A panel, headed by former finance secretary Vijay Kelkar, and tasked with examining and suggesting reforms for the public-private partnership (PPP) model in infrastructure projects, might recommend the reviving of plans to launch a permanent advisory body called 3P India, Business Standard has learnt.
The 10-member committee, constituted on May 26, has till end-August to submit its report. It is also likely to recommend the need for better pitching to private sector investors of the success stories in PPP, especially in roadways and ports. It might also recommend ways to improve dispute redressal mechanisms through better exit models for investors.
Senior officials who are aware of the deliberations of the Kelkar committee on PPP, said if 3P India is set up as proposed in the 2014-15 Budget by Finance Minister Arun Jaitley, it can serve as an advisory body with a longer-term mandate to review, examine, and suggest reforms and changes in the PPP model, as compared to panels with short-term terms of reference like the committee itself.
“Discussions in the panel have, among other topics, centred on the need for 3P India. It could be a ‘centre for excellence’ for PPP projects which could hire the best talent from finance, infrastructure, government, private sector and academia to study global-best practices, review current contractual arrangements of such partnerships, and work upon improving the PPP model for infrastructure financing,” a senior official said.
Presenting his first Budget, Jaitley had said last year: “PPPs have delivered some of the iconic infrastructure like airports, ports and highways, which are seen as models for development globally. But we have also seen the weaknesses of the PPP framework, the rigidities in contractual arrangements, the need to develop more nuanced and sophisticated models of contracting and develop quick dispute redressal mechanism. An institution to provide support to mainstreaming PPPs called 3P India will be set up with a corpus of Rs 500 crore.”
According to reports, 3P India was likely to be a non-profit company on the lines of the National Skill Development Corporation, without regulatory power, but with the mandate to look at a whole gamut of issues obstructing the growth of PPPs in India such as model concessionaire agreements, bidding process, dispute resolution mechanism. It was said the government would have a 49 per cent stake in the body.
A National Investment and Infrastructure Fund (NIIF), with a similar stake by the Centre, was notified last week but with the intention of funding pro-jects rather than advising on these.
For 3P India, a Cabinet note was prepared and sent for the Union Cabinet’s approval. But for reasons unknown to them, it was never taken up at the top level and hence, the proposed Rs 500 crore was not released, officials say.
The Kelkar panel, officially called the Committee on Revisiting & Revitalising the PPP Model of Infrastructure Development, was tasked with reviewing PPP policy, analysing the risks involved in PPP projects in different sectors and the existing framework of sharing of such risks, suggesting an optimal risk-sharing mechanism between private investors and the government, and suggesting measures to improve capacity building in government for effective implementation of the PPP projects.
Apart from Kelkar, the panel comprises Rajasthan Chief Secretary C S Rajan, and Managing Director of IIFCL S B Nayar, among others. From the central government, a joint secretary each from the Roadways Ministry and the Finance Ministry are part of the panel. Sources confirmed that the meetings of the panel were still underway and hence no recommendation had been firmed up yet.
"The panel will have more meetings. There is also a need to pitch the success stories in PPP and dispel the uncertainties s surrounding the model and infrastructure in general. The Centre needs to talk more about the implemented PPP projects, like in the roads and port sectors. The existing perception has been built around the failures, like in some power and metro rail projects," the official said.
The efforts to suggest a revitalisation of PPP comes at a time when the government's focus is on increased public spending in infrastructure to boost economic growth, at a time of weakened corporate sector balance sheets. This year, the central government is likely to spend an additional Rs 70,000 crore in capital expenditure. In fact, the capital spending for the April-September 2015 could be the highest ever, when compared with similar periods in past financial year.
It is believed that a streamlined PPP model, with more realistic contractual arrangements and better dispute mechanism with exit provisions will once again attract more private players.