Cabinet to discuss more teeth to FMC, PPP oversight today

A system to monitor and enforce concessionaires’ obligations in public-private partnership (PPP) projects and a long-pending proposal to strengthen the commodities futures market regulator are to come before the Union cabinet tomorrow.

The PPP issue was pending for some time and hastened at the insistence of the Prime Minister’s Office (PMO). Last month, the PM had himself taken up this issue and a note was prepared. It outlines what can be defined as transgressions by concessionaires and visualises a system of penalisation.

For instance, if a concessionaire is found levying user charges outside the limits specified; if public assets transferred to the concessionaire are misused; if there is leakage, diversion or misclassification of government revenues; if breach of contract, then recovering of penalties. All these are to be monitored, in a chain of escalating responsibility.

About 200 PPP projects are in operation in various infrastructure sectors. So far, there’s a single instance where a concessionaire was charged with falling short of the standards set out in the agreement signed with the government. Yet, hundreds of instances have been found where concessionaires shortchanged users of services and the government of revenue. In theory, nodal ministries are supposed to exercise vigilance. That nearly Rs 10 lakh crore outlay on PPP projects across Union and state government projects has yielded just one case of alleged breach (the matter is before a high court) suggests lack of monitoring.

The other issue, the consumer affairs ministry proposal to amend the Forward Contracts (Regulation) Act, 1952, has been pending for a little over five years. The amendments seek to entrust the Forward Market Commission (FMC) with more powers and also change some of the definitions in the earlier law to facilitate futures trading in indexes and options trading in individual commodities and indexes. In equity markets, trading is allowed in stocks, futures and indexes.

The FCRA amendments were first cleared through an ordinance. This had lapsed, as the 14th Lok Sabha could not clear the Bill, due to opposition from Left parties. Then, the cabinet again cleared the amendments in September 2010 and introduced the Forward Contracts (Regulation) Amendment Bill, 2010, in Parliament. This was referred to a standing committee of MPs. Officials said the panel had numerous suggestions, many of which did not find favour with the consumer affairs ministry.

The original amendments had sought to increase the penal provisions, along with changing the composition and functioning of the FMC. Experts said the main beneficiaries of the reforms would be companies producing commodities or using these as raw materials, since options would provide them more security in volatile markets.