Thank you, Dr Vijay Kelkar. And thanks, too, to all your esteemed committee members.
Since the early 2000s, the private sector has been asking for a level-playing field for public-private partnerships (PPP). But nobody listened. You have now clearly recommended the setting up of independent sector regulators with a unified mandate.
The private sector has repeatedly argued that the balance of power in PPPs was against it. But nobody listened. You have used an appropriate term to recognise this phenomenon - "Obsolescing bargain", whereby government authorities have the upper hand once a project is completed and concessionnaires lose their bargaining power. You have therefore recommended setting up a National Facilitation Committee for the resolution of prickly project issues.
From the mid-2000s, the private sector has been arguing that a "one-size-fits-all" type of model concession agreement was doing more harm than good. But nobody listened. You have now recommended a far more bespoke approach to concession structuring. More importantly, you have argued for a completely fresh approach to risk allocation. In fact, the hybrid annuity model and the revised format of ultra mega power project bids testify to the crying need to reset traditional risk allocation formats.
Since 2010, the private sector has been asking for a constructive approach to re-negotiating PPP projects in trouble. But nobody listened. Now you have suggested that PPP contracts must have a clearly articulated dispute resolution structure and that unforeseen "black swan" events do indeed necessitate amending the terms of the concession agreement. Thank you.
Through the 2000s, the private sector has been recommending a body for a unified approach to PPPs, whether central, state or departmental. But nobody listened. Your committee has now strongly suggested moving ahead with the 3P Institute without further delay. (It must be acknowledged that the hon'ble finance minister had indeed noted its necessity and announced it in his maiden Budget.)
The private sector has repeatedly pushed the "reverse BOT (build, operate, transfer)" model, citing the example of the Mumbai-Pune Expressway. But nobody listened. You have now endorsed this idea and recommended monetising existing infrastructure projects owned by the state, thereby also offering a clutch of brownfield projects to get more private sector involvement.
The private sector has been crying hoarse that relevant and justified commercial decisions are not taken over extended lengths of time by bureaucrats afraid of investigative repercussions. This gave rise to a "decision paralysis". But nobody listened. Your committee has recognised this and sought an amendment to the Prevention of Corruption Act, 1988, so that genuine commercial errors of judgement by officials are not penalised.
Sir, it is clear that your Committee on Revisiting and Revitalising the PPP Model of Infrastructure Development will stand out as a milestone in the economic history of PPPs and infrastructure in India. If one were to take the liberty of highlighting the areas where further work could be done to further the objective of revitalising PPPs, the following would suggest themselves:
Re-negotiation: Your committee has clearly recognised that the long tenure of PPP projects exposes them to the risks of "black swan" events, which necessitate re-negotiating the concession in good faith by all stakeholders. This then points to a permanent PPP re-negotiation mechanism, which has not been clearly articulated in your report. To the best of our understanding, the Infrastructure PPP Project Review Committee and the Infrastructure PPP Adjudication Tribunal that have been suggested are only for the limited purpose of addressing legacy problems. The chief economic advisor, in the last Economic Survey, suggested that the government set up an "independent re-negotiation commission for PPPs".
Swiss challenge: Your committee has taken a negative stand on the Swiss challenge method of procurement as not being able to pass the test of transparency and good governance. This may not necessarily be so. As this writer has argued in a previous Infratalk piece, "Swiss challenge, Indian style" (December 8, 2015), this method is able to bring in private sector project development capacity to supplement an already stretched public system. Moreover, there are ways and means available to make Swiss challenge bids amenable to fair play.
Role of states: With fiscal devolution and cooperative federalism, the role of state governments in creating and nurturing PPPs will be far greater. A framework is required for linking state PPPs to the mainstream of best practices.
Electricity distribution, irrigation and public housing: While your report dwells on issues in specific sectors such as roads, ports, airports and railways, it is important that as a nation we shape our thinking on three areas crying out for private involvement - electricity distribution, irrigation and public housing.
Development financial institution (DFI): Through the 1960s, 1970s and the 1980s, DFIs played a key role in making capital available for industrial development. A similar intervention has often been felt necessary for PPPs in infrastructure. A set of institutions was conceived to partially address this, starting from the Infrastructure Leasing & Financial Services Limited to the Infrastructure Development Finance Company Ltd and finally, the India Infrastructure Finance Company Limited. However for whatever reasons, the sector lacks a DFI, which could take long-term views on sector financing and development. The issue of whether the PPP movement could benefit from a DFI is still wide open.
Irrational bidding: Irrational bidding has been the bane of PPP projects. It is not a phenomenon that is guaranteed to go away on its own. Human nature, and the "unleashing of animal spirits" amongst entrepreneurs will continue to see this aspect queering the PPP pitch. A clear task ahead is to evolve formats that prevent irrational bids from being accepted.
Plug and play: Much of the stress in PPPs is because of hurried bid-outs without sovereign clearances. It is not just land acquisition, as rightly emphasised in the report, but a welter of other permissions encompassing forests, environment, utilities, defence and local authorities. It is important that no concessioning authority in future be allowed to bid out projects without all sovereign clearances first being in place. It is a tough condition, but absolutely essential.
Whilst these, and fresh issues will continue to arise as PPPs hopefully move forward again, it is clear that the Kelkar Committee has done a seminal service in charting the path for a PPP revival.
Thank you Dr Kelkar.
Vinayak Chatterjee is chairman, Feedback Infra. vinayak.chatterjee@feedbackinfra.com;
Twitter: @Infra_VinayakCh
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
