The Union Ministry of Finance on 28 December 2015 released the report of the Committee on Revisiting and Revitalising Public Private Partnership (PPP) Model. The 9-member committee was headed by former Finance Secretary Vijay Kelkar and submitted its report on 19 November 2015.
The committee was constituted on 26 May 2015 to review the experience of PPP Policy and suggest measures to improve capacity building in Government for their effective implementation.
More importantly, the committee recognized the PPP Model in infrastructure as a valuable instrument to speed up infrastructure development in India.
Hence, it called for PPP contracts need to focus more on service delivery instead of fiscal benefits alone.
The recommendations of the committee are of relevance to the overall growth of the economy as PPP projects have become the preferred mode to develop large scale infrastructure projects.
At present, over 12007 PPP projects are under implementation across the country, involving about 7.2 lakh crore rupees worth of investment.
Key recommendations of the committee
• Significance: Speeding up of the PPP model is urgently required for India to grow rapidly and generate a demographic dividend for itself and also to tap into the large pool of pension and institutional funds from aging populations in the developed countries.
• India’s success in deploying PPPs as an important instrument for creating infrastructure will depend on a change in attitude of all authorities dealing with PPPs-public agencies, government departments supervising and auditing and legislative institutions.
• The Government may take early action to amend the Prevention of Corruption Act, 1988 which does not distinguish between genuine errors in decision-making and acts. This is necessary to make only malafide action by public servants punishable and not errors.
• Experience has also underlined the need to further strengthen the three key pillars of PPP frameworks namely Governance, Institutions and Capacity, to build on the established foundation for the next wave of implementation.
• The Committee strongly endorsed setting up of the “3PI” which can, in addition to functioning as a centre of excellence in PPPs, enable research, review and roll out activities to build capacity, etc.
• Independent regulators should be set up with a unified mandate that encompasses activities in different infrastructure sub sectors to ensure harmonized performance by the regulators.
• Model concession agreements be issued only when 80 per cent of the land for a project has been acquired.
• The committee advised against adopting PPP structures for very small projects, since the benefits of delivering small PPP projects may not be commensurate with the resulting costs and the complexity of managing such partnerships over a long period.
• Unsolicited Proposals (“Swiss Challenge”) may be actively discouraged as they bring information asymmetries into the procurement process and result in lack of transparency and fair and equal treatment of potential bidders in the procurement process.
• Since state owned entities SoEs/PSUs are essentially Government entities and work within the government framework, they should not be allowed to bid for PPP projects.
• The Committee recommended the government to notify comprehensive guidelines on the applicability and scope of access to, under RTI and Art 12 of the Constitution, and auditing of financial related matters in order to avoid any delays in public asset provision.
• Banks and financial institution should be encouraged to issue Deep Discount Bonds or Zero Coupon Bonds (ZCB) to mobilise long term capital at low cost.
• Ministry of Finance may develop and publish a national PPP Policy document and it should be endorsed by the Parliament to impart an authoritative framework to implementing executive agencies as well as to legislative and regulatory agencies charged with oversight responsibilities.
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When: 28 December 2015