Vijay Kelkar-headed panel on revitalisation of public-private-partnership (PPP) model of infrastructure development will submit its report to Finance Minister Arun Jaitley by the end of this month. The panel has held wide consultations with stakeholders on the issue of reviving PPP model.
Physical infrastructure is an integral part of development of an economy and provides basic services that people need in their every day life. Well developed physical infrastructure provides key economic services efficiently, improves the competitiveness, extends vital support to productive sectors, generates high productivity and supports strong economic growth.
Over the years, the basic infrastructure in India has been developed to an extent, which is not sufficient enough while considering India’s geographical and economic size, its population and the pace of overall economic development. Infrastructure bottleneck has been a serious concern in India and basic infrastructure like roads, railways, ports, airports, communication and power supply are not comparable to the standards prevalent in its competitor countries.
To develop the Indian infrastructure to a world class and to remove the infrastructure deficiency in the country, the investment requirements are mammoth, which could not be met by the public sector alone due to fiscal constraints and mounting liabilities of the Government. This would call for participation of private sector in coordination with the public sector to develop the public infrastructure facilities.
In this direction, the economic reforms initiated in the country provide forth the policy environment towards public-private partnership (PPP) in the infrastructure development. Sector-specific policies have also been initiated from time to time to enhance the PPP in infrastructure building. While the PPP is spreading to develop basic infrastructure world wide, in India, the participation of private sector in the infrastructure building has not been much encouraging, despite several rounds of policy reforms.
In the Indian context, the term PPP is used very loosely while at the international arena. According to Ministry of Finance Government of India the PPP project means a project based on a contract or concession agreement, between Government or statutory entity on the one side and a private sector company on the other side, for delivering infrastructure service on payment of user charges. This is a narrower definition as compared to world best practices where the private sector participation in any form of concession agreement, divestiture of the public sector, greenfield projects and management and lease contract are considered as PPP.
The Planning Commission of India (now NITI Aayog) has defined the PPP in a generic term as “the PPP is a mode of implementing government programmes/schemes in partnership with the private sector. It provides an opportunity for private sector participation in financing, designing, construction, operation and maintenance of public sector programme and projects”. In addition, greenfield investment in the infrastructure development has also been given more encouragement in India.
Read – Electronics Development Fund Becomes Operational
During his Budget Speech 2015-16 in Parliament, the Union Finance Minister Arun Jaitley had announced that the PPP mode of infrastructure development has to be revisited, and revitalized, in which the major issue involved is rebalancing of risk. In pursuance of this announcement, a Committee comprising of the following members has been constituted:
- Dr. Vijay Kelkar, Chairman
- C.S. Rajan, Member
- S.B. Nayar, Member
- Shekhar Shah, Member
- Pradeep Kumar, Member
- Representative of Ministry of Road Transport & Highways – not below the rank of Joint Secretary, Member
- Vikram Limaye, Member
- Sudipto Sarkar, Barrister-at-law, Kolkata, Member
- P.S. Behuria, IRS (Retd.), Member
- Ms. Sharmila Chavaly, Member Secretary
Read – RBI Releases Bi-monthly Monetary Policy
TERMS OF REFERENCE
- Review of the experience of PPP Policy, including the variations in contents of contracts and difficulties experienced with particular variations/conditions, if any,
- Analysis of risks involved in PPP projects in different sectors and existing framework of sharing of such risks between the project developer and the Government, thereby suggesting optimal risk sharing mechanism,
- Propose design modifications to the contractual arrangements of the PPP based on the above, and international best practices and our institutional context, and
- Measure to improve capacity building in Government for effective implementation of the PPP projects.
Infrastructure Development Finance Company (IDFC) shall provide secretarial assistance to the Committee. The Committee shall submit its report within a period of three (3) months from the date of its Constitution.
(The private sector designs, builds, owns, develops, operates and manages an asset with no obligation to transfer ownership to the government. These are variants of design-build-finance-operate (DBFO) schemes.)
Wrap-around addition (WAA)
(The private sector buys or leases an existing asset from the Government, renovates, modernises, and/ or expands it, and then operates the asset, again with no obligation to transfer ownership back to the Government.)
(The private sector designs and builds an asset, operates it, and then transfers it to the Government when the operating contract ends, or at some other pre-specified time. The private partner may subsequently rent or lease the asset from the Government.)