BOOT (build, own, operate and transfer)
What is BOOT (build, own, operate, transfer)?
BOOT (build, own, operate, transfer) is a public-private partnership (PPP) project
model in which a private organization conducts a large development project under
contract to a public-sector partner, such as a government agency. A BOOT project
is often seen as a way to develop a large public infrastructure project with private
funding.
How the BOOT model works?
The public-sector partner contracts with a private developer - typically a large
corporation or consortium of businesses with specific expertise - to design and
implement a large project. The public-sector partner may provide limited funding
or some other benefit (such as tax exempt status) but the private-sector partner
assumes the risks associated with planning, constructing, operating and
maintaining the project for a specified time period. During that time, the developer
charges customers who use the infrastructure that's been built to realize a profit.
At the end of the specified period, the private-sector partner transfers ownership
to the funding organization, either freely or for an amount stipulated in the original
contract. Such contracts are typically long-term and may extend to 40 or more
years.
BOOT is sometimes known as BOT (build, own, transfer). Variations on the BOOT
model include BOO (build, own, operate), BLT (build, lease, transfer) and BLOT
(build, lease, operate, transfer).
A BOOT structure differs from BOT in that the private entity owns the works.
During the concession period the private company owns and operates the facility
with the prime goal to recover the costs of investment and maintenance while
trying to achieve higher margin on project. The specific characteristics of BOOT
make it suitable for infrastructure projects like highways, roads mass transit,
railway transport and power generation and as such they have political
importance for the social welfare but are not attractive for other types of private
investments. BOOT & BOT are methods which find very extensive application in
countries which desire ownership transfer and operations including. Some
advantages of BOOT projects are:
Encourage private investment
Inject new foreign capital to the country
Transfer of technology and know-how
Completing project within time frame and planned budget
Providing additional financial source for other priority projects
Releasing the burden on public budget for infrastructure development
BOOT CONTRACT :
Under a BOOT contract, a private organisation undertakes to complete a
large project, such as a complex infrastructure project, which they are granted
a concession to finance and build by a public sector partner, typically
a government department. The public partner may provide limited funding or
other benefits but the private organisation accepts most of the risks.
The private organisation is then granted the right to own, maintain and operate
the project for a set period of time, during which they can draw fees from users of
the asset. Once the time period has elapsed, the control of the project transfers to
the public sector partner, either freely or for a fee that is stipulated in the
original contract. It is common for the time period to be several decades in the
case of big infrastructure projects that carry a lot of construction and
operational risk.
GREENFIELD MINOR PORT- GUJARAT
Incentives
Project Structure BOOT
Project feasibility study Ready
Project Land acquisition By GMB/Govt. of Gujarat
Tariff setting freedom Full
Operational freedom Full
Lenders protection Yes
Concession Period 30 years + Extendable on mutual terms
Sub concession/contract Yes
Future development rights Yes
Gujarat is one of the most progressive, forward-looking and advanced States in the country
when it comes to infrastructure development efforts. In particular, Gujarat's maritime sector is
considered to be the most developed among the States of India in the matter of minor ports.
Those in charge of policy formulation in the State felt that the time was ripe for the launch of a
major effort to ensure that Gujarat emerged as the "Port State" of India. In the long run, the State
could earn the status of being the main gateway on the western coast to the entire hinterland.
Over the years, the GMB has sought to ease the load on the overburdened major ports of
western India, including Mumbai and Kandla, by developing new port facilities. In the process,
state-of-the-art ports have become the order of the day in Gujarat.
Some of these all-weather, direct-berthing, deep-sea ports represent the country's first
Greenfield ports developed in the joint sector on BOOT (Build, Own, Operate and Transfer)
basis.
In this age of liberalization, it was felt that investments should come from the private sector. In
1995, Gujarat set a precedent by formulating a Port Policy, which expressed the State's
intention to opt for the increasing participation of the private sector in the development of the port
sector. The objective of the policy is to achieve the highest standards in port infrastructure and
services and consequently attain higher traffic at the ports and enhance the process of
industrialization in the State.
The policy is comprehensive as it appreciates and accounts for the strategic maritime location of
Gujarat and the existing entrepreneurial spirit of the State. One of the highlights of the State's
Port Policy is the identification of 10 Greenfield sites with a vision to develop these ports
matching global standards.
1995
Gujarat formulated a Port Policy, which expressed the State's intention to opt for the increasing
participation of the private sector in the development of the port sector
1997
Government of Gujarat announced the Build Own Operate & Transfer (BOOT) scheme to serve
as a framework for investment in the port sector
The Government of Gujarat in 1997 announced the Build Own Operate & Transfer
(BOOT) scheme to serve as a framework for investment in the port sector. This lays
emphasis on timeliness of infrastructure creation, efficiency of operation, operational
autonomy to the private sector and synchronization with the development of the hinterland.
Under this scheme, the government's role is to be maintained only in appropriate areas and
its financial liabilities are to be kept to a minimum. Hence, it can be said that Gujarat is the
'Port State' of India in its truest sense.
Privatization
Gujarat has been a pioneer in encouraging public private participation in the Port sector. It
has reaped enormous success in its PPP model and has set up a benchmark for other
states to follow. Gujarat Maritime Board has multiple port privatization models to promote
private player participation in Gujarat ports and to enhance its holistic development.
The State's Port policy statement of 1995 and BOOT policy in 1997 spelled out an explicit
strategy of port-led development, including the creation of new ports of international
standard, in which private sector participation played a dominant role. The Gujarat
Infrastructure Development Act 1999 further accelerated the process of decision making for
the Port Sector and created the legal environment and framework within which private
investment can flow to the State.
GMB under its Port Privatization Model has been actively promoting and developing
Greenfield Ports. It has identified Greenfield sites to develop all weather direct berthing ports
in participation with private port players. These port projects are being developed under
BOOT policy (Build Own Operate Transfer) and will be transferred back to GMB after
completion of 30 years BOOT period.
