PPP can foster economic growth and development: Panel
Important policy instrument
The report has suggested the setting up of an Infrastructure PPP Project Review Committee (IPRC) to deal with the problems being faced by PPP projects. The committee said that there was urgent need to evolve a suitable mechanism that evaluates and addresses actionable stress in stalled PPP projects. Sector specific institutional frameworks should be developed to address these stalled infrastructure projects. There should be a better identification and allocations of risks between the stakeholders. Contracts for the PPP projects should focus more on service delivery instead of fiscal benefits, the report said. The committee proposed to set up an Infrastructure PPP Adjudication Tribunal (IPAT) with the mandate of evaluating and sending its recommendations in a timebound manner upon a reference being made of "actionable stress" in any infrastructure project developed in PPP mode beyond a notified threshold value. The IPAT could be chaired by a judicial member (former SC Judge or HC Chief Justice) with a technical and financial member. It suggested the IPRC should consist of one expert each from economics background and one or more sectoral experts preferably engineers, and legal experts. The Union finance ministry should allow banks and financial institutions to issue zero coupon bonds, which assessment and appraisal capabilities by banks and specific RBI guidelines to lenders for encashment of bank guarantees. The report also underlined the need to review the Model Concession Agreement (MCA) to ensure speedier resolution of disputes. The report said that the government should encourage PPP model in greenfield as well as brownfield airport projects. It suggested an independent tariff regulatory authority for railways to help it tap PPP opportunities. The success of deploying PPP as an additional policy instrument for creating infrastructure in India will depend on the change in attitudes and mindsets of all the authorities including public agencies partnering the private sector, govern- ment departments supervising the PPPs, and auditing and legislative institutions providing oversight of the PPPs, the report said. For strengthening policy, governance and institutional capacity, the committee has recommended setting up of an institution for invigorating private investment in infra, besides preparing a national PPP policy. The Kelkar committee said regulators of domestic pension, insurance and longterm funds may be encouraged to allow investment in PPP SPVs with a lower than 'AA' rating if developers access credit guarantee instruments. Professional support to the Department of Economic Affairs at a programmatic level is essential for policy implementation and regulatory assistance and also for delivery guidance at the project level. A centre of excellence in PPPs, enabling research, activities to build capacity, more nuanced and sophisticated contracting models and developing a quick dispute redressal mechanism is overdue. The report also called for speedy amendment to the Prevention of Corruption Act, Vigilance and Conduct rules applicable to government officers. For scaling up finances, the report recommended the government must refrain from taking any retrospective decision or treatment in project financials or commercial terms (airport or port sectors), including decisions that risk the moral hazard of post-award change in bid conditions. State support agreements should be enforced and states asked to face punitive costs for not completing their obligations as part of centre-state initiatives.