Big names like Reliance Energy, Tata Power, Jindal Steel, Tata Reality and Infrastructure, IL&FS, IDFC have shown interest.
PURA, the pet theme of former President Abdul Kalam -- Provision of Urban Amenities in Rural Areas — is going the private-public-partnership way. The central government is set to tie up with top infrastructure companies on this.
The idea is to use a PPP between Centre, states and private companies to develop panchayats or clusters of panchayats, using a financial model that the rural development ministry says has not been tested before anywhere. It also raises constitutional questions on the rights of panchayats, since these bodies do not seem intended to be a signatory in the agreements planned in this regard.
The rural development ministry had sought expression of interest from private companies for such projects. Yesterday, it announced having got applications from 98 companies. These include big names like Reliance Energy, Tata Power, Jindal Steel, Tata Reality and Infrastructure, IL&FS, IDFC, NEPC and so on.
The PPP revenue model has been opted for as the ministry feels its schemes have failed to make an impact on rural development. "Despite spending Rs 75,000 crore on rural development every year, there is little impact in the form of any rural transformation. There is an absence of simultaneity in the programmes and there is also a lack of maintenance of the projects," says Arvind Mayaram, financial advisor in the ministry, credited with developing the PPP model on the issue.
Charge to private developers
The business model prepared for the project includes handing over of all schemes under the ministry like drinking water, employment guarantee, sanitation, road building, etc, as well as schemes under other ministries at the level of the panchayat or cluster of panchayats, to be run by the private developer for 10 years. The developer will also be free to set up revenue-generating add-ons like a rural tourism hub, warehouses, rural markets and so on, says rural development secretary B K Sinha.
The programme is so designed that the cost of maintenance of the amenities like water supply, sanitation, electricity and gaps in infrastructure funding through different government schemes would be paid by the government through a viability gap funding arrangement for 10 years. This would be 35 per cent of the total project cost. The maximum grant a developer may get would be Rs 42 crore and thus the cost of a project may not exceed Rs 120 crore, the ministry says. The developer would get a minimum return of 12 per cent, says Mayaram.
Safeguards
The government says it is aware of the dangers of handing over development of villages to private builders and developers. So, it has added a clause in the agreement that land acquisition would not be allowed in the project areas.
The ministry also says that there would no encroachment into the powers of the panchayats. But, the agreements being signed do not have the panchayats or gram sabhas anywhere -- they are between the Centre, state and the private parties.
According to Mayaram, the state governments have all expressed interest in the scheme and no objections have been raised so far. Where there is objection, the PURA wont go, he says.
Asked if National Rural Employment Guarantee Scheme funds would now be available to the private developer in the PURA project villages, Sinha said they may use part of the funds, wherever needed for development of village infrastructure.
The first PURA PPPs would be ready for signing by December, when 10 project areas would be identified by the companies that are shortlisted. The reason is that the funds available for PURA in the current Plan are only Rs 248 crore, sufficient only for 10 projects. More villages may be taken up for PURA development in the next five-year Plan, the ministry says.
