- A committee reviewing public-private partnership (PPP) in infrastructure has suggested the revival of a defunct proposal to establish 3P India to support PPPprojects.
- It has also called for a rational allocation of risks among various stakeholders in a project, and moving away from the one-size-fits-all approach to PPP model concession agreements (MCAs).
- Recommended setting up independent regulators for PPP projects in various sectors and pushed for amendment to the Prevention of Corruption Act to clarify the difference between cases of graft and genuine errors in decision-making.
- It added the government should encourage development of airports, ports and railways through PPP, by ensuring easier funding for projects with long gestation periods.
- “PPPs are an important policy instrument that will enable India to compress time in its journey towards economic growth.
- A successful and growing stream of PPPs in infrastructure will go a long way in accelerating the country’s development process,” said the report, which was made public by the finance ministry on Monday.
- The committee strongly endorses the 3PI, which can function as a centre of excellence, enable research, and review and roll out activities to build capacity,” .
- For future PPP contracts, the panel suggested proper assessment of managing risk and that there should be a renegotiation framework in the bid document itself.
- “The adoption of the MCA has meant that project-specific risks are rarely addressed by project implementation authorities in this one-size-fits-all approach.
- A rational allocation of risks can only be undertaken in sector- and project-specific contexts.
- “The finance ministry should allow banks and financial institutions to issue zero-coupon bonds, which will also help to achieve soft landing for user charges in the infrastructure sector,” the report said.
- Other suggestions include restrictions on the number of banks in a consortium, building up of risk assessment and appraisal capabilities by banks, and specific guidelines to lenders for encashment of bank guarantees.
- It also suggested there should be a provision for monetisation of viable projects that had stable revenue flows after engineering, procurement and construction delivery.
|Roads:Increase concession period for BOT projects|
Ports: Move from pre-TAMP (tariff authority for major ports) to current-TAMP
Railways: Take up simpler projects first to build credibility
Power: Not many power projects are under PPP. But the sector has a far-reaching impact on infrastructure PPPs
Airports: Prepare a policy that addresses the expected growth parameters of the sector and promotes PPPs
- The report also said the private sector must be protected against the loss of bargaining power over long time spans. It noted that there was an urgent need to evolve a suitable mechanism to restart stuck PPP projects, taking lessons from the highways sector, where such projects have resumed.
- “There is an urgent need to evolve a suitable mechanism that evaluates and addresses actionable stress. Sector-specific institutional frameworks should be developed to address these stalled infrastructure projects,” it said.
- “The committee recognises the need for a quick, equitable, efficient and enforceable dispute-resolution mechanism for PPP projects. It is suggested that PPP contracts have clearly articulated dispute-resolution structures that provide flexibility to restructure within the commercial and financial boundaries of the project,” it said.
- The report stated that the PPP structure should not be adopted for small projects. It also said there was a need to attract viable long-term investors and to explore options for sourcing cheap long-term capital.
- “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, government departments supervising the PPPs, and auditing and legislative institutions providing oversight of the PPPs.