As most State Tourism Corporations are looking to develop integrated coastal tourism infrastructure with due focus on transport, basic beach amenities, large revenue generating projects, village / rural integration with socio-economic & environment friendly considerations; they are increasingly  opening up to the idea of public private partnerships for Coastal Tourism Infrastructure. This note briefly discusses PPP in Development and O&M of Coastal Tourism Infrastructure.

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State Tourism Corporations (STCs) of all the coastal states in India have conducted numerous studies in the past leading to a conclusion that several locations in their states are highly desirable for development of integrated beach / coastal tourism. Many locations, however, lack basic facilities (toilets, showers, changing rooms, life guards etc.) as well as other facilities for accommodation and eateries and a proper access to these places. Of particular concern is the lack of amenities and services like quality water-supply and sanitation facilities, solid waste management, health, communications, disaster management and support services. Furthermore, the Indian coast has significant diversity of natural resources including diverse flora & fauna including mangroves, specialized habitats, salt pans, community structures etc, which might face the threat of degradation owing to various economic activities including tourism.

Looking forward to an integrated coastal tourism infrastructure development with due focus on transport (approach by sea, road, rail as well as air), village / rural integration and environment friendly considerations, STC’s are increasingly  opening up to the idea of public private partnerships along with funding of above infrastructure through various sources.

Further, many STCs have access to land parcels of various sizes near pristine beaches and backwaters along the coastline, which they intend to utilise for above mentioned tourism infrastructure.

In most cases, the STC’s intention to provide coastal tourism infrastructure may be classified under two major heads:

1. Integrated Tourism Infrastructure at Large Land Parcels: targeting large revenue generating projects which are either attracting large footfalls or select clientele (both national and international).
2. Development of Beach Infrastructure / Facilities: targeting popular but underdeveloped beaches along the state’s coastline, wherein substantial tourists are observed, by providing basic facilities in a planned manner for sustainable management of the beach environment and thereby ensuring a more complete beach tourism experience.

This note tries to discuss the provision and development of beach infrastructure / facilities on PPP basis.

Integrated Tourism Infrastructure at Large Land Parcels

An STC may intend to leverage a large land parcel for development of tourism infrastructure facilities like resorts, amusement parks, golf courses, budget / star hotels, information centres, cultural centres etc.

Large land parcels along a coastline are likely to be located in vicinity of or have a mixture of pristine beaches /rocky coastline and dense plantation / habitation. A combination of either or both can be leveraged for development of large tourism attraction facilities. The possible tourism components might include:

• Hotels / Resorts /Clubs / Marinas / Cruise Terminal
• Amusement Parks / Theme Parks / Golf Courses
• Nature Trails / Heritage Trails / Water Sports / Beach Sports / Diving
• Sea World /Edutainment Tourism Centre etc.

A project of above scale would require conceptualisation of components that is a mix of above list which is indicative. The same may also include project components that are not part of the above list. A balanced mix of the project components would lead to conceptualisation of a facility that would have stable and sustainable sources of revenue from tourism with minimal seasonal fluctuations and thus make the project financially feasible and bankable.

For the purpose of achieving a balanced project mix, a detailed market and demand assessment should be undertaken. In addition to above a detailed assessment of the infrastructure available in the region as compared to the infrastructure required should also be carried out. The above two studies leading to development of a project master plan in addition to the environment and social consideration would lead to establishment of project costs and possible revenue streams. A detailed financial assessment of the same should be undertaken to create a balance in the proposed project mix.

Such large projects are likely to witness large investments (sometimes amounting upto INR 2-3 billion). With such enormous investments, rigorous marketing is required to bring in world class private sector players and operators of the facility in question. Policies and strategies would need to be streamlined for ensuring the same.

Development of Beach Facilities

Many STC’s have shortlisted a few popular but underdeveloped beaches along the state’s coastline, wherein substantial tourists are recorded, albeit local or regional and not national or international. In most cases, these locations lack basic facilities on the beach front and do not have any dedicated beach management program. Promoting such beaches would lead to increased tourist inflow to these locations; thereby necessitating immediate development of beach facilities including but not limited to:

• Freshwater / Bathing Facilities
• Washrooms / Restroom / Sanitary Facilities
• Quality Refreshment / Restaurants / Drinking Water Facilities
• Temporary Structures / Resting Facilities / Benches
• Facilities for Beach Security / Life Guards / Lockers etc.
• Parking Facilities
• Facilities for beach games / water sports
• Temporary structures for Handicrafts / Local Markets
• Waste Management / Beach Cleaning Facilities
• Facilities for camping grounds / cooking etc.
• Facilities for communication, lighting / first aid etc.
• Budget Accommodation Facilities in vicinity of the beaches etc.

The above facilities though small, and seemingly unimportant, go a long way in popularising a beach / location. Many a times, presence of above mentioned facilities is a major factor in ensuring a complete beach tourism experience, thereby attracting more tourists to a location, which in turn acts as a socio-economic growth engine for the region.

Furthermore, provision of above mentioned facilities in a planned manner leads to sustainable management of the beach environment. Though not exceedingly capital intensive, these facilities incur substantial operation and management costs. Furthermore, the quality of these facilities have a direct impact on the beach environment and therefore, sustainable beach popularity.

It is with above considerations, STC’s are increasingly looking forward to utilize the private sector expertise and efficiency in development, operation and maintenance of the above referred facilities.

Primarily, the following options are available with STC’s for involving private sector participation in the same.

Option 1: Construction Contract + O&M Concession

The STC designs the facilities, invests capital through construction contracts for the same, and selects a private sector O&M Operator.

Advantages:

• The STC utilizes its own budgetary outlay of capital expenditure, non – profitable projects can be taken care of
• The STC has complete control over design and quality of facility (the STC may choose to hire the best design services in the market)
• The STC utilizes the expertise and efficiency of private sector in O&M
• The STC shifts the risk of O&M on Private Sector

Constraints:

• Construction Contractor has no incentive for quality control other than avoidance of penalty.
• The STC has the complete responsibility of project preparation including designs, construction drawings, construction monitoring, etc. Multiple agencies are involved for undertaking the same
• The STC has to undertake multiple bid processes – for selection of design service provider, construction contractor and then for O&M Operator
• More no. of private sector players are involved, thereby leading to complications in agreement clauses and legal hassles
• The STC has to enter into licensee / lease agreement for each facility individually leading to increased legal / audit issues and paperwork

Option 2: PPP in Development as well as O&M

The STC outlines the specification / guidelines / controls for Development (construction / build & finance), Operations and Management of the facilities and selects a private sector player for implementing the same on PPP basis.

Advantages:

• The STC acts as a promoter and regulator rather than provider
• The STC completely utilizes the expertise and efficiency of private sector in O&M
• The STC shifts the entire risk of facilities on Private Sector
• The private sector player has incentives for innovative designs and quality construction and O&M as it is his source of revenue
• The STC can still utilize its budgetary outlay in the form of capital subsidy / reimbursement of construction expenses on case to case basis
• The STC specifies specifications / guidelines / controls thereby ensuring quality development and O&M at its own terms, conditions and requirements
• The STC carries out only one bid process encompassing all services.
• The STC is relieved of detailed project preparation, design and monitoring activities.
• The STC enters into only one agreement with the private sector player.
• The STC can keep provisions for future facilities leading to well planned beach management.
• The STC’s budget outlay can be utilized for unviable projects / locations

Constraints:

• Requires project structuring with due consideration to all stakeholders
• The STC may or may not have in-house expertise to structure a project or agreement on case to case basis, hence services of an advisor would be required for technical, financial, legal, and managerial expertise for judicious selection of private sector player

In view of above, an indicative and non-exhaustive matrix for possible roles of government and private sector players in a coastal tourism project has been prepared. It is to be noted that the matrix is for guidance purpose only; the roles of each stakeholder are likely to vary and should be thoroughly evaluated on case to case basis.