PPP can foster eco­nomic growth and de­vel­op­ment: Panel

Im­por­tant pol­icy in­stru­ment

Project Monitor - - FRONT PAGE - The Hyderabad metro rail pro­ject is amongst the big­gest in­stances of PPP in In­dia he eight-mem­ber Vi­jay Kelkar Com­mit­tee’s re­port on pub­lic pri­vate part­ner­ships, which was sub­mit­ted to the fi­nance min­istry on Novem­ber 19, 2015, was re­cently made pub­lic. T

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.

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