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Cover Story
Partners in development
Great partnerships can achieve great things and is just what
a country like India can do with right now. Public-private partnerships have
earned the reputation of creating an organised system through the marriage of
two entities who bring their expertise to a project, often of national importance.
By Gayatri Vijaykumar
 Winston
Churchill once said that if we are together nothing is impossible; if we are
divided all will fail. The good old 'united we stand, divided we fall', only
rephrased. Either way, this maxim holds true for many things in life, including
tourism.
Great partnerships, like great marriages, have the power to bring out the best
in each partner. One such form of coming together of powers is the public-private
partnership (PPP) that can bring about sweeping changes. In India, this model
is popular in many sectors, touching tourism as well.
The 100 per cent FDI in tourism gives way to immense unexplored possibilities
that, if capitalised by the private and public sectors together, can help write
the success story of tourism in India. Although most tourism projects are private
by nature, active involvement by the public sector in areas of infrastructure,
safety and creating an environment conducive to investment is required to ensure
that projects remain sustainable.
- Infrastructure development
Jose Dominic |
Prem Subramaniam |
Infrastructure is an area where the public sector can and
has been inviting private players to develop projects. Prem Subramaniam,
principal - business development, IDFC, says "In some countries there is
a difference between those who own the tracks and those who run the train. In
India we can implement a similar model wherein the laying and maintenance of
tracks and security issues can be handled by the public sector while the running
of the train can be handed over to the private sector."
He adds that even bus terminals can be managed through this model where the
government provides the land and a private player operates the terminus, setting
up ATM facilities, seating areas, food stalls, etc and charging a fee. "Such
PPP models can follow a Build Operate Transfer (BOT) model wherein the private
player can take the project on lease for 15 years, develop it and then transfer
it to the government. "The intention is to have a seamless connectivity
which would cut down on the dependence of private transport as much as possible,"
adds Subramaniam.
To facilitate parking, he says that we need vertical parking.
"Nehru Place in Delhi can be cited as an example of vertical parking wherein
the parking space has been leased to a private entity that in turn develops
five floors of parking and uses three floors for commercial purposes to obtain
revenue," says Subramaniam. Speaking about the potential PPP has to facilitate
tourism development, D C Sekhar, MD, Lavender Cruises, says, "The
road map and master plans drawn up by the government is most crucial. If the
government can accurately sense the potential in different regions, it can study
the infrastructure required, the environmental impact and plan years ahead.
It is crucial that private players also see the potential in the same areas."
I M Vittalamurty |
Archana Capoor |
With approximately 7,500 kilometres of coastline and numerous
unexplored rivers, India has immense potential to develop cruise tourism. In
order to leverage this, the government would have to ensure that infrastructural
facilities such as harbours, cruise terminals and jetties with proper security
are provided.
Giving his views on how public and private entities can come together to promote
cruise tourism, Sekhar says, "We are at a stage where the canvas is practically
blank. The long term environmental impact and thrust areas can be planned now.
Identifying suitable locations and encouraging private parties to set up marinas
is the logical first step. The basic facility of safe parking for the boat,
providing water, fuel and clearing garbage are the minimum requirements. Thereafter,
we can expect high net worth individuals to buy boats or operators who will
own and hire boats."
He however cautions that operating cruise ships on the coast
is capital intensive with first mover risks. "But the government can help
by eradicating initial risks, like leasing government land for a hotel, it can
own the particular ship and dry lease or bareboat charter to the operator,"
explains Sekhar. The Tourism Finance Corporation of India is forthcoming to
fund projects related to cruise tourism though a final policy on cruise tourism
from the government is still awaited. Archana Capoor, its chairman and managing
director, explains that the corporation is waiting for the policy to be in place.
TFCI, she says, would also not mind funding PPP or even private projects.
| The Golden Chariot, South India's first luxury train
conceived by the Department of Tourism, Government of Karnataka, can be
considered as an example of how PPP can be used to promote rail tourism.
In sync with the department's PPP initiatives, various aspects of the running
of the luxury train have been taken care of by private players.
While heritage walks off the train is organised
by Bangalore Walks, the onboard hospitality is being taken care of by
Mapple Group. The marketing and promotion of the train is being undertaken
by Luxury Trains, that is also consolidator and GSA for Palace on Wheels,
Heritage on Wheels and Deccan Odyssey. To promote the Golden Chariot,
Luxury Trains has conducted road shows in Geneva, Paris, Seattle, New
York and Los Angeles and has also participated in various travel marts
including the World Travel Mart, London. Conceived to be an Rs 32 crore-project
in 2003, the total cost has increased to Rs 38 crore with a waiver in
the excise duty of Rs 3.65 crore.
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 Estimates
state that by 2020, Indians airports would be handling volumes of up to 100
million passengers and approximately 3.4 million tones of cargo annually. These
figures underscore the urgent need to upgrade existing airports and build new
ones with international standards.
Keeping this in mind, the government's airport modernisation plan proposes investment
of US$ 9 billion by 2010. The Cochin International Airport (CIAL), the first
greenfield airport made operational in 1999, is a classic example of how the
PPP model can be applied to develop an international airport with world-class
standards.
In May 2006, the Delhi and Mumbai airports were handed over to joint venture
companies for modernisation. Two new greenfield airports in Hyderabad and Bangalore
were also approved. The GMR Hyderabad International Airport (GHIAL) commenced
operations in March while the Bangalore International Airport Limited (BIAL)
promoted by Siemens Project ventures, Larsen & Toubro and Unique Zurich
Airport (with Karnataka State Investment & Industrial Development Corporation
(KSIIDC) and the Airport Authorities of India serving as state promoters) is
expected to commence operations by May this year. The latter saw private promoters
holding 74 per cent equity stake with the public sector holding 26 per cent.
An example of a successful joint venture in the aviation sector is the GVK-led
Chhatrapati Shivaji International Airport which was recently awarded the 'Aeronautical
Excellence Airport of the Year' at the 2008 Frost and Sullivan Asia Pacific
Aerospace and Defence Awards. It was conferred in recognition of the efforts
made by the Mumbai International Airport in developing the aeronautical segment
of the airport. CSIA was chosen from among a host of airports in the Asia Pacific
region.
The Indian Railways Catering & Tourism Corporation (IRCTC)
is also showing keen interest on taking up PPP initiatives and has drafted policies
and plans like setting up 100 budget hotels in around 100 locations wherein
it will provide land. The luxury trains such as the Palace on Wheels in Rajasthan,
Deccan Odyssey in Maharashtra and the latest entry from Karnataka, the Golden
Chariot are examples of successful public-private synergies. IRCTC has also
proposed to offer tour itineraries across states with the help of travel agents
to promote multi-state tourism.
| A PPP is a partnership between the public and private
sectors for the purpose of delivering a project or service which was traditionally
provided by the public sector where the private sector lends its innovation
and technological, financial and management expertise. The term PPP is used
to describe a wide variety of working arrangements from loose, informal
and strategic partnerships, to design-build- finance-and-operate (DBFO)
type service contracts and formal joint venture companies.
Private Finance Initiative (PFI) is one of the
most developed forms of PPP which offers governments the opportunity to
involve private sector management and capital in modernising and improving
the quality of public services, without undermining the government's responsibility
to the taxpayer for the quality of the service provided.
PPPs are not vehicles for privatising public services
since the government retains full political accountability for the service.
Rather, they are simply a means by which the government can use what the
private sector offers to improve its own performance. It is done by establishing
arrangements, by way of legally binding contracts that will bring benefits
to both sectors. The private sector needs to earn a return on its ability
to invest and perform. The public sector wants to deliver services to
the standard specified and to make the best use of public resources. Crucially,
PFI is seen to provide services considerably earlier than under traditional
procurement, which implies that PFI helps deliver the right projects more
quickly, thereby delivering better value to the taxpayer.
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State initiatives in developing PPP
Individual states have realised the potential that viable PPP initiatives have
in promoting tourism in the respective states. Given below are examples of how
some states are using the PPP model to develop tourism.
The Maharashtra Tourism Development Corporation (MTDC) will work with travel
agents and service providers from the untapped regions of Maharashtra to promote
tourism along the Konkan belt. Under the title 'Mahabhraman', MTDC plans to
bring tour operators and agents from Mumbai in direct contact with service providers
like hoteliers, car rentals, resort owners and adventure tour operators in these
untapped regions.
Abhijeet Patil, CEO of Raja Rani Travels, one of the agents working alongside
MTDC on this project, said the primary purpose of launching such a programme
was to retain the large number of visitors who come to Mumbai by taking them
around Maharashtra. "Most business travellers use Mumbai as a transit destination
and prefer flying out to Kerala or Goa for a quick holiday. We want to try and
lock these people inside Maharashtra. MTDC has set up parameters where travel
agents can interact with service providers, whether it is hoteliers or adventure
tour operators in places like Nagpur and Ganpatiphule. The crux of Mahabhraman
is to identify all the players in the industry," said Patil.
MTDC has claimed that the tour packages will be different
from traditional tour packages, encompassing agri-tourism, adventure sports,
archaeological heritage and art and history.
According to UNWTO, the most effective tools for
public-private sector co-operation in the future are:
- Development of tourism education/training programmes
- Creation of increased visibility/awareness for tourism initiatives
- Support for industry participation at trade shows
- Participation in co-op marketing programmes
- Provision of initial/start-up financial support
- Facilitation of local approval process
- Provision of land swaps or transfer of development
- Rights to preserve environmental values
- Provision of tax credits for historic preservation
- Provision of technical support for innovative product development
programmes
- Provision of manpower or other non-financial resources
- Privatisation of telecommunications
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A tourism policy is being formulated for the state which would assess and monitor
state tourism for revenue generation. Also, the central government has sanctioned
a loan of Rs 8 crore to Haryana for developing its districts of Panipat, Kurukshetra
and Pinjore in a circuit for tourists, the total cost of which would be Rs 16
crore. Also Tilyar, Daruheda, Hodal and Karnal will be developed as integrated
tourist destinations in collaboration with private players. By 2010, 17 hotels
would be set up under the PPP model. Also a proposal has been forwarded to the
state government to form a tourism promotion board comprising government officials
as well as private players
Sanjay Kaul, director of Department of Tourism, Government of Kerala, says,
"The strong private-public partnership initiative is the key factor for
Kerala Tourism's success. We have set up a marketing and promotion initiative
called Project Synergy, which spreads across joint participation in trade fairs,
road shows, joint advertising, joint familiarisation visits, etc. In 2008 we
will be organising Kerala Travel Mart, which is one of the biggest PPP state
initiatives."
In order to promote tourism in the state using the PPP model, the Karnataka
State Industrial Investment Development Corporation is preparing a shelf of
PPP projects for the four circuits in Karnataka. Shoba Nambisan, its MD, said,
"We conducted a study of the four circuits consisting of the Mysore, Hassan
and Halebid circuit, the north Karnataka circuit, the coastal circuit and the
Shimoga circuit and found that these routes lack basic infrastructure and amenities
like food, accommodation and proper toilet facilities."
The Department of Tourism also conducted Momentum Karnataka 2008 in order to
woo potential hospitality investors into the state. The investment drive will
be spread over six months in two phases of 90 days each. According to I M Vittalamurthy,
secretary to Government, Kannada & Culture, Information and Tourism, Government
of Karnataka, the department will facilitate interactions between interested
investors and land owners and that government land would be made available at
50 per cent of the market price for developing the projects.
Miles to go
The success of various PPP projects that have been undertaken so far underline
the importance of creating partnerships in order to capitalise on the immense
tourism potential the country has. However, care must be taken to ensure that
all stakeholders have their roles and responsibilities clearly defined. Cautions
Subramaniam, "Many in India do not know the difference between partnership
and patronage. In some cases the government asks the private party to put in
the money instead of entrusting the job of developing the project to the party.
Hence specific roles have to be clearly outlined."
According to Jose Dominic, MD of CGH Earth, the public and private sectors should
focus on the social environment which is being neglected. "The success
of a destination will be determined based on the totality of the tourist's experience.
The public and private sectors can collect their respective strengths to bring
about a positive tourist experience and ensure repeat visitors," he says.
With inputs from Andrea Lopez, Anupama Sushil & Reema
Sisodia
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