Revamp PPP in infra, don't bury it: Kelkar panel

Separate law needed to boost PPP

A committee on Public-Private Partnership (PPP) in infrastructure sector has suggested a revamp of PPP model with a change in mind-set with all authorities dealing with it.

It has also recommended that the PPP contracts focus more on service delivery rather than on fiscal benefits.

 “India’s infrastructure deficit whether congested roads and ports, inadequate hospitals or wastewater treatment facilities, and slow trains-is a key factor constraining rapid, competitive economic growth and job creation and thereby imposing huge costs on society. Low productivity, poor competitiveness, high costs, and the slow pace of urbanization are some of the consequences of this deficit,” the Vijay Kelkar Committee report warned.

It said, there was “absolutely no time to lose in addressing this deficit” and advocated a successful and growing stream of PPPs in infrastructure for accelerating the country's development process.

The report, which was submitted to Finance Minister Arun Jaitley last month, was made public on Monday.

 “India will be the world’s most populated country before 2030, outgrowing China. Without sustained rapid economic growth and the resulting productive jobs, India will be unable to convert its demographic transition into a demographic dividend,” it said.

The Kelkar report is in line with the suggestions given by the Economic Survey this year which had raised an alarm that the current state of the PPP model was due to poorly designed frameworks, which needed restructuring.

Much like the current report, the Survey had also said that the existing contracts focused more on fiscal benefits than on efficient service provision. For example, in port and airport concessions, the bidder offering the highest share of gross revenue collected to the government was selected.

For funding, the Kelkar Committee report suggested that 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 also suggested there should be a provision for monetisation of viable projects that have stable revenue flows after engineering, procurement and construction delivery.

The report underlined the need for review the Model Concession Agreement (MCA) and ensure speedier resolution of disputes. For airports, it recommended the government encourage PPP model in greenfield as well as brownfield projects. It suggested an independent tariff regulatory authority for railways to help it tap PPP opportunities.