Kelkar panel suggests easier funding for PPP projects

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A committee on reviving PPP model has suggested the government should encourage development of infrastructure sectors, including airports, ports and railways under the public private partnership mode by ensuring easier funding for projects with long gestation period.

The host of recommendations suggested by the Vijay Kelkar Committee, include review of the model concession agreements, raising of funds through zero coupon bonds and setting up of independent sectoral regulators.

“PPPs are an important policy instrument that will enable India to compress time in this journey towards economic growth and development. A successful and growing stream of PPPs in infrastructure will go a long way in accelerating the country’s development process,” said the report, which was made public by the Finance Ministry today.

The report was submitted by Kelkar to Finance Minister Arun Jaitley last month.

With regard to stalled PPP projects, the committee said it needs to be kick started.

“There is an urgent need to evolve a suitable mechanism that evaluates and addresses actionable stress. Sector specific institutional frameworks should be developed to address these stalled infrastructure projects,” it said.

The report said there should be a better identification and allocations of risks between the stakeholders and the contracts for the PPP projects should focus more on service delivery instead of fiscal benefits.

The government, it said, “must move the PPP model to the next level of maturity and sophistication” and foster trust between private sector and public sector partners in implementing the PPP projects.

As regards the funding of PPP projects, it said “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”.

The other suggestions include restrictions on number of banks in a consortium, building up of risk assessment and appraisal capabilities by banks and specific RBI guidelines to lenders for encashment of bank guarantees.

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 also underlined the need for review the Model Concession Agreement (MCA) and ensure speedier resolution of disputes.

As regards airports, it said the government should 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.

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