Kelkar committee for easier funding for PPP projects

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SME Times News Bureau | 29 Dec, 2015
The committee on reviving the public-private partnership (PPP model) of infrastructure development has suggested that the government should encourage easier funding for projects with long gestation periods.

"PPPs are an important policy instrument that will enable India to compress time in this journey towards economic growth and development. A successful and growing stream of PPPs in infrastructure will go a long way in accelerating the country's development process," said the report by the Vijay Kelkar Committee, which was released by the finance ministry on Monday.

"The finance ministry should allow banks and financial institutions to issue zero coupon bonds, which will also help to achieve soft lending for user charges in infrastructure sector", it said.

According to the report, the government "must move the PPP model to the next level of maturity and sophistication" and foster trust between private and public sector partners in implementing PPP projects.

It also suggested that there should be provision for monetisation of viable projects which have stable revenue flows after engineering, procurement and construction delivery.

The other suggestions include restrictions on number of banks in a consortium, building up of risk assessment and appraisal capabilities by banks and specific RBI guidelines to lenders for encashment of bank guarantees.

"There is an urgent need to evolve a suitable mechanism that evaluates and addresses actionable stress. Sector specific institutional frameworks should be developed to address these stalled infrastructure projects," it said.

The report also underlined the need for reviewing the Model Concession Agreement (MCA) and ensure speedier resolution of disputes.

The committee called upon all parties concerned to foster trust between private sector and public sector partners for making PPP model a success.

"The success of deploying PPP as an additional policy instrument for creating infrastructure in India will depend on the change in attitudes and mindsets of all the authorities including public agencies partnering the private sector, government departments supervising the PPPs, and auditing and legislative institutions providing oversight of the PPPs," it said in the report.

The panel proposed an Infrastructure PPP Project Review Committee (IPRC) with one expert each from economics background and one or more sectoral experts preferably engineers, and legal experts, with a mandate to evaluate and recommend in a time-bound manner on a reference being made of "actionable stress" in any infrastructure project developed in PPP mode beyond a notified threshold value.

The committee also proposed setting up of an Infrastructure PPP Adjudication Tribunal (IPAT) chaired by a judicial member with a technical and financial member.