PPP risk rating draft to be finalised next week

Can the risk-rating system be made optional in private-public partnership (PPP) projects? This is an issue the finance ministry is looking into.

At present, risk rating system is a mandatory for all PPP projects.

"First, we want to test how the risk-rating system runs," an official source said.

Even as the Planning Commission opposed the idea of risk rating by a third party, the committee of the credit rating agencies "" ICRA, CRISIL, Fitch Ratings and CARE submitted a report recently, with the proposal to rank projects based on certain parameters on a 1 to 5 scale, 1 being the lowest and 5 the highest rank, both, at pre-bid and post-bid stages.

The four agencies have been assigned to develop a common rating methodology for the PPP projects.

"While the pre-bid rating is meant to gauge the viability of the project, the post-bid rating, after the special purpose vehicle is made and the developer is roped in, will be more crucial as it will take into account the strengths and weaknesses of the developer, construction being a major risk in the project. It will also help bring in investors," an official source added.

The draft paper will be finalised in a meeting between the finance ministry and the credit rating agencies on April 11. After that, the paper will be posted online and will be sent to the stakeholders for their feedback.

The finance ministry has scheduled a meeting of stakeholders on April 25 which will also be attended by the Reserve Bank of India, Securities and Exchange Board of India (SebiI), Insurance Regulatory and Development Authority among the other stakeholders.