No public-private partnership for projects below Rs 25 crore

The state government has decided that no project costing less than Rs 25 crore will be taken up under public-private partnership (PPP), a move authorities hope will revive the fledgling concept and attract investors.

So far, projects costing less than Rs 25 crore were approved for PPP, making them impractical for investors to participate in. The decision to fix a minimum threshold for PPP projects was taken at the first PPP empowered committee meeting of the Infrastructure Development Department (IDD) held recently.

“Smaller projects shouldn’t be the priority,” Additional Chief Secretary (infrastructure development) B H Anil Kumar, who heads the empowered committee, told DH.

Kumar said in the absence of a threshold, projects costing Rs 1-10 crore were offered under PPP and they ended up remaining on paper. “Which project partner will come forward if the cost of the project is small? It should make sense for the private partner to put in an effort. And, naturally, the private players should get some returns also,” he added.

Since 2007, buoyed by the success of the Kempegowda International Airport, Karnataka has approved 90 infrastructure projects under PPP. But, only seven of them have taken off, signifying fundamental flaws in the government’s approach.

The committee, during its maiden meeting, noted that the PPP policy of 2018 has generated little interest within the government. The policy, which was put in place when the Congress-JD(S) coalition was in power, covers 14 sectors with 96 sub-sectors. All 30 administrative departments have PPP cells that get trained on capacity-building by the IDD.

“In spite of repeated persuasion by IDD with departments to identify and propose PPP infrastructure projects, the response received is either nil or minuscule,” the committee said, according to the proceedings of the meeting, which DH has accessed. “There are misconceptions about PPP that need to be cleared at the lower level of the bureaucracy,” Kumar said. “Government servants, in general, are wary and that’s probably because they don’t understand PPP. Many fear that a PPP project, once grounded, comes back to haunt them,” he said, adding that PPP needed “application of mind”.

Further, the committee discussed enhancing viability gap funding (VGF) from 20 per cent to 30 per cent of the total project cost. VGF involves the government giving a capital grant for projects that are economically justified, but commercially unviable.

The IDD is developing project management software to track the creation of land parcels and the implementation of projects.

Check out the latest videos from DH: