Govt to rework PPP model, to push for infrastructure projects

Kelkar committee constituted to relook at the public private participation projects

GN Bureau | May 27, 2015


#infrastructure   #investment   #ijay kelkar   #arun jaitley   #ppp   #PPP   #public private participation  

The PPP (the public private partnership) has become a favourite model for building infrastructure projects and after encountering numerous hiccups the government has constituted a committee to relook and revitalise the model.

The panel’s terms of reference include reviewing the experience of PPP policy, analysis of risks involved in the projects and current framework of sharing of such risks. This would mean that the panel would have go for modifications to contractual arrangements of PPP, examine international best practices as well as institutional context.

Many private players have been seeking changes in contracts to make them more flexible for renegotiation, and to ensure land is bought beforehand.

Finance Minister Arun Jaitley in his budget speech for 2015-16 had made an announcement regarding re-visiting the existing PPP mode to execute such projects.

The 10-member panel to be headed by former finance secretary Vijay Kelkar has been entrusted to suggest ways on improving capacity building for effective implementation of PPP projects. Among the members of the committee are C S Rajan, Chief Secretary, Rajasthan Government; S B Nayar, CMD, IIFCL; Shekhar Shah, Director General, NCAER; Pradeep Kumar, MD, CBG, SBI; Vikram Limaye, MD, IDFC; P S Behuria, former IRS and Sudipto Sarkar, Barrister-at-law, Kolkata.

Also it contains a representative, not below the rank of joint secretary, from the Road Ministry as its member, while Sharmila Chavaly, Joint Secretary, Department of Economic Affairs, Finance Ministry is the Member Secretary.

The panel is likely to consult various stake holders in private sector, government sector, legal experts, banking/financial institutions and academia while firming up recommendations. Infrastructure Development Finance Company (IDFC) will provide secretarial assistance to the Committee.

The Committee has been asked to submit its report within three months.

The government wants private companies to contribute half of a $1 trillion investment target over five years to 2017 to alleviate clogged-up roads and end electricity blackouts.

But various issues have caused delays and prompted banks to cut credit lines, leaving scores of projects in limbo and deterring new investment.

Narendra Modi came to power after cutting the number of approvals needed for road projects in Gujarat, making it easier for investors to build dozens of new highways. He also restructured utilities to make Gujarat India’s only state with almost universal 24 hour electricity.

Road-building is particularly prone to PPP weaknesses. At least 600 billion rupees ($10 billion) worth of projects is unfinished, primarily because of difficulty obtaining the required land to lay, lengthen or widen roads.

However, the infrastructure investment target for 2017 is going to be missed.

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