State pushes for PPP in infrastructure

Although the State government has been chanting the Public Private Partnership (PPP) mantra for years, the response from the private sector has been lukewarm.

This has not deterred the government from exploring PPP as an effective option for infrastructure development. According to officials, infrastructure development through the PPP mode is a priority sector for the second edition of the Global Investors Meet (GIM), scheduled for June 7 and 8.

As many as 190 infrastructure projects worth about Rs 2.24 lakh crore across eight sectors – transport, urban infrastructure, tourism, markets, industrial infrastructure, health, energy and education – will be promoted during the event.

A cursory look at the PPP’s project database of the State Infrastructure Development Department - a nodal agency responsible for implementing projects - offers an insight into the project’s status within the State. Some 300 projects dot the database.

But of these, only about a dozen projects have suceeded in finding private investment in the last decade. They include the Bangalore-Mysore Infrastructure Corridor project, the Bengaluru International Airport, four-laning of Bangalore-Mysore highway, minor airports at Shimoga, Gulbarga and Bijapur towns and the development of 10,000 kms of road.

Other ambitious proposals have simply failed to take off, whether it be a high-speed rail project to the Bengaluru International Airport or a monorail network in Bangalore or the Bidadi integrated township, there is a long list of unfulfilled projects which have been waiting years for private investment.

Interestingly, a majority of projects that the government has decided to promote at the GIM have been on the Infrastructure Development Department database for years, stalwarts without financial backing or interest. According to offical sources, the government will invite a Registration of Interest from investors in order attract support.

But the lack of a clear-cut policy and unnecessary political meddling have crippled state projects, according to offical sources. The proposed Bidadi integrated township is a case in point. The mega project was awarded to the Delhi-based company, DLF, in 2006 by the-then JD(S)-BJP government.
A successive BJP government scrapped it upon entering office. Then inexplicably decided to tender it again for investment. During the 2010 GIM, the project was the subject of a Registration of Interest, which produced no takers.

Similarly, the Bangalore-Mysore Infrastructure Corridor, the first mega-infrastructure PPP project in Karnataka, is mired in land-related controversies. The project is incomplete even though it was signed into agreement 16 years ago. Several big-ticket projects like the Proposed Special Economic Zone at Nandagudi in Bangalore rural district, the Peripheral Ring Road around Bangalore have also suffered due to political interference, sources said.

The absence of guidelines and tender documents is also a handicap for the government regarding the implemention of PPP projects. But this may be changing. Sources said that the centre has recently come out with model guidelines.

Hurdles cleared

The government has now scrambled to take initiatives in order to attract private investment in public projects, including passing separate legislation concerning infrastructure.

“The Bill seeks to set up the Karnataka Infrastructure Authority to approve and oversee timely implementation of PPP projects.

The Authority, headed by the Chief Secretary, will have the final say and there will not be scope for making any adhoc changes in the project,” said Rajkumar Khatri, Principal Secretary, Infrastructure Development Department.
In addition, the government has decided to provide viability gap funding above what the central government offers.

According to Khatri, the Karnataka Viability Gap Fund with an initial corpus of Rs 500 crore will be set up for this purpose.

“Moreover, all the projects that the government is offering during the GIM have been identified as ‘feasible’ by professional agencies. Hence, we are expecting a good response from investors,” he said.

Expectations

BCIC looks at the GIM-2012 as a forum where the concerns of the industries are being addressed so that the government can take appropriate actions to make the State more investor-friendly.

Vinod Nowal, president,
Bangalore Chamber of
Industry and Commerce

GIM-2012 will prove a great opportunity for Small and Medium Enterprises (SME) to interact with the big players. SMEs are emerging as the backbone of development and there is a need to strengthen the sector.

J Crasta, president,
Federation of Karnataka Chambers of Commerce and Industry

The event will provide a much needed booster dose for the manufacturing sector. At the same time, the government can simplify the rules for running SME. At present, SMEs are controlled by more than 30 departments.

Prakash Raikar
president, KASSIA