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The most significant criteria for a continued growth rate of an economy rests on the provision of a quality infrastructure. According to the Planning Commission, an approximation of 8 percent of the Gross Domestic Product or GDP needs to be invested. This would help in acquiring a prospective economy as stated in the 11th Five Year Plan. Fund investment of over US $ 494 billion has been conceived of according to the 11th Five Year Plan with effective from 2007 to 2012. The investment sectors under consideration are inclusive of telecommunications, electric power, water transport, road, rail, air, water supply as well as irrigation amounts to about Rs. 20,27,169 crore according to 2006-07 prices.
In order to meet such demands, various Public Private Partnerships or PPPs are being promoted for implementation of infrastructure projects. PPP is often described as a private business investment where 2 parties comprising government as well as a private sector undertaking form a partnership. The deficit can be overcome by ensuring much more private capital investment. Expert guidance is the only way out for enabling efficiency through subsequent reduction in cost.
Several initiatives have been undertaken by Government of India to enable a greater PPP framework in order to eradicate the constraints. Various foreign as well as private investments by waving off charges are encouraged. Framing of standardized contractual documents for laying down the terminologies related to risks, liabilities and performance standards have been devised. Approval schemes for PPPs in the central sector has been streamlined through Public Private Partnership Appraisal Committee or PPPAC. A website has been launched for the purpose of virtual PPP market serves as an online database for PPP projects.
As India is a emerging economy, it requires significant amount of investment. Government is already passing through the phase of deficit. This kind of models proves to be a blessing in disguise. This would definitely help in acquiring a prospective economy as stated in the 11th Five Year Plan. Thus, the success of these projects & growth are very much in sync & interdependent.
Some major constraints:
Sufficient instruments as well as the ability to undertake long-term equity cannot be provided by the market in the present financial scenario. Also financial liability required by infrastructure projects would not be sufficed.
Most sectors face a lot of hindrance in enabling a regulatory framework as well as a consolidated policy. So its important to convert such policies into PPP friendly. To achieve the desires results, active participation of various state projects are essential.
Lack of ability of private sectors to fit into the risk of investing in diversified projects also needs to be overcome. Modernization of new airports, transmission systems and building power generating plants are some of the avenues which required skilled manpower.
Ability of public institutions to manage the PPP process should also be subdued. Maximizing the return of the stakeholders needs to be managed due to the involvement of long term deals including the life cycle of the asset infrastructure.
Lack of credibility of bankable infrastructure projects used for financing the private sector should also be overcome. Inconsistency is still visible in the limitations of PPP projects, despite of continued initiatives by States and Central ministries.
Inadequate support to enable greater acceptance of PPPs by the stakeholders forms another source of constraint.
Mainstreaming Public Private Partnerships:
Department of Economic Affairs is facilitating mainstreaming Public Private Partnerships through Technical Assistance from Asian Development Bank. The primary objective is effective institutionalization of the PPP cells to deliver their mandate through provision of 'in-house' consultancy services to each of the selected entities at the Center and State level. Institutionalization of PPP skills includes:
Refining the PPP policy and regulatory framework,
meeting compliance/public safety norms,
improving bidding documents and procedures,
determining risk sharing,
conducting value-added research/analysis, and
determining adequate monitoring arrangements
The selected entities will be provided assistance for a period till December 2009 in the form of: 1 PPP Expert on an individual basis focusing on project financial analysis and risk management; 1 Management Information Systems expert (on an individual basis) focusing on information management and a panel of three legal experts on retainer basis (expected input: intermittent over the year but approximately 6-7 months throughout the year) to provide legal expertise on PPPs.
The States wishing to avail this Technical Assistance are required to enter into an MOU with DEA detailing steps that would be taken to promote PPPs in the State.
The MOU requires the State Government to:
Set up a PPP Cell as the nodal agency for processing all PPP projects in the State with a designated PPP Nodal Officer and defined scope of work.
Develop a robust shelf of projects amenable for PPPs and adhere to the following set of targets on the level of PPPs in the State:
Commit to establish such policies and regulatory and governance frameworks in the identified infrastructure sectors to enable a transparent and effective private sector participation
Prepare a "Plan of PPP projects" in conjunction with its Annual Plan. s
Commit to (i) adopt standard concession agreements for PPP projects in defined infrastructure sectors; (ii) adopt competitive bidding procedures for bidding and awarding of infrastructure projects under defined rules and procedures according to best international commercial practices and GOI guidelines; (iii) designate a State-level dispute resolution mechanism for the speedy resolution of disputes relating to PPP projects; and (iv) adopt formal State policies on environment, resettlement and social safeguards with respect to the implementation of infrastructure projects, according to best international commercial practices.
Help the participating State implement PPP schemes effectively and efficiently;
Enhance capacity of PPP cells in participating entities to prepare, evaluate, and appraise PPPs in infrastructure;
Significantly improve monitoring of overall progress in PPPs in infrastructure at both central and state levels through well-knit databases;
Increase awareness among potential private sector partners about the project cycle of PPP projects in infrastructure, and the expectations of Government with respect to value for money; and
Over the long term, an increase in private sector participation in infrastructure development and management throughout the country.