Joining Hands

Written by Ravindersingh | Ravinder Singh | Updated: Nov 14 2012, 09:08am hrs
Public-private partnership (PPP) is an effective tool for bringing private sector efficiencies in creation of economic and social infrastructure assets and for delivery of quality public services. The extent of private sector participation in creation of infrastructure, especially through PPP, has shown a promising increase in recent years.

As of January 2012, there were 881 PPP projects with a total project cost (TPC) of R543,045 crore as compared to over 700 projects with TPC of R371,239 crore by March 2011. These projects are at different stages of implementation i.e. under bidding, construction and operational stages. The broad sectors encouraged under the PPP framework are highways, railways, ports, airports, power and urban infrastructure.

The appraisal mechanism for the PPP projects has been streamlined to ensure speedy appraisal of projects, eliminate delays, adopt international best practices and have uniformity in the appraisal mechanism and guidelines. The appraisal mechanism notified includes setting up of the Public-Private Partnership Appraisal Committee (PPPAC) responsible for the appraisal of PPP projects in the central sector. Since its constitution in January 2006, the PPPAC has granted approval to 223 projects, with a total project cost of R212,819.50 crore.

Standardised bidding and contractual documents have been notified. These include model request for qualification (RFQ); request for proposal (RFP) and RFP for technical consultants; Model concession agreements (MCAs) for different sectors, including highways (both national and state highways), ports, urban transport (Metro) and power sectors, and the 'manuals of standards & specifications' have been developed and standardised.

Further, project sponsors are encouraged to take up projects through a transparent, open competitive bidding process, which leads to greater transparency and consistency to the bid process and terms of contract.

Sectoral distribution

The maximum number of PPP projects have been undertaken in the road sector with 447 projects, constituting 51.6% of the total projects. This was followed by the urban development sector with 177 projects (22.4%), energy with 77 projects (8.9%), ports with 62 projects (7.2%) and tourism with 55 projects (6.4%). In all, 225 projects have been completed whereas 410 are under various stages of construction and 184 under the bidding stage and the remaining in other various stages.

State-wise, Karnataka had the maximum of 105 projects with a total cost of R44,459.85 crore under PPP, followed by Andhra Pradesh with 98 projects at a project cost of R67,696.31 crore, Madhya Pradesh, 86 projects (R14,928.7 crore), Maharashtra, 76 projects (R45,916.34 crore), Gujarat, 72 projects (R45,315.02 crore), Rajasthan, 65 projects (R16,479.5 crore), Tamil Nadu, 50 projects (R21,491.04 crore), Haryana 35 projects (R67,840.57 crore), West Bengal, 34 projects (R6,849.8 crore) and Orissa (R22,652.88 crore), Kerala (R22,281.54 crore) and Punjab (R4,653.7 crore) with 32 projects each.

Viability gap funding

A unique characteristic of infrastructure projects is that the positive externalities caused by the projects cannot be captured by project revenues alone. Hence, a project may be economically essential but commercially unviable. Such projects, which are marginally viable or unviable, can be made financially attractive through a grant. The viability gap funding (VGF) scheme was devised for financial support to PPPs in Infrastructure. It provides VGF support to PPP projects up to 20% of the total project cost.

So far, 131 projects have been granted approval with a TPC of R67,237.47 crore and VGF support of R13,077.28 crore. An amount of R617.00 crore has been disbursed as VGF under the Scheme for Financial Support to PPPs in Infrastructure.

The following sub-sectors have been included in the list of sectors eligible for VGF support under the Scheme for Financial Support to Public Private Partnerships (PPPs) in Infrastructure i.e. Viability Gap Funding Scheme.

Capital investment in the creation of modern storage capacity, including cold chains and post-harvest storage.

Education, health and skill development, without annuity provision

Infrastructure projects in Special Economic Zones and internal infrastructure in National Investment and Manufacturing Zones

Oil/gas/liquefied natural gas storage facility (includes city gas distribution network); oil and gas pipelines (includes city gas distribution network); irrigation (dams, channels, embankments etc.); telecommunications (fixed network and includes optic fibre/wire/cable networks which provide broadband/Internet); telecommunication towers; terminal markets; common infrastructure in agriculture markets; and soil testing laboratories. The scope of VGF scheme to support PPP projects in infrastructure has also been extended to attract private investment. The Delhi-Mumbai Industrial Corridor (DMIC) is being developed on either side along the alignment of the Western Dedicated Rail Freight Corridor with central assistance of R18,500 crore spread over a period of five years.

Projects under IIPDF

The India Infrastructure Project Development Fund (IIPDF) assists projects that closely support the best practices in PPP project identification and preparation. The IIPDF supports up to 75% of the project development expenses. So far, 51 projects have been approved with an IIPDF assistance of R64.51 crore.

Capacity building

To intensify and deepen capacity building of public functionaries at the state and municipal levels and to integrate the capacity building programme on PPPs in the ongoing programmes at the state level, a comprehensive National PPP Capacity Building Programme has been developed by department of economic affairs (DEA), which has been rolled out at the state level in collaboration with KfW German Development Bank. Under it, eight different programmes have been conducted and 155 trainers of trainers (ToTs) have been covered. Fifteen states and two central training institutes viz. Indian Maritime University and Lal Bahadur Shastri National Academy of Administration have rolled out training programmes on PPPs and have trained over 700 public functionaries who deal with PPPs in their domain.

Online Database

An online database on PPP projects and the website have been developed. The purpose of the website is to provide comprehensive and current information on the status and extent of PPP initiatives in India at the central, state and sectoral level. The potential use of PPPs in e-governance, health and education sectors remains largely untapped across India , though of late there have been some activities shaping in these sectors.

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