Kelkar panel suggests ways to revive PPP projects
The report of the committee on revisiting and revitalizing the PPP model was made public by the finance ministry. The high-level government panel, headed by former finance secretary Vijay Kelkar, suggested sweeping reforms to energise public-private partnerships (PPP) in the infrastructure sector. If the government signs off on the recommendations it would result in a major overhaul of the existing framework.
PPP or public-private partnership is "a long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility, and remuneration is linked to performance".
Currently, significant number of PPP projects have been stalled by legal disputes relating to financial issues. As per an estimate by Dept. of Economic Affairs, projects worth Rs.704,527 crore in different stages of implementation have been taken through PPP. According to Economic Survey, at the end of December 2014, the stock of stalled projects added up to Rs.8.8 trillion, or 7% of India's GDP.
The private investment in infrastructure sector has been slow since 2012-13. The slowdown is both in terms of award of new projects and also delays in implementation of already awarded projects. Some of the key problems include: rigidity of the existing Model Concession Agreement (MCA), contractual issues, delays in disputes resolution, issues related to infrastructure financing, etc,.
Over 90 per cent of the projects awarded on PPP mode in India are in the road sector. However, award of road projects has fallen significantly short of targets in the recent years (2012-13, 2013-14, 2014-15). The issues impacting PPPs in the highway projects include : aggressive bidding, land acquisition and environmental clearances, overleverage (creating assets on borrowed money beyond a sustainable level), etc.
The government on 26 May 2015, named Vijay Kelkar to head a 10-member committee that will recast the model of infrastructure development in which the government partners private firms.
In the railways sector, the panel recommended taking up simpler projects initially to build credibility. It also recommended setting up of regulatory authority to settle technical issues such as track-access charges. For ports, strengthening and accelerating environmental clearance was suggested. Further, it recommended providing support infrastructure (including land, reliable access to utilities, dredging, rail, roads) to the developer.
Kelkar committee strongly endorsed the proposal for 3P India for PPPs, an infrastructure think-tank that Jaitley proposed in the budget last year. It said 3PI can function as a centre of excellence, enable research, and review and roll out activities to build capacity.