Initiatives by Govt of India for promoting Public Private Partnerships (PPPs)

By | December 17, 2015
(Last Updated On: December 17, 2015)

Initiatives by Government of India for promoting PPPs: Government of India (GoI) has been placing strong emphasis on the use of Public Private Partnerships (PPPs) as a strategy for expanding the provision of infrastructure services. Several initiatives have been taken to create an enabling framework for PPPs:

Ø  The appraisal mechanism for the PPP projects has been streamlined to ensure speedy appraisal of projects, eliminate delays, adopt international best practices and have uniformity in appraisal mechanism and guidelines.

Ø   The Public Private Partnership Appraisal Committee (PPPAC) set up for the appraisal of PPP projects posed by Central Line Ministries and Departments has so far in 2015 approved 13 central projects proposal with TPC of Rs.21817.03crore (USD 3636.17 million).

Ø  The Government had created a Viability Gap Funding Scheme for PPP projects. Infrastructure projects are often not commercially viable on account of having substantial sunk investment and low returns. However, they continue to be economically essential. Accordingly, the Viability Gap Funding Scheme has been formulated which provides financial support in the form of grants, one time or deferred, to infrastructure projects undertaken through public private partnerships with a view to make them commercially viable. The Scheme provides total Viability Gap Funding up to twenty percent of the total project. The Government or statutory entity that owns the project may, if it so decides, provides additional grants out of its budget up to further twenty percent of the total project cost. Viability Gap Funding. During the current calendar year i.e. 2015, so far Empowered Institution has granted in-principle approval for 5 projects with a Total project cost of 901.00 crore (USD 150.16 million). Like-wise, EI also granted Final Approval to 9 projects of 1119.66crore (USD 186.61 million)[1] in various sectors with VGF component of Rs. 166.7 crore (USD 27.78 million).

Ø  Municipal Borrowing- Government has initiated a pilot project for developing a framework to build capacities of Urban Local Bodies ( ULBs) to raise financing through the Capital Markets for financing infrastructure projects (normally PPPs). The pilot initiative aims to develop a replicable model and related documents and demonstration of the model through a successful pilot transaction for an ULB. Guidelines for issuance of Municipal Bonds in India have been notified

Ø  Knowledge Resources: As part of wide ranging efforts for knowledge dissemination on PPPs, DEA has developed tool kits and knowledge products for use of PPP practitioners. These include:

(i)                 Post Award Contract Management: Department of Economic Affairs (DEA) has developed Post-Award Contract Management Guidance Material for Highways, Ports and Education sectors. The material is aimed at providing guidance and support to Project Authorities, especially in ensuring routine monitoring and also management of key risks that can emerge during the post-award phase of the project. Further, the Manuals are accompanied by user-friendly, interactive Online Toolkits that can be used by Project Authorities for practical application-oriented assistance in project management activities. The Guidance Material and the Online Toolkits will be available to users on the Department’s website for PPPs, i.e.,

(ii)               Framework for Renegotiation of PPP Contracts: A report on a suggested framework for renegotiation of PPP contracts has been developed, which focuses on changes that may need to be made in the contractual and institutional arrangement post award of the projects. Work on the identification of the legal clauses in the concession agreement is underway. The well researched guidance note for Renegotiation Framework particular focus on the National Highway and Major Port concessions. The model clauses based on established thresholds for renegotiation are being drafted, to distinguish quantified bid percentages and qualitative “materiality” type considerations.

Source : Press release by Govt of India , Ministry of Finance 16-December, 2015

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