New PPP projects' oversight won't do: Industry

Last week’s important Cabinet decision, on an oversight mechanism for monitoring public-private-partnership (PPP) projects, has been termed a half-baked solution by industry. They’ve welcomed the initiative but fear this would just turn out to be another drag on their operations, besides that of a probe by the Comptroller and Auditor General’s office.

The announcement comes at a time when problems in the Delhi Airport Metro Express line have got mired in a blame game, with operator Reliance Infrastructure putting the entire onus on state-owned Delhi Metro Rail Corporation for defects in the structure because of which the services had to be suspended.

 

“The oversight mechanism cleared by the Cabinet is just a short-term fix,” says Vinayak Chatterjee, chairman of Feedback Infrastructure Services. He said a long-term solution would mean ‘truly independent’ regulators for various infra sectors, equidistant from the government, private developer and the consumer, for looking into appropriate policy frameworks, PPP structures, transparent bidding, performance oversight and dispute resolution.

M Murali, director-general, National Highways Builders Federation, believes putting in place the oversight mechanism was a good development, in the sense that it would lead to some accountability on both sides. “But we would expect the oversight committee to also look into the problems related to acquisition of land, among others, faced by road developers and leading to delay in project execution,” he stressed.

The institutional mechanism for monitoring of PPP projects, cleared by the cabinet, will have a two-tier system - a Projects Monitoring Unit (PMU) and a Performance Review Unit (PRU). Setting up a monitoring mechanism "will certainly help projects taken up in a PPP mode", according to Isaac George, non-executive director of GVK Power and Infrastructure Ltd and chief executive officer of the company's transport division.

"We wanted a monitoring committee from the Prime Minister's Office which would monitor and resolve all the problems and issues relating to PPP projects, like that of the Commonwealth Games Committee, comprising experts and which would ensure execution of the projects,” he said. “Though the mechanism cleared by the cabinet had deviated a bit from this, it would help implementation of PPP projects."

In the cabinet-approved plan, the PMU will monitor the performance of PPP projects at the project authority level and the PRU at the ministry or state government level. The PMU will give a report to the PRU within 15 days of the close of the relevant month. This is to cover compliance of conditions, adherence to time lines, assessment of performance, remedial measures and imposition of penalties. The PRU will review the reports by the different PMUs and oversee or initiate action for rectifying any defaults or lapses.

In addition to following the guidelines for the mechanism, the respective ministries will send a quarterly compliance report to the Planning Commission and the finance ministry. The Commission, in consultation with the finance ministry, will prepare a summary of these reports, with the recommendations relating to further action or improvements, to be placed before the Cabinet Committee on Infrastructure once every quarter for the next two years. According to Gajendra Haldea, advisor to the Commission deputy chairman, the system would ensure provisions of the concession agreements and applicable laws were enforced, with the ultimate aim of protecting the users from being short-changed.

Industry, however, wants a lot more. Chatterjee said infra developers had been asking for a world-class regulatory structure for seven years. “It is understood that the Planning Commission had prepared draft legislation to create a new architecture for truly independent regulatory authorities two years ago. Unfortunately, the political clearance to move ahead with that is yet to come. It is high time this is put on a fast track,” he stressed.