Private players will be able to exit PPP projects in all sectors
NEW DELHI: The revised framework for public private partnership (PPP) projects in India will offer an exit options for private players in all sectors, including power, railways and SEZs, among others. At present, only road projects under the PPP model have an exit clause.
PPPs, awarded through a competitive bidding process, are typically very high-value contracts, often with huge capital and operating costs, making it difficult for developers to cope with financial losses. Besides, difficulties in land acquisition and environment clearances often lead to delays and litigation. In some cases, PPP projects can even extend up to 30 years.
According to the Centre for Monitoring Indian Economy (CMIE0, the total value of stalled projects stood at around ₹11.2 lakh crore as of June 30, 2016, with 75% of the projects belonging to the private sector.
The Centre last year allowed developers to exit highway projects two years after completion.
“There is no question of stalling the PPP model…we are just revising it,” said a senior finance ministry official who did not wish to be identified. “The PPP model has been a success. We admit certain projects have landed problems but those were related to unforeseen events such as availability of coal. In the revised model, we will plug those holes and ensure that in cases of stalemates due unforeseen events, private players can have an easy exit and bring in fresh blood without hindering the project execution.”
Apart from the exit clause, the government has also asked the PPP cells in various ministries to study the reasons behind delayed projects. “A list of such projects is being made, and the reasons for the delay will be analysed,” said the official quoted earlier.
According to sources, once the reasons are analysed and solutions provided, the Project Monitoring Group will start tracking the progress of the projects.
“The concept of allowing changes in the PPP contract to aid exit of private players is underway in the road sector. The power ministry has started experimenting with it,” another finance ministry official said. In fact, the ministry has identified hydroelectric projects in the north-east, where it will allow private players to exit, a source said.
The Vijay Kelkar panel report on the PPP model for infrastructure development, released last year, had also suggested that the private sector needs to be protected in case of “abrupt economic or policy changes.”
Meanwhile, minister of finance for state Arjun Ram Meghwal on Sunday said the government can use the PPP mode to optimally utilise idle assets of public sector units to promote skill development and generate new jobs.