With the Planning Commission asking Karnataka to put in place a new infrastructure policy, in order to be eligible to avail Viability Gap Funding from the Center for Public Private Partnership projects, the state government has at last come up with a final draft for a new policy.The new policy, when finally cleared, will replace a 1997 infrastructure policy that was originally meant for five years but has now been in place for almost a decade. “There have been changes in the tax and stamp duty regime, formulation of Government of India’s policy of PPP in infrastructure projects, and the concept of the VGF. In line with these changes, Karnataka has now resolved to formulate this new infrastructure policy,” states the draft.“There is now an urgency to push the new infrastructure policy through to be in a position to avail VGF for PPP, especially after the deputy chairman of the Planning Commission’s warning during budget allocation that the state could lose out if it does not put in place a PPP policy for infrastructure development,” a senior state official said.As required by the Centre, the new policy will see the setting up of a PPP cell to function as a single window facilitator of private investment in infrastructure projects. District level PPP cells have also been proposed in the policy.“There is discussion currently on where the PPP cell should be set up — whether in the infrastructure department, finance department or planning department,” sources said.The new infrastructure policy for Karnataka has been pushed around government departments for over two years now. Several departments had raised objections to the appointment of a single agency to facilitate investment. Several proposals in earlier drafts, including creation of land banks for projects, the use of the Swiss challenge method for awarding projects and the formulation of an infrastructure act have been dropped. “As far as possible, for all new investments in infrastructure, the option of implementing the project through PPPs would be considered first. GoK would directly invest in a project only after satisfying itself that the same cannot be implemented through a PPP,” says a March 15 draft of the policy.The policy outlines a role for PPP “both in creating new infrastructure assets, as well as in managing assets already created”. Key initiatives outlined under the policy include the levying of user charges to make PPPs viable and the scope for private investors to develop real estate to make a project viable.If an infrastructure project is not financially viable “the private investor may be allowed to acquire additional land on the same terms as the land for the main project, and develop suitable commercial activities to ensure a reasonable composite internal rate of return,” the draft states.
