Page 25 - Banking Finance July 2019

ARTICLE

During a Budget Speech Finance Minister public procurement, wherein a government invites bids for
a public project, and then publishes the bid, before inviting
has Introduced Other Two Methods:
competing counter proposals to either match or improve the
1. Hybrid Annuity Model initial proposal. If a third party's bid is more efficient, the

2. Swiss Challenge Model first bidder is asked to submit a fresh bid. If the first bidder
comes up with a better proposal, it gets the project, and if
Hybrid annuity model-2016 - A brain child of transport it fails, the one with the more efficient bid wins the project.
minister so to get a better method of bidding for The government in return, will have to reimburse
infrastructure development to get rid of drawbacks of earlier 'reasonable costs' incurred by the initial company in
methods. These new methods are combination of most of preparing the proposals, if they end up losing the contract.
the advantages of BOT and EPC method viz.
Is This Idea New to India?
In BOT : Risk of finance, maintenance and revenues is with It is not new for India. At least half-a-dozen states have used
proposer the Swiss Challenge to award projects in sectors including
IT, ports, power and health. Gujarat included it in the
In EPC : Risk of finance, maintenance and revenues is with
Gujarat Infrastructure Development Act, 1999, and in 2006,
Government
amended the Act to provide for direct negotiation. It was
subsequently made part of the Andhra Pradesh
So new methods are combination of both i.e.
Infrastructure Development Enabling Act and Punjab
¨ Finance - 60% private & 40% Govt. or PSUs
Infrastructure (Development & Regulation) Act.
¨ Operation - private
¨ Revenue - Govt. Rajasthan and Madhya Pradesh have included it in their
guidelines for infra projects. At the central level, the Draft
Finance will be after considering the inflation during the Public Private Partnership Rules, 2011, allow the Swiss
implementation stage. Other than BOT & EPC neither Challenge only in exceptional circumstances - that too in
government nor private party have to bear the cost initially. projects that provide facilities to predominantly rural areas
Private have to invest only 60% instead of 100% and or to BPL populations.
government have to finance 40% instead of 100% that too
Presently, ‘Swiss Challenge Method’ is in limelight because
in prolonged installments of 5 years.
in recent past Cabinet cleared a proposal to redevelop about
What is the Swiss Challenge Method? 400 railway stations through 'open invitation' from
interested parties. The parties will present designs and
“Swiss Challenge Method' is a new process of giving
business ideas for commercial exploitation of Railways real
contracts to private players on an unsolicited proposal. Any
estate - land and air space. Stations are redeveloped by
person with credentials can submit a development proposal
Indian Stations Development Corporation Ltd, a Special
to the government. That proposal will be made online and
Purpose Vehicle (SPV) set up as a joint venture between
a second person can give suggestions to improve and beat
IRCON (51%) and Rail Land Development Authority (49%).
that proposal."
But given its inability to develop all stations, the SPV
proposes to accept business ideas from private players. So
An expert committee will accept the best proposal and the
reportedly the government is considering allowing private
original proposer will get a chance to accept it, if it is an
developers to submit unsolicited proposals for expressways.
improvement on his proposal. In case the original proposer
This will quicken the process of awarding the projects and
is not able to match the more attractive and competing
building the roads.
counter proposal, the project will be awarded to the
counter-proposer.
Swiss Challenge Method
The ‘Swiss Challenge Method’ is a relatively new form of - A Competitive Solution for Private Infrastructural

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