIDC Karnataka State Industrial and Infrastructure Development Corporation

KTPP Act

Karnataka Transparency in Public Procurements Act, 1999 (includes

amendments thereof)

KTPP Rules

Karnataka Transparency in Public Procurement Rules, 2000 (includes

amendments thereof)

K-RIDE

Rail Infrastructure Development Co. Karnataka Ltd.

KUIDFC

Karnataka Urban Infrastructure Development &Finance Corporation

Ltd.

State PPP Policy for Infrastructure Projects 2025

KVGF

Karnataka Viability Gap Fund

LRTS

Light Rail Transit Systems

MRTS

Mass Rapid Transit Systems

MSW

Municipal Solid Waste

NGO

Non-Governmental Organization

JNNURM

Jawaharlal Nehru National Urban Renewal Mission

O&M

Operation & Maintenance

PDF

Project Development Fund

PIF

Project Investment Fund

PPP

Public-Private Partnership

PSP

Private Sector Participant

ROMT

Rehabilitate-Operate-Maintain-Transfer

SHLCC

State High-Level Clearance Committee

SLSWA

State Level Single Window Agency

SPV

Special Purpose Vehicle

VGF

Viability Gap Fund

State PPP Policy for Infrastructure Projects 2025

DEFINITIONS

Asset

The assets of the public sector and Government Departments are

diverse and spread out across the state. These assets could be

categorized, broadly, into the following classes: a) Land and

Buildings; b) brown-field operational assets such as pipelines,

roads, mobile towers etc.

Asset Monetization

Asset Monetization is a limited period license / lease of an asset

owned by a Department or Government Agency to a Private Sector

Participant for an upfront or periodic consideration or a

combination of both.

Bidder

Any entity which has submitted a proposal to undertake an

Infrastructure Project under Public-Private Partnership

Central Government

Government of India

Central Government

Agency

Any Department of the Central Government, any statutory

authority of the Central Government, or body corporate, owned or

controlled by the Central Government holding greater than 50% of

the paid-up share capital in such entity.

Company

Any entity incorporated under the Companies Act 1956 / 2013

Concession Period

Concession Period or Project Term means the duration of the

contract or concession agreement for the PPP project.

Department

Departments in State Government

Developer

Any Private Sector Participant who has entered a contract for

development of an Infrastructure Project with the Government /

Government Agency on PPP Basis

District PPP

Committee

A committee constituted by Government at the District level to

facilitate and co-ordinate infrastructure projects under the PPP

route.

Government

Government of Karnataka

Government Agency

Any Department of the Government, any statutory authority, local

body, or body corporate, owned or controlled by the Government

holding minimum 51% of the paid-up share capital in such entity.

State PPP Policy for Infrastructure Projects 2025

India Infrastructure

Project Development

Fund

India Infrastructure Project Development Fund (IIPDF) Scheme is

administered by DEA, GoI for providing financial support to the

Government Agency for onboarding quality advisory services for

better structuring of bankable and biddable PPP projects.

IIPDF supports Government Agency in sourcing funding to cover

PPP transaction costs, thereby reducing the impact of costs related

to procurement of TAs on their budgets.

Infrastructure

The basic physical structures and facilities, such as buildings,

roads, power supplies, etc., needed for the operation of a society or

enterprise.

It includes all infrastructure sectors and sub-sectors as defined in

Schedule IV – APPLICABLE SECTORS of this document (i.e.,

“PPP Policy for Infrastructure Projects, 2025”) and any

amendments / additions made thereof.

Infrastructure Project

A project in Infrastructure, in the sectors delineated in this Policy

Karnataka

Infrastructure Project

Development Fund

Karnataka Infrastructure Project Development Fund (KIPDF)

Scheme is administered by IDP&IWTD, GoK for providing

financial support to the Government Agency for onboarding quality

advisory services for better structuring of bankable and biddable

PPP projects.

KIPDF supports Government Agency in sourcing funding to cover

PPP transaction costs, thereby reducing the impact of costs related

to procurement of TAs on their budgets.

Karnataka Viability

Gap Funding

Karnataka Viability Gap Funding (KVGF) or Grant means a grant,

one-time or deferred, provided under Government of Karnataka’s

VGF Scheme with the objective of making a project commercially

viable

Private Sector

Participant

Means any Entity other than:

a. Central Government or Central Government Agency

b. State Government or State Government Agency

c. Any joint ventures between Central Government, Central

Government Agencies, Government and/or Government

Agency, where there is no shareholding from private/ retail

investors.

Public Need

Means a substantial or obvious community need for the proposed

project based on all attendant circumstances as compared to a mere

convenience. The determination of “Public Need” shall be taken by

the relevant Department after considering (a) Common use and

needs of the community; (b) Appropriateness of the project in

relation to the development plans of the Department; and (c)

Possibility of the project otherwise not coming up.

State PPP Policy for Infrastructure Projects 2025

Public Private

Partnership

Public Private Partnership or “PPP” is a form of fixed-term

contractual arrangement between a public entity on one side and a

private entity on the other, for the provision of public assets and/or

public

services

through

investments

being

made

and/or

management being undertaken by the private entity, may or may

not require payment of fee by users, for a specified period of time,

where there is well defined allocation of risk between the private

entity and the public entity and the private entity’s performance is

contractually obligated to conform (or are benchmarked) to

specified and predetermined performance standards.

Public Private

Partnership

Appraisal Committee

(PPPAC)

Public Private Partnership Appraisal Committee (PPPAC) is the

Committee constituted by Infrastructure Development, Ports and

Inland Water Transport Department (IDP&IWTD), Government of

Karnataka in PPP Cell to make recommendations to review,

approve / disapprove PPP project proposals.

PPP Cell

PPP Cell is the institutional arrangement established by

Infrastructure Development, Ports and Inland Water Transport

Department (IDP&IWTD), Government of Karnataka to manage

all activities related to policy, technical, legal and such other

matters pertaining to PPP projects.

Rehabilitate /

Renovate

Rehabilitate / Renovate refers to the process where PSP are given

the responsibilities to rehabilitate, or renovate, or restore or

upgrade, or improve an existing infrastructure asset. This involves

the restoration and modernization of the infrastructure to meet

current standards and demands and extend their lifespan. After

rehabilitation / renovation, the PSP typically operates the asset for a

specified concession period before transferring it back to the

government. Under PPP, rehabilitation / renovation projects

leverage private sector investment and expertise, while risks and

benefits are shared between public and private partners.

State PPP Policy for Infrastructure Projects 2025

Revenue

Revenue shall mean all amounts charged and recovered by the PSP

from the Users on mutually agreed terms and shall include user

charges for use of the infrastructure / service by the Users and shall

also include but not be limited to all charges, rent, license fees,

tariff, fee, compensation, benefits, deposits (whether long term or

short term and whether refundable or not), capital receipts,

insurance claims, or any other similar payment by whatever name

called, received by or paid to the PSP or receivable by the PSP or

payable to the PSP or due and realisable by the PSP, for or with

respect to use of the infrastructure / service. Further, the

Concession Agreement will outline the sources of revenue for the

project, including the methods for calculating and collecting.

Risk

An uncertain event which, if it occurs, may cause actual project

outcomes to differ from expected outcomes.

State High Level

Clearance Committee

(SHLCC)

State High Level Clearance Committee (SHLCC) is the Committee

constituted by Government of Karnataka under Section 3 of the

Karnataka Industries (Facilitation) Act 2002.

State Level Single

Window Agency

(SLSWA) for PPP

State Level Single Window Agency (SLSWA) for PPP is the

Agency constituted by Government of Karnataka at the State level

for approval of PPP projects up to the limit as prescribed by

Government of Karnataka from time to time.

Transaction Advisors

Consultants hired through a transparent system of procurement by

the Government Agency to assist them in designing the project

and/or providing technical, financial and legal input for the project

design, and providing advice for the management of the process of

procuring the Private Sector Participant for the PPP project. These

include Transaction Advisers selected from the panel of

Transaction Advisers announced by GoI (through Department of

Economic Affairs), GoK (through IDP&IWTD) and on nomination

basis from time to time.

Viability Gap

Funding

Viability Gap Funding (VGF) or Grant means a grant, one-time or

deferred, provided under Government of India’s VGF Scheme with

the objective of making a project commercially viable.

State PPP Policy for Infrastructure Projects 2025

PART I.

PREAMBLE

Karnataka is one of the most economically vibrant States and has demonstrated strong

growth over the years. As per the Economic Survey of Karnataka (2023-24),

Karnataka’s per-capita income of INR 3.32 Lakh is higher by 79% to all India per-

capita income of INR 1.85 Lakh during FY 2023-24 at current prices. Karnataka’s

Gross State Domestic Product (GSDP) at current prices for FY 2023-24 is INR 25.01

Lakh Crore, contributing to 8.4% of the national GDP. In FY 2023-24, the State has a

significant contribution from service sector, i.e., 67%, while industry and agriculture

sector contributions are 20% and 13% respectively¹.

Infrastructure has been one of the key priority areas for India and the Central

Government has increased infrastructure spending at a rapid pace over the years.

However, the increase in India’s GDP in recent years has put tremendous pressure on

its infrastructure. There are parts of the country which remain isolated economically

as well as geographically and their immense potential remains untapped. The lack of

infrastructure not only results in reduced economic output, it also translates into

additional costs in terms of time, effort and money to access essential services such as

health care and education. Therefore, it is important that infrastructure development is

given prime consideration for economic welfare.

The World Bank (WB) and International Monetary Fund´s (IMF) economic forecasts

both make the case for increased infrastructure investment to support long-term

growth. India’s gross domestic product (GDP) grew by 8.2% in FY 2023-24², thereby

making it one of the world’s fastest-growing major economies. To support this long-

term growth, there is a stronger need to focus on the development of infrastructure

and raising resources to finance infrastructure requirements.

Infrastructure development has remained central to Karnataka’s efforts to deliver

inclusive and robust growth. Clearly recognising the need to develop high quality

infrastructure as a means to achieve rapid economic growth, the Government of

Karnataka (GoK) had come out with an Infrastructure Policy in 1997. The

Infrastructure Policy of 1997 was aimed at expanding and upgrading infrastructure to

meet the growing needs of the industrial and agricultural sectors, inviting private

investment in infrastructure, and adopting a co-ordinated and integrated approach to

infrastructure development. The policy also had specific incentives and concessions

for infrastructure projects. However, with the efflux of time, there have been changes

in the tax and stamp duty regime, formulation of Government of India’s (GoI) policy

of Public-Private-Partnership (PPP) in infrastructure projects, and the concept of the

Viability Gap Fund (VGF). In line with these changes, the State Government resolved

to formulate the Infrastructure Policy of 2007 which was further amended in October

2015 and again in March 2018 to keep pace with new development. To ensure the

1 Source: Economic Survey of Karnataka, 2023-24

2 Source: Economic Survey of India 2023-24

State PPP Policy for Infrastructure Projects 2025

policy is refreshed and aligned with the latest domestic and global trends in the

infrastructure sector, an updated PPP Policy for Infrastructure Projects is being

released in 2025.

Karnataka has seen many successes in PPP Infrastructure projects over the years. One

notable example is the Kempegowda International Airport (KIA) in Bengaluru which

is the 3^rd busiest airport in India. KIA was conceived and developed as a green field

international airport on PPP format, and became operational in May 2008. It is one of

the largest airports in India built with modern technology and is ranked among the top

in terms of quality of service and user experience. The State Government has 13%

equity shareholding in Bangalore International Airport Limited.

As Karnataka grows and takes its rightful place in the national and global economy,

the Government’s focus has remained on sound policies and inclusive institutions.

This is where the Karnataka’s strong economic frameworks come in to make the

State’s economy more resilient and ever more supportive of growth. Today,

Karnataka has more than 20 policies across multiple high-potential sectors such as

Aerospace and Defence, Biotechnology, Engineering R&D, IT, IT-enabled services,

Innovation, Textiles, Agri-Business and Food Processing, Start-up, Tourism,

Animation Visual Effects Gaming, Semi-conductor, Renewable Energy, Solar,

Infrastructure, Road, Port, Grape Processing and Wine, Pharmaceutical, NRI, etc.,

that improve productivity and wages, employment opportunities and outcomes.

The Government of Karnataka’s Industrial Policy 2020-25 envisions building a

prosperous Karnataka through inclusive, sustainable & balanced industrial

development and lays emphasis on providing good infrastructure support for

promotion of industries.

The Government of Karnataka has also been a fast mover in providing appropriate

policy push to adopt new technologies. For example, the Startup Policy 2022-2027

builds on the previous status policies of the State and aims at stimulating the growth

of 10,000 new startups over the next 5 years, nurturing them throughout their business

lifecycle while making Karnataka a global innovation hub. Similarly, the Engineering

R&D Policy 2021, the first of its kind in India, prioritised aerospace & defence; auto,

auto components & EV; biotechnology, pharma and medical devices; semiconductors,

telecom, ESDM; and software products to attract leading entities to establish and

expand in Karnataka. Karnataka was the first southern state to launch a renewable

energy policy in 2009 and the Renewable Energy Policy 2022-2027 aims to continue

the policy’s success to deepen the renewable energy markets in the State and make

Karnataka an attractive destination for the sector’s investors.

These policies have been evolved with a view to augment and expedite infrastructure

development through active private sector participation. Promotion of private

investment has been high on the agenda of Government of Karnataka. However,

State PPP Policy for Infrastructure Projects 2025

infrastructure challenges remain large and require public investment to encourage

private investment to supplement.

10.

The Government has sought to deal with some of these constraints by implementing

various programmes and projects departmentally and through Government Agencies.

These are being financed through various sources including budgetary resources,

grants and loans from GoI, and bilateral and multi-lateral agencies.

11.

Karnataka has embarked upon an infrastructure led development strategy. The

Government recognises the experience from several emerging markets and

developing economies that the bottlenecks and gaps in critical infrastructure could

hinder the potential rate of growth of the economy. These targets are expected to be

achieved by facilitating private sector investment and rapidly upgrading technology.

The Government of Karnataka recognises that high levels of economic and industrial

growth and job creation can be achieved only if infrastructure develops at a

commensurate pace. The Government also recognizes that the private sector can play

a substantial role in infrastructure development and that given the right policies and

frameworks, adequate private investment can become available. The State

Government has already taken several initiatives in this regard, envisaging significant

investments in projects in transportation (for airports, ports, railways and roads),

tourism, power generation, urban infrastructure, etc., which leads to the direct and

indirect job creation related to infrastructure.

State PPP Policy for Infrastructure Projects 2025

PART II.

OBJECTIVES & BENEFITS

12.

PPP Policy for Infrastructure Projects, 2025 envisages increasing the quality and

quantity of infrastructure through the implementation of a multi-year infrastructure

Action Plan. The policy focus is on recognizing and embracing the key role of Public

Private Partnerships (PPP) in enhancing infrastructure development. The impact of

infrastructure on an economy depends greatly on the policy environment within which

the investment is made. The need for infrastructure development is so enormous that

all efforts need to be made to maximize the limited public sector resources through

PPPs in the development and functionality of infrastructure.

13.

The Government of Karnataka therefore proposes to provide and facilitate an

increasing role for PPP - both in creating new infrastructure assets, as well as in

managing assets already created. By this, the Government seeks to derive the

following benefits, which would deliver better value to the user:

a) Savings in costs due to innovative designs, timely project implementation and

higher efficiencies in operations

b) Enhanced quality of services to users due to better managerial practices &

efficiencies

c) Reduction in, and gradual elimination of, pricing constraints

d) Enabling public funds to be earmarked for other commercially non-viable but

socially justifiable projects

e) Financial innovation and development of cost-effective solutions

f) Greater employment opportunities in the infrastructure sector

g) Achievement of Sustainable Development Goals (SDG)

14.

PPP would be considered both in new Infrastructure Projects and in managing

existing Infrastructure Projects. The specific option to be pursed would be based on

the specific requirements of the project, for which the Government may seek

recommendations from experts / professional agencies. Where necessary, the

Government may also set up independent advisory group(s) to assist in the

formulation of sector strategies and selection of suitable implementation options.

15.

As far as possible, for all new investments in infrastructure, the option of

implementing the project through PPP would be explored. Exceptions would be made

with regard to projects in backward areas, or projects with high social relevance, but

which are prima-facie not financially viable. The following models would be

considered, inter-alia, for PPP:

a) Project Implementation by a private developer / operator or joint ventures with

Government under a licence / concession structure.

b) Project implementation by a Special Purpose Vehicle (SPV) set up by

Government / Government Agency followed by divestiture to a private operator

after stabilization of operations.

State PPP Policy for Infrastructure Projects 2025

c) Project implementation by Government / Government Agency followed by a

medium or long-tenure O&M contract to a private operator.

16.

Government recognizes that for some projects it may be necessary for Government of

India or Government of Karnataka to extend financial support by way of equity

participation, Viability Gap Fund³, or other mechanisms in order to leverage the

desired levels of private finance. It is envisaged that the incentives / financial support

contemplated under this Policy are applicable:

a) For infrastructure projects where, in the opinion of the Government, the project is

a public service delivery project set up for common use, where such infrastructure

would otherwise not be created; and

b) Only for bridging the viability gap for Infrastructure Projects on a PPP basis.

17.

Given the experiences with the reform process in the last decade, it is felt that a

consistent approach needs to be followed in all infrastructure sectors, so that the

process of development is both uniform and complementary. The PPP Policy for

Infrastructure Projects 2025 seeks to formulate the touchstone principles that would

constitute the broad framework for the development of all infrastructure sectors in the

State. Operational Guidelines shall be issued to further elaborate on undertaking PPP

projects in all infrastructure sectors in the State.

18.

In order to achieve this consistency, Government would develop multi-year Action

Plans detailing the strategies and implementation plans for each of the infrastructure

sectors clearly setting out the role for PPP, which would allow for the provision of

adequate and reliable infrastructure services of high quality at affordable prices to

users.

PART III.

APPLICABLE SECTORS

19.

This Policy shall govern infrastructure projects for all the sectors & sub-sectors. In all

cases, it is envisaged that the incentives / financial support contemplated under this

Policy are applicable only if the conditions under Para 16 are met. The sectors / areas

under the ambit of the Policy are set out in Schedule IV would be updated as and

when appropriate. The Departments through their Internal PPP Cell shall develop

annual action plan for PPP projects and the list of PPP projects shall be reviewed by

SLSWA for PPP. The Departments through their Internal PPP Cell shall undertake

training and capacity building programs for the Department officers in their respective

sectors for developing and managing projects implemented on PPP mode.

3 As per Guidelines on Support to Public Private Partnerships in Infrastructure issued by the Ministry of Finance, Department of Economic

Affairs, Government of India and Government of Karnataka.

State PPP Policy for Infrastructure Projects 2025

PART IV.

TOUCHSTONE PRINCIPLES

20.

The PPP Policy for Infrastructure Projects has been developed around the following

main principles:

a) Efficient use of assets and allocation of resources

b) Fair payment for services

c) Equitable contractual structures

d) Transparent procurement process

e) Balanced regulatory framework

f) Enabling institutional framework

g) Incentives for project development

EFFICIENT USE OF ASSETS AND ALLOCATION OF RESOURCES

21.

Government recognises that efficiency in allocation of resources can be achieved by

prioritisation of projects in an objective and unbiased manner. To this end,

Government would first look at the option of better utilization of existing assets

before new investments are proposed. Priority would be accorded to those projects

where development of critical linkages provide significant network or linkage

benefits, as in the case of a transportation link interfacing railways, roads and ports, or

a power project in the vicinity of a consumption centre.

22.

Government would develop projects based on consideration of both social need and

economic viability, the focus being integrated infrastructure development.

Government, however, recognises that “social” projects may not offer sufficient

commercial incentive for PPP. In such cases, Government would use other

compensation mechanisms like provision of VGF, or annuity payments. As an

alternative, Government (or Government Agency) may implement such projects

upfront and eventually transfer management of services to a Private Sector Participant

(PSP), where feasible.

23.

Government would also develop objective criteria for rationalization of investments

for expanding, upgrading and/or development of infrastructure by adhering to the

policies in the State.

24.

Since Government would actively promote PPP in infrastructure projects, a larger

share of investable public funds could be used for identified social needs that may not

otherwise be amenable to private finance initiatives. In order to create a sustainable

source of Government funds for long-term infrastructure financing, Government

would leverage internal and extra-budgetary resources under various schemes from

the Central Government, State Government, and assistance from bilateral and

multilateral agencies.

Based on infrastructure need and funding requirements, Departments / Government

Agencies would identify existing assets within their jurisdiction which can be made

State PPP Policy for Infrastructure Projects 2025

available for monetization. Asset Monetization involves the creation of new sources

of revenue by unlocking the value of hitherto unutilized or underutilized public assets.

Individual Departments through their Internal PPP Cell shall identify and prepare a

comprehensive list of all existing assets which could be examined for monetization or

recycling. To ensure generation of funds through Asset Monetization, it is important

that the identified assets are revenue generating assets or potential revenue generating

assets.

• In case of Revenue generating assets, the future revenue can be monetized to

generate the funds, until and unless the asset is a land parcel kept for recycling.

• Potential revenue generating assets means it is an inefficient asset which is

identified for recycling so that monetization can bring private efficiency and

modern technology; and funds can be generated to invest in future infrastructure

requirements.

FAIR PAYMENT FOR SERVICES

25.

Government recognizes that in a system where pricing of services is not economically

sustainable, users would have no incentive to economise on their use of resources, and

service providers would have no incentive to become more efficient. Government

believes that the inculcation of the “provider-charges” and the “user-pays” principles

are fundamental to the success of PPPs. To this end, Government would, where

necessary and appropriate, consider levy of user charges (tolls, fees, tariffs, cesses,

etc.) to meet the following objectives:

a) Create a stable and dedicated financial source for construction / redevelopment /

rehabilitation / replacement of project assets and their ongoing operations and

maintenance in order to provide efficient, sustainable and high-quality services at

affordable prices to users.

b) Manage demand

c) Encourage PPP

d) Cover costs of service provision

e) Recognise that economically weaker sections may require certain subsidies in user

charges and provide explicitly for such subsidies to the project to ensure that the

project remains economically viable.

26.

The levy of user charges would be based on one or more of the following criteria:

a) Savings to users

b) Willingness to Pay

c) Need for explicit subsidies

d) Uniformity between various projects

e) Cost Recovery

f) Debt service & Equity returns

State PPP Policy for Infrastructure Projects 2025

EQUITABLE CONTRACTUAL STRUCTURES

27.

Government would set in place appropriate contractual arrangements to give effect to

the process of project implementation. Government’s endeavour would be to develop

contractual frameworks that would allow for equitable allocation of risks between the

contracting parties, taking into account the legitimate concerns of private investors.

The attempt would be to allocate risks to the party best suited to bear the risks. A

matrix of typical project risks and risk mitigation measures is set out in Schedule I.

28.

EXISTING ASSETS: The contractual / implementation structures used would

include the following:

a) Management of the whole or part of the assets by private operators through

i. Operations, Maintenance and Transfer contracts;

ii. Lease of assets / Area Concession;

iii. Rehabilitate / Renovate, Operate, Maintain and Transfer (ROMT) contracts.

b) Sale of whole or part of the assets

c) Partial or full divestiture of the Undertaking

d) Direct contractual approach (large upfront payment coupled with small annual

payments or small upfront payment coupled with large annual payments)

e) Structured finance approach through securitization of public assets such as

INVITS, REITS, etc.

29.

NEW ASSETS: Depending on the nature of the project, the contractual structures /

agreements used for new projects would include, inter-alia:

a) Build & Transfer (BT)

b) Build-Lease-Transfer (BLT) / Build-Own-Lease-Transfer (BOLT)

c) Build-Transfer-Lease (BTL)

d) Build-Transfer-Operate (BTO)

e) Build-Operate-Transfer (BOT) / Design-Build-Operate-Transfer (DBFOT)

f) Build-Own-Operate-Transfer (BOOT) / Design-Build-Own-Operate-Transfer

(DBOOT)

g) Build-Operate-Transfer (BOT) / Design-Build-Operate-Transfer (DBOT)

h) Build-Finance-Operate-Transfer

(BFOT)

Design-Build-Finance-Operate-

Transfer (DBFOT)

i) Build-Own-Operate (BOO)

j) Build-Operate-Share-Transfer (BOST)

k) Build-Own-Operate-Share-Transfer (BOOST)

l) Build-Own-Lease-Transfer (BOLT)

m) Hybrid Annuity Model (HAM)

Even the listed contractual structures, can be further categorized based on the project

requirements. For example, In the case of BOT model, it can be again categorised into

few types based on the payment received by the Private Sector Participant:

a) BOT: Users pay for the services provided

State PPP Policy for Infrastructure Projects 2025

b) BOT: VGF support is provided by the Government and Users pay for the services

provided

c) BOT: Government pays for the services provided, i.e., Annuity

d) BOT: VGF support is provided by the Government and in addition, Government

pays for the services provided, i.e., HAM

Similarly, various models of PPP could be structured based on the project

requirments.

30.

SPECIAL PURPOSE VEHICLES: Where appropriate, Government/ Government

Agencies may participate in the equity structure of any SPV for the development and

implementation of infrastructure projects. The selection of the PSP for participating in

the SPV would follow the procurement process set out in para 32. The equity

structure of the SPV would be decided on a case-to-case basis.

31.

Government recognizes that creation of infrastructure under the PPP model requires

that there be reasonable assurance that competing facilities would not be created that

would materially adversely affect the technical and financial viability of the project.

TRANSPARENT PROCUREMENT PROCESS

32.

All contracts would be awarded on the basis of a fair and transparent procurement

process, under the ambit of the Karnataka Transparency in Public Procurement Act

(Act 29 of 2000), or under a “Swiss Challenge” format as set out in para 34. In all

cases, the award criteria would be spelt out upfront. The stages in the procurement

process could be single-stage or multi-stage, depending on the size or level of

complexity of the project. For this purpose, Government may use the services of

Empanelled Consultants / advisers empanelled by State or Central Government.

Generally, the stages in the procurement process would include:

a) Expressions of interest (EOI)

b) Request for Qualifications (RFQ)

c) Request for Proposals (RFP)

d) Technical and financial evaluation

e) Signing of Agreements

33.

The criteria used for selection would inter-alia include objective technical and for

financial parameters, such as:

a) Level of service, quality of assets offered;

b) Lowest present value of Viability Grant support;

c) Lowest quantum of land;

d) Lowest present value of asset based support from the Government;

e) Highest share (or present value of) of revenue;

f) Lowest unit value or present value of payments by Government;

g) Highest upfront payment (or present value of upfront payments);

h) Highest present value of future payments;

State PPP Policy for Infrastructure Projects 2025

i) Lowest concession period;

j) Lowest unit value or present value of user fees;

k) Highest premium on (or present value of) equity shares offered.

l) Reverse Auction

34.

Swiss challenge or Suo-moto proposals to promote innovative projects by

maximising competition & transparency⁴: A Private Sector Participant (Proposal

Initiator) may submit a suo-moto and innovative proposal (Original Proposal) to

Government / Government Agency for setting up an Infrastructure Project containing

the following:

a) Articulation of the public need for the project;

b) Requisite technical details, i.e., details of alignment / site, estimates of cost, etc.;

c) Cost incurred by the Proposal Initiator for the development studies related to the

project.

i. In respect of Suo-moto and innovative proposals:

1. Only such proposal that has innovation in technology, that is unique and

legally owned or authorised to be used by the Proposal Initiator that could

result in increased value addition; it may refer to incremental, emergent or

revolutionary changes in products, services and/or process. The proposal

should not only be suo-moto but also innovative.

2. Only such of the projects which do not require any financial support from the

Government, shall be considered.

3. Such of projects which would result in monopoly and exclusive rights shall

not be considered.

4. The requirement of land, if any, for the project would be considered for

acquisition / allotment at the market rates / KIADB allotment rates wherever

required. Under no circumstances, no land will be made available at

concessional rates.

5. The following sectors are considered with the threshold limits of the project

costs as indicated hereunder. The guidelines for procurement of PPP projects

through Swiss Challenge Route is issued separately. These, however, may

change from time to time.

No.

Infrastructure Sectors

Threshold Limits

Agri-infrastructure

Projects costing Rs. 25 crore and above.

Education

Projects costing Rs. 25 crore and above.

Energy

Projects costing Rs. 50 crore and above.

Healthcare

Projects costing Rs. 50 crore and above.

4Vide Government Order No. IDD 07 ITS 2013 dated 30.10.2015.

State PPP Policy for Infrastructure Projects 2025

No.

Infrastructure Sectors

Threshold Limits

Industrial Infrastructure

Projects costing Rs. 100 crore and above.

Irrigation

Projects costing Rs. 500 crore and above for

major irrigation projects; and

Projects costing Rs. 200 crore and above for

minor irrigation projects.

Public Markets

Projects costing Rs. 25 crore and above.

Tourism

Projects costing Rs. 50 crore and above.

Transportation

and

Logistics

Projects costing Rs. 500 crore and above.

10.

Urban and Municipal

Infrastructure

Projects costing Rs. 50 crore and above.

11.

Sports

and

Youth

Services

Projects costing Rs. 50 crore and above.

12.

Housing

Projects costing Rs. 50 crore and above.

13.

Rural Development

Projects costing Rs. 25 crore and above.

14.

Tele-communications

Projects costing Rs. 100 crore and above.

6. No VGF assistance would be available.

7. A maximum of 4 months⁵ shall be made available to the project proponent

from the day of clearance by the SLSWA for PPP to submit final proposals

along with DPR / PFR / Feasibility report to enable to go ahead inviting

competitive bidding for counter proposals.

ii. Government would, in the first instance, assess the public need for the

Infrastructure Project. In case the Infrastructure Project is found to satisfy a public

need, Government would assess the technical feasibility/ suitability of the Original

Proposal and modify the same, if required. Government may carry out additional

studies for the project, if required.

iii. After evaluating the proposal and considering it suitable, Government would, put

up competitive bidding for counter proposals (“Swiss Challenge”). The Original

Proposal (except proprietary information and details of the financial proposal) and

contract principles of the Original Proposal would be made available to any

interested applicants. If the competitive bidding process results in a superior

proposal, the Proposal Initiator would be given an opportunity to match the

competing counter proposal within a stipulated time-frame, and be selected as the

project concessionaire only if he is within 15% of the superior bid value. If the

Proposal Initiator declines to match the superior counter proposal, then the

applicant who has made the superior proposal would be selected as the

5Revised to 4 months vide corrigendum order No. IDD 59 ITS 2009 dated 16.08.2010.

State PPP Policy for Infrastructure Projects 2025

concessionaire. Upon such selection, Government/ Government Agency

concerned shall cause/ arrange to reimburse to the Proposal Initiator, a part or the

whole of the project development costs, as determined upfront and declared in the

bidding documents, and may recover the same from the successful bidder. In order

to encourage competition in the bidding process, the superior bidder, in the event

the project is not offered to him would be reimbursed/ compensated to an extent

an amount not exceeding 0.10% of the cost of the project, or Rs. 20.00 lakhs,

whichever is less.

35.

Government would evaluate all proposals received for any Infrastructure Project.

Government may also choose to appoint suitable external advisors or consultants,

where necessary, for the purposes of evaluation.

36.

In order to facilitate expeditious project implementation, Government would

endeavour to conclude the evaluation process for all Infrastructure Projects within 90

days from the date of submission of the final proposals. In the case of suo-moto

proposals, Government would decide to proceed with the bidding process within 180

days of their submission. In any event, Government would endeavour to provide all

necessary State-level clearances and enable implementation of any Infrastructure

Project being taken up through Public Private Partnerships within 180 days from the

date of submission of the final proposals for such project.

BALANCED REGULATORY FRAMEWORK

37.

Given that availability of unencumbered land in a time-bound manner is a critical pre-

requisite for most Infrastructure Projects, Government intends to set in place suitable

mechanisms, for facilitating expeditious acquisition of land for such projects. If found

necessary, Government would also consider promulgating a specific legislation for

expeditious acquisition of land for infrastructure projects covered under this Policy.

38.

Since many infrastructure facilities and services have natural monopoly

characteristics, independent regulation may be desirable to ensure that the interests of

both users and service providers are kept in view.

39.

Government intends to set up independent regulatory authorities⁶ for some of the

infrastructure sectors. The role of the regulator would include setting norms for entry

and exit, tariff fixation, and establishing standards for construction, operations and

maintenance for the facilities/services. However, the setting up the regulatory

authorities would be decided based on the specifics of each sector.

ENABLING INSTITUTIONAL FRAMEWORK

40.

At present the process of project identification and development is handled by the

various Departments and Government Agencies and in case of urban projects by the

respective urban local bodies. The Infrastructure Development Ports & Inland Water

6Also multi-utility regulators

State PPP Policy for Infrastructure Projects 2025

Transport Department (IDP&IWTD), Government of Karnataka, which has been set

up as the nodal agency to streamline the process of appraisal and approval of

Infrastructure Projects, shall facilitate various Departments in developing

Infrastructure Projects through PPPs.

41.

Infrastructure Development Ports & Inland Water Transport Department through the

“PPP Cell” would manage all activities related to policy, technical, legal and such

other matters related to PPP projects. The PPP Cell is headed by the Director, PPP

Cell.

42.

IDP&IWTD would be duly strengthened with staff having appropriate skills to enable

it to co-ordinate and integrate the necessary procedures and processes for facilitating

Government/Government

Agencies

expeditious

project

approval

and

implementation. Experts in domain areas such as PPP, finance, legal, procurement,

urban, rural, engineering, etc., would be hired by IDP&IWTD either directly or

through an agency to work exclusively for infrastructure projects and assigned within

respective Departments for seamless reporting and co-ordination with Departments.

Simultaneously, capacity would also be built up in Government/Government

Agencies at the State and District level, to formulate and implement Infrastructure

Projects on PPP basis. Services of empanelled consultants / Transaction Advisors may

be hired by the respective Departments/Government Agencies for structuring of PPP

projects and submit to IDP&IWTD for approval.

43.

The PPP Cell may also engage consultants as and when necessary. The PPP Cell will

be the nodal agency to receive the proposals in respect of the PPP projects and place

them before the State Level Single Window Agency for PPP projects for

consideration and approval. The PPP Cell may invite/co-opt representatives from the

private sector, nominated by State - level Industrial fora such as ASSOCHAM, CII,

FKCCI, KASSIA, IWPA and ISA et.al.

44.

Government will set up a District PPP Committees at the District level, to co-ordinate

and facilitate the implementation of infrastructure projects, including facilitation for

obtaining clearances and approvals on a PPP route. The District PPP Committee shall

be chaired by the Deputy Commissioner of the concerned district. The District PPP

Committee shall have officers of appropriate rank, nominated by the Government, as

well as up to three representatives from the private sector, nominated by State - level

Industrial fora such as ASSOCHAM, CII, FKCCI, KASSIA, IWPA and ISA et.al.

45.

PPP Cell will act as a nodal agency to assist the Government in the development of

PPP policies and programme, review and monitor PPP projects during

implementation, execution and management and make suitable recommendations to

the Government for its consideration and adoption. To assist IDP&IWTD, PPP Cell

would also setup a Public Private Partnership Appraisal Committee (PPPAC) to make

recommendations to review, approve / disapprove project proposals on the basis of

Value-for Money and other considerations. PPPAC will be under the chairpersonship

State PPP Policy for Infrastructure Projects 2025

of Director, PPP Cell and shall comprise of multi-disciplinary Experts with relevant

expertise like technical, economic, financial, and legal expertise relevant to the

industry (sector / project proposal) concerned. PPP Cell may procure / avail the

services of experts / specialists from academia and sector specific industries to the

PPPAC, Performance Review Unit. Financial Support under the Karnataka Viability

Gap Fund (KVGF) Scheme and recommendations for such allocation of the Fund for

Projects would be placed by the PPP Cell for IDP&IWTD’s approval. Further, KVGF

for the project would be finalised in concurrence with Finance Department, GoK.

46.

KSIIDC, if so directed by IDP&IWTD, would also assist the respective Departments

in the project development and procurement process, where such assistance is

requested. Alternatively, these services could be procured from Empanelled

Consultants by State or Central Government as suitably identified and selected by the

Departments concerned and accordingly the proposal could be sent to the KSIIDC to

be placed for approval by IDP&IWTD.

47.

A State Level Single Window Agency (SLSWA) for PPP has been set up at the State

Level under the Chairpersonship of the Chief Secretary to approve the projects under

PPP projects up to INR 500 Crore, and to recommend the projects above INR 500

Crore to the State High Level Clearance Committee (SHLCC) under the

Chairpersonship of the Hon’ble Chief Minister constituted under Section (3) of the

Karnataka Industries (Facilitation) Act 2002. In the case of all PPP proposals up to

INR 500 Crore, the concerned Department shall, in consultation with the IDP&IWTD

place them before the SLSWA for PPP for approval. For all proposals in excess of

INR 500 Crore, the SLSWA for PPP will scrutinize the proposals and make its

recommendations to the SHLCC for approval. The IDP&IWTD, as the nodal

Department for PPP, will assist the concerned Departments in the evaluation of all

such projects. The IDP&IWTD shall also assist the SLSWA for PPP and SHLCC in

evaluating and deciding upon the specific proposals.

48.

The concerned Departments need to send the PPP proposals availing KVGF support

to Finance Department, GoK for seeking approval through IDP&IWTD. In addition,

PPP proposals from all Departments involving land⁷ need to follow the due procedure

of seeking approval from Finance Department, GoK and Cabinet.

49.

POST AWARD GOVERNANCE AND PROJECT MONITORING⁸:

i. It is essential to continuously monitor the performance of the PPP projects over

the project life cycle in accordance with the Planning Commission guidelines on

“Institutional Mechanism for monitoring of PPP projects” issued vide OM

No.14011/09/2008-Infra (Part-II) dated 08.08.2012 of Department of Economic

Affairs, Government of India.

ii. The institutional structure for monitoring PPP projects requires the creation of a

7 Land utilization or land monetization or concession provided or transfer of rights or similar process.

8Vide Government Order No. IDD 07 ITS 2013 dated 30.10.2015.

State PPP Policy for Infrastructure Projects 2025

two-tier mechanism for monitoring PPP projects. The PPP Cells within each

Department will have a Project Monitoring Unit (PMU) which monitors the

projects through a reporting mechanism. The Monitoring Reports for each project

would include compliance of contract terms, adherence to timelines, assessment

of performance, remedial measures and imposition of penalties. The State Level

Performance Review Unit (PRU) set up under PPP Cell would review the PPP

Project Monitoring Reports submitted by the different PMUs and oversee or

initiate action for rectifying any defaults or lapses.

iii. KSIIDC will set up a suitably designed information management system to seek

information and monitor progress regarding implementation of PPP projects.

Departments / Government Agencies shall update the progress of PPP projects in

information management system on quarterly basis and compile the aforesaid

quarterly reports.

50.

IDP&IWTD would set out the process for scrutinizing and clearing all investment

proposals, frame guidelines for assessing the feasibility of private investment, set in

place standard procurement documents and framework agreements, and assist the

Government/Government Agencies in the procurement of developers. IDP&IWTD

would also facilitate the Government/Government Agencies, to develop and

implement Infrastructure Projects in the PPP format, in an expeditious manner.

51.

In order to facilitate financing of project development and implementation in an

efficient, sustainable and expeditious manner, Government would use “Infrastructure

Initiative Fund”, “Indian Infrastructure Project Development Fund” (IIPDF) and

“National Investment and Infrastructure Fund” (NIIF) along with its “Karnataka

Infrastructure Project Development Fund” (KIPDF). IDP&IWTD would set out the

policy and regulatory guidelines and provide the necessary institutional support for

operation and management of the Fund. All fees and charges⁹ accruing from project

development and investment initiatives of IDP&IWTD/ concerned Government/

Government Agency, would be credited to the Infrastructure Initiative Fund.

Government would also make contributions to the Fund through budgetary provisions

and/or other sources, from time to time, as it may deem appropriate.

52.

Each Department shall nominate a nodal officer for PPP. The nodal officer (he/she)

will be trained with the help of PPP Cell in IDP&IWTD and equipped with the

necessary knowledge to coordinate and facilitate such matters pertaining to PPP in

their respective Departments. In addition, individual Departments through their

Internal PPP Cell shall develop strategy and prepare road map for individual sectors

for infrastructure development in the State that will:

a) Identify critical projects in different sectors that need immediate attention;

b) Identify projects where significant benefits of network extension can be exploited

for integrated infrastructure development;

9 Such as project development fees, application/tender charges, concession payment, interest charges guarantee payments, taxes, cess, etc.

State PPP Policy for Infrastructure Projects 2025

c) Explore the scope for PPPs in developing new Infrastructure Projects and

augmenting existing infrastructure facilities and encourage such participation

through appropriate incentives;

d) Prepare a shelf of projects for posing on a PPP format;

e) Mobilize resources through appropriate policy measures to supplement private

sector investment, especially in the case of commercially non-viable projects;

f) Identify and resolve bottlenecks in the institutional framework that are likely to

impede investments and therefore provide a conducive environment for

infrastructure development through PSP;

g) Facilitate the conversion of approved projects into the implementation phase.

53.

The institutional roles and responsibilities are set out in Schedule II.

54.

Government also recognizes the role of public opinion and stakeholder participation

in facilitating Infrastructure Project development and implementation. Since the

viability of projects is contingent upon cost to the final user, it is important to

ascertain “what the market can bear”. Mobilizing public opinion and ensuring

stakeholder participation is thus an integral part of Infrastructure Projects.

IDP&IWTD would collaborate with professional bodies, NGOs, Industry

Associations, and User Groups in facilitating this process.

INCENTIVES FOR PROJECT DEVELOPMENT

55.

Government may consider providing incentives such as subsidies, concessions,

financial assistance, etc., set out in Schedule III to promote private finance initiatives

in infrastructure development. These would be available to all projects falling in the

ambit of Para 19 of this Policy. Investors would be eligible for any other additional

incentives proposed/available for projects under existing sectoral policies/proposed

sector-specific strategies, but Government shall take a holistic view of the totality of

incentives, vis-à-vis the viability requirements of the project. In addition, several of

these projects would also enjoy tax benefits under the Income Tax Act, 1961, as

delineated by the Government of India.

56.

In case of projects where no private investments in the form of private equity

participation are envisaged, and where the Government Agency or implementing

authority directly awards the project to a contractor following a standard procurement

process, but not under a specific concession structure as described in Para 28-30 of

this document, no incentives would be available under this Policy.

57.

Incentives such as subsidies, VGF in the infrastructure sector would be based on the

need for balancing adequate cost recovery, with social needs and regional

development. Wherever incentive is necessitated for social / regional needs, it shall be

the endeavour of the Government to ensure that such incentives are direct and

transparent. In all other cases, it shall be the endeavour to price services to be

commensurate with the real costs of service provision, and sustainability of the

State PPP Policy for Infrastructure Projects 2025

project. Department and their Internal PPP Cell shall review the incentives that may

be proposed for the project. All such incentives applicable under sectoral policies /

schemes / guidelines have to be approved by the concerned Department and the

Finance Department.

58.

To the extent that the project parameters may permit, every project shall endeavour to

maximise employment opportunities to the local population of the State of Karnataka.

PART V.

MONITORING AND EVALUATION OF POLICY

59.

The PPP Policy for Infrastructure Projects, 2025, will be translated into a

comprehensive Plan of Action where the State Government through the concerned

Department and their Internal PPP Cell would develop multi-year Action Plans

detailing the strategies and implementation plans for each of the infrastructure sectors.

60.

A Coordination Committee is constituted by the Government, under the

Chairpersonship of Additional Chief Secretary / Principal Secretary / Secretary,

IDP&IWTD to facilitate coordination and planning from various Departments and

thereby make recommendations to State High Level Clearance Committee regarding

the development of policies, directives, manuals and guidelines in a timely manner for

taking interim course corrections.

61.

The monitoring and evaluation of the policy would be done at the State level by the

State High Level Clearance Committee under the Chairpersonship of Hon’ble Chief

Minister.

62.

Evaluation takes place at different instants while generally mid-way through the

policy cycle or programme implementation at the end. The output of an evaluation

can be used as the basis for new policy initiatives. The Evaluation of the PPP Policy

for Infrastructure Projects 2025, will be carried out through neutral and credible

agencies once every three years and the results will be placed before the State High

Level Clearance Committee. The programmes and interventions will be tweaked and

redesigned on the basis of these results and as per evolving infrastructure needs in the

State.

State PPP Policy for Infrastructure Projects 2025

PART VI.

DURATION AND REVIEW OF POLICY

63.

This policy would come into force with effect from the date of issue of Government

notification and would be effective till the formulation of a new PPP Policy for

Infrastructure Projects.

64.

There would be an interim review of this Policy every three years based on a critical

assessment of feedback from stakeholders, and changes in scope that are deemed

necessary and desirable, would be incorporated at that stage.

65.

The Government recognizes that expanding and institutionalizing the scope of PPP in

the provision of infrastructure may also necessitate appropriate changes in the existing

legislative framework. It is however felt that the present framework offers sufficient

scope for PPPs in the development of infrastructure. The specific legislative

constraints for PPPs will also be reviewed and addressed during the interim review.

PART VII.

SECTORAL STRATEGIES

66.

The broad principles set out in this document would govern the various strategies to

be developed for each sector. The concerned Departments through their Internal PPP

Cell would finalize the sector strategies and action plans thereunder within six months

of the date this Policy comes into force.

67.

IDP&IWTD would assist Government/Government Agencies in making a concerted

effort to set out an action plan for already identified project development

opportunities in various infrastructure sectors in the immediate term. IDP&IWTD

would interface with other Departments concerned, such as the Public Works, Ports &

Inland Transport Department, Urban Development, Energy, Commerce & Industries,

and Information, Tourism & Youth Services, among others, to advise on and co-

ordinate the identified and new project development activities.

State PPP Policy for Infrastructure Projects 2025

PART VIII. SPECIAL THRUST TO DEVELOPMENT OF INFRASTRUCTURE IN

KALYANA KARNATAKA REGION DEVELOPMENT BOARD, KALABURAGI¹⁰

68.

Given the special status to the Kalyana-Karnataka Region Development Board during

the year 2013 under Article 371 J of the Constitution of India, the following measures

shall be taken to encourage the development of infrastructure in this region:

a. Infrastructure Strategic Action plan for the region that would address key social

and economic Infrastructure such as roads and bridges, healthcare, educational,

drinking water supply, minor irrigation, animal husbandry, sericulture and urban

development.

b. Create a PPP Cell in the Kalyana-Karnataka Region Development Board

(KKRDB) which will be equipped to:

i. Identify potential PPP projects that can be undertaken in the region

ii. Facilitate selection of private developers for implementation of various

projects

iii. Oversee the performance of these projects

c. The Coordination Committee will monitor the progress of projects on a quarterly

basis.

d. Government shall undertake specific capacity building programs for the officers

in the region to understand the need and benefits of PPP. All projects being

implemented on PPP mode would be fast tracked to ensure faster delivery of

services.

PART IX.

MODEL BID DOCUMENTS, POLICIES AND RULES FORMULATED

BY GOVERNMENT OF INDIA¹¹

69.

Government of India has brought out several model bid documents for various sectors

and the Departments will adopt them for PPP projects undertaken in the State. The

State will administer policies and rules on PPP as and when released by Government

of India.

10Vide Government Order No. IDD 07 ITS 2013 dated 30.10.2015.

11Vide Government Order No. IDD 07 ITS 2013 dated 30.10.2015.

State PPP Policy for Infrastructure Projects 2025

PART X.

SCHEDULE

SCHEDULE I – EVALUATION OF RISKS & RISK MITIGATION

MEASURES

Projects are subject to various types of risks during the development, construction and

operations periods. In a PPP framework, these risks are typically assigned to the parties best

able to handle them. The following table sets out the typical project risks envisaged during

the project life cycle and their mitigation measures in a standard Concession (BOT) contract.

Risk Description

Assigned to

Risk Mitigation Measure

I. Project Development Period

Statutory clearances needed

prior

implementation

including

Environmental

Clearance

EPC

Contractor

Concessionaire

Government

shall

facilitate

obtaining all such clearances

Land Acquisition

Government Agency

Government shall set in place

appropriate process to expedite land

acquisition.

The

Government

Agency or implementing authority

may ensure availability of 90%

unencumbered land at the time of

tender. However, this may be

relaxed on case-to-case basis by

SLSWA / SHLCC.

Departments may constitute suitable

institutional

mechanism

for

handling land acquisition process.

Delay in Land acquisition

Government Agency

-do-

II. Construction Period

Project Design Risk

EPC

Contractor

Concessionaire

Detailed technical evaluation by

independent Technical Consultant.

Independent

Engineer

entrusted

with detailed scope of work to

ensure that project conforms to

design standards and specifications.

Political

Force

Majeure

Event (War, invasion, armed

conflict or act of foreign

enemy, strikes, agitation,

blockade,

embargo,

Concession Agreement

(CA)

Agreement typically lays down

provisions for extension in time,

sharing of costs and payment of

compensation by the Contracting

Authority under such events.

State PPP Policy for Infrastructure Projects 2025

Risk Description

Assigned to

Risk Mitigation Measure

insurrection, military action,

civil commotion)

Non-Political Force Majeure

(Floods,

Earthquakes,

Drought, etc.)

Damage / Injury to 3^rd

parties

EPC

Contractor

Concessionaire

Insurance generally procured by

EPC Contractor with an extension

of cross liability

Cost Overrun Risk

EPC

Contractor

Concessionaire

Construction

cost

estimates:

Independent

revalidation

construction costs estimated by EPC

Contractor.

Fixed time / fixed price contracts:

Risk related to cost overrun passed

on to the EPC Contractor.

Insurance Cover

Project

Completion/Time

Overrun Risk

EPC

Contractor

Concessionaire

Fixed time / fixed price contract

with EPC Contractor

Performance Security provided by

EPC Contractor, including defects

liability period

Retention Money

Equity stake in project SPV

Inflation Risk

EPC

Contractor

Concessionaire

Transferred to the EPC Contractor /

Concessionaire

under

the

EPC

Contract

Technology Risk

EPC

Contractor

Concessionaire

provide

warranties

commitments

upgrade technology to meet output

specifications

Termination Risk

Promoters

Concessionaire

Lenders

Termination Compensation

Substitution / Step-in Rights to

Project lenders

III. Operations Period

Traffic/ Demand Risk

Concessionaire / CA

Depending on project

Detailed

Traffic

Studies

independent traffic consultant /

State PPP Policy for Infrastructure Projects 2025

Risk Description

Assigned to

Risk Mitigation Measure

expert.

Annuity

structures

Financial

Support

Revenue Risk

Concessionaire / CA

Traffic surveys / willingness-to-pay

studies

Annuity

structures

Financial

Support

Revenue Leakage Risk

Concessionaire / CA

Origin-Destination surveys; tolling

infrastructure, monitoring systems

Independent Auditor

Maintenance Standards

O&M

Contractor

Concessionaire

Performance Security

Monitoring

Independent

Engineer

Increase in O & M costs

O&M

Contractor

Concessionaire

Fixed Price Contract

Injury to the Project Road

users / third parties

O&M

Contractor

Concessionaire

Insurance Co.

Insurance Cover

Environmental Risk

O&M

Contractor

Concessionaire

Concessionaire / O&M Contractor

to meet the accepted environmental

norms during the operations period.

This could be enforced through

suitable clauses in the Concession

Agreement.

Termination Risk

CA / Concessionaire /

Lenders

Termination Compensation

Substitution / Step-in-Rights to

Project Lenders.

IV. Financing Risks

Equity

Sponsors / Investors