The proposal for a trust to be at the helm of the Delhi-Mumbai industrial corridor project is being viewed with scepticism by the Planning Commission. Even though the cabinet cleared the $90-billion project in September last year, the commission is concerned that the trust being not under strict regulatory gaze as companies, the proposed model for managing finances of the project could become less than transparent in practice.
As per the cabinet decision, the funds (contributed by Japanese financial institutions as debt) will be held by a trust which will then make further investments in special purpose vehicles (SPVs) created for each state where the corridor pass through.
The SPVs will be directly responsible for building the trunk infrastructure for the project.
A senior planning commission official told FE, ?Our issues are very simple. We do not endorse the trust format and we want a more transparent set-up for public projects.?
The department of industrial policy and promotion (DIPP), however, reckons that the Commission’s apprehensions are baseless.
Talking to FE, former DIPP Secretary RP Singh, who initiated the project said that although DMIDC was a private company with ILFS and IDFC as the major shareholders, with the Cabinet decision, the two firms were made to exit and their equities were transferred to LIC and IIFCL, both government firms.
?As a result the DMIDC has now become a deemed Government company. This was done to avoid any conflict of interest in future and to ensure that the upsides from the project are not shared with any private company,? Singh said.
Highlighting the potential upside of the DMIDC project and the fact that it would be bidding for projects after de-risking them fully by obtaining necessary government approvals, the trust model was considered ideal.
?The trust will be the repository of all the grants from the government from where the equity will flow to different SPVs of DMIDC. The upside will again flow back into the trust,? Singh explained.
The Planning Commission also feels that the trust and the investors should have different advisors to avoid conflict of interest.
Sources said despite the DIPP’s efforts to provide clarifications to the planning commission and convince it of the utility of the current model, the commission continues to be wary. ?If we have to amend or bring changes then again DIPP will only have to move a fresh cabinet note which we do not intend to,? said the DIPP official.
Singh said since the trust would be headed by the Secretary, department of economic affairs and would have other secretaries to the Government of India as trustees, transparency can be ensured.
?This is a very innovative structure where full accountability is ensured and conflict of interest is totally avoided,? he said. The finance ministry is totally in agreement with the trust model.
The project proposes to develop self-sustainable, smart cities on either side of the 1,483km western dedicated rail freight corridor between Dadri in Uttar Pradesh and Jawaharlal Nehru Port Trust in Navi Mumbai.
The corridor will run across six states?Uttar Pradesh, Haryana, Madhya Pradesh, Rajasthan, Gujarat and Maharashtra?and a majority of the projects in the corridor are envisaged to be implemented through public-private partnerships.
