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Tuesday, June 14, 2016

Kelkar committee recommendations on PPP

Kelkar chalks out rules for PPP revival

An expert panel led by former Finance Secretary, Vijay Kelkar, has called for swift amendments to the anti-corruption law and an endorsement from the Parliament for a new policy for public private partnerships or PPPs that balances risk-sharing between private and public partners, in order to spur infrastructure building.
  • The report, which was released by the government recently, said rebooting PPPs is an urgent priority to take advantage of the ‘historical conjunction of the country’s infrastructure needs and the availability of long-term funding’.
  • The report also highlighted that it is critical for India to make the leap from a low-income country to a high-income one in two to three decades, else it risks falling into a ‘middle income’ trap.
  • The panel has also asked the government to actively ‘discourage’ the ‘Swiss Challenge’ for auctioning infrastructure projects, under which any bidder can offer to improve upon a project proposal submitted by another player. This model has been adopted by the government since July to redevelop 400 railway stations.
Highlights of the report:
  • The report notes that India’s success in deploying PPPs as an important instrument for creating infrastructure will depend on a change in attitude of all authorities dealing with PPPs-public agencies, government departments supervising and auditing and legislative institutions.
  • The panel has asked the Government to take early action to amend the Prevention of Corruption Act, 1988 which does not distinguish between genuine errors in decision-making and acts. This is necessary to make only malafide action by public servants punishable and not errors.
  • The report also underlines the need to further strengthen the three key pillars of PPP frameworks namely Governance, Institutions and Capacity, to build on the established foundation for the next wave of implementation.
  • The report asks for an independent regulatory with a unified mandate that encompasses activities in different infrastructure sub sectors to ensure harmonized performance by the regulators.
  • The panel has also asked the government to issue model concession agreements only when 80% of the land for a project has been acquired.
  • The panel is against adopting PPP structures for very small projects, since the benefits of delivering small PPP projects may not be commensurate with the resulting costs and the complexity of managing such partnerships over a long period.
  • The panel has recommended the government to notify comprehensive guidelines on the applicability and scope of access to, under RTI and Art 12 of the Constitution, and auditing of financial related matters in order to avoid any delays in public asset provision.
  • The report asks the government to encourage banks and financial institution to issue Deep Discount Bonds or Zero Coupon Bonds (ZCB) to mobilise long term capital at low cost.
The committee has also favoured disallowing statutory audit into the books of special purpose vehicle formed under the companies act.
sources: the hindu, pib.

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