Govt considers revival of public-private alliances

With private investment in infrastructure project nearly stagnant, the government is keen to revive the public-private partnership (PPP) programme. The finance ministry has called for a meeting of stakeholders, including private developers and industry associations, next Monday to discuss possible changes in PPP policy.

PARTNERSHIP REDUX

• The government has been trying to revive PPP after contractual issues, financial overhang and delays in clearances have stalled private investment in new projects
• It had envisaged half of $500 billion investment in the infra sector to come from the private sector during the 12th Plan period ending March 2017
• Projects worth Rs 7,04,527 crore in different stages of implementation have been taken up through the PPP mode. This is 27% higher than Rs 1,87,107 crore worth of projects taken up purely through private investment

A senior government official told Business Standard that the meeting is expected to last a few hours to get a shortlist of suggestions and ideas on PPP in the run-up to the Budget. The meeting, which will be presided over by Economic Affair Secretary Shaktikanta Das, will be the third such meeting with stakeholders after two rounds of meeting with economists and financial institutions.

The government has been trying to revive PPP after contractual issues, financial overhang and delays in clearances have stalled private investment in new projects. In May this year, it had set up a committee under former Finance Secretary Vijay Kelkar to review the PPP policy, including the variations in contents of contracts and difficulties experienced with particular variations/conditions, if any. Since PPP projects are bound to long-term contracts lasting up to 30 years, tackling unexpected changes in conditions of operation is increasingly becoming difficult. The committee will also analyse risks involved in PPP projects in different sectors and existing framework of sharing of such risks between the project developer and the government, thereby suggesting optimal risk-sharing mechanism.

Besides the finance ministry, the Kelkar Committee had carried out consultations with the private developers of PPP projects. Officials said the committee would submit its report by early November. The committee was originally expected to submit its report by August.

The committee is likely to suggest design modifications to the contractual arrangements of the PPP and measure to improve capacity building in government for effective implementation of PPP projects. Besides Kelkar, the other members of the committee include S B Nayar, chairman and managing director of IIFCL, and Shekhar Shah, director-general, NCAER.

The Union government had envisaged half of $500 billion investment in the infrastructure sector to come from the private sector during the 12th Plan period ending March 2017. According to an estimate of the department of economic affairs, projects worth Rs 7,04,527 crore in different stages of implementation have been taken up through the PPP mode. This is 27 per cent higher than Rs 1,87,107 crore worth of projects taken up purely through private investment.