Govt to tighten norms for partnership projects

Government funding will not come easy for infrastructure projects that would be executed through public-private partnership (PPP). The Commi...

Government funding will not come easy for infrastructure projects that would be executed through public-private partnership (PPP). The Committee on Infrastructure has proposed a revision in the procedure for PPP projects where automatic approvals would be limited to proposals costing less than Rs 100 crore and are charted under a model concession agreement (MCA).

Projects where capital costs or underlying value of assets exceed Rs 100 crore — or those that involve deviation from the MCA — would need approval of a PPP Appraisal Committee that is being set up to safeguard the interests of the state and public.

The committee’s approval would also be necessary for roads, ports, airports and urban infrastructure projects where transfer of public assets and delegation of government power (to collect user charge) is involved.

Story continues below this ad

Projects that provide services to users in a monopoly or semi-monopoly situation or those involving risk sharing by the government would also have to be processed by the proposed committee.

The Committee would be chaired by Economic Affairs Secretary with secretaries of Planning Commission, Expenditure, Legal Affairs and of the Department sponsoring the project as its members. The Department of Economic Affairs will set up a special cell, with outside legal, financial and technical experts if necessary, for servicing and due diligence of the proposals.

‘‘This may be necessary to protect government interest, particularly in the face of highly qualified expertise that the private sector participants may employ while negotiating these projects,’’ it said.

The rationale for a careful scrutiny of concession terms prior to government funding, says the proposal for the Cabinet Committee on Economic Affairs, is that disputes arising out of project terms could lead to significant payouts by the government.

Story continues below this ad

These concerns, it said, would not be addressed by selecting promoters through competitive bidding as the latter only provides a level playing field. ‘‘It may not secure good value in terms of performance standards, user concerns, public revenues and contingent liabilities,’’ says the proposal.

The proposal formulated by a ministry would be considered by the appraisal panel for ‘in principle’ clearance before inviting expressions of interest from prospective investors. Ministries would be told to mandate model concession agreements with standard terms and conditions. Proposals for sectors where such MCAs exist, would require the committee’s approval only before inviting financial bids.

Under the recently floated PPP, the government will offer financial support for infrastructure projects provided they are executed jointly by public and private sector.

The support would include development, financing, construction, maintenance as well as operation of the project by an entity with at least 51 per cent private equity.

MORE SCRUTINY

Story continues below this ad

• Automatic approval for projects below Rs 100 crore with model concession agreement

• Any other projects would be vetted by a committee to safeguard the state’s interests

• Approval required for any project that involves transfer of public assets, delegation of government power

• Chaired by Economic Affairs secretary, and secretaries of Planning, Expenditure, Legal, and department concerned