Govt to set up parallel PIB

The government will set up an approval system, parallel to the public investment board (PIB), to clear public-private partnership (PPP) projects in sectors like roads, ports, airports, power and tourism.

A PPP project appraisal committee, headed by the expenditure secretary will be set up to assess and approve projects.

This was decided at a meeting held yesterday between Finance Minister P Chidambaram and Planning Commission Deputy Chairman Montek Singh Ahluwalia. The committee will also include representatives from administrative ministries and the Planning Commission.

A PPP cell will also be set up under the Planning Commission to assist this committee. The meeting also approved the guidelines for assessing these projects. They will now be forwarded for the Cabinet approval.

A consensus already exists on the operationalisation of the special purpose vehicle (SPV) for infrastructure development. These, along with the viability gap fund guidelines, will form the blueprint for the governments' financing of big infrastructure projects.

"A large number of infrastructure projects are not financially viable and, therefore, need the viability gap funding simultaneously to complete the financial picture," said an official.

According to the proposed guidelines, the private partner will have to fund at least 40 per cent of the total equity to avail financial help from the SPV. The extent of viability gap funding is proposed to be capped at 20 per cent of the project cost.

Finance Minister P Chidambaram in the budget speech had said that infrastructure projects, which were financially viable, but faced difficulty in raising resources would be funded through the financial SPV.

The government was to decide the borrowing limit for the SPV for each year. For 2005-06, the borrowing limit was fixed at Rs.10,000 crore. A provision of Rs 1,500 crore for viability gap funding for infrastructure projects, to be used in conjunction with the SPV, was also made.

The projects were to be appraised by an inter-institutional group of banks and financial institutions. The SPV was to lend funds, especially debts of longer maturity, directly to eligible projects to supplement other loans.