Public-Private Partnership Model to Boost Infrastructure Development in India


By Ravinder Singh

Public Private Partnerships (PPPs) is an effective tool for bringing private sector efficiencies in creation of economic and social infrastructure assets and for delivery of quality public services. The extent of private sector participation in creation of infrastructure, especially through PPP, has shown a promising increase in the recent years. As on January 2012, there were 881 PPP projects with Total Project Cost of Rs. 543,045 crore as compared to over 700 projects with TPC of Rs.371,239 crore by March 2011. These projects are at different stages of implementation i.e. under bidding, construction and operational stages. The broad sectors encouraged under the PPP framework are Highways, Railways, Ports, Airports, Power and Urban Infrastructure etc.

PPP Projects Approved by the PPPAC

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. The appraisal mechanism notified includes setting up of the Public Private Partnership Appraisal Committee (PPPAC) responsible for the appraisal of PPP projects in the Central Sector. Since its constitution in January 2006, PPPAC has granted approval to 223 projects, with a total project cost of Rs. 212,819.50 crore.

Standardized bidding and contractual documents have been  notified. These include model Request for Qualification (RFQ); Request for Proposal (RFP) and RFP for technical consultants; Model Concession Agreements (MCAs) for different sectors including Highways (both National and State Highways), Ports, Urban Transport (Metro), Power sectors and Manuals of Standards & Specifications have been developed and standardized. Further, Project Sponsors are encouraged toward projects through a transparent open competitive bidding process, which leads to greater transparency and consistency to the bid process and terms of contract.

Sectoral Distribution of PPP Projects

The maximum number of PPP projects have been undertaken in the Road sector with 447 projects, constituting 51.6% of the total projects.  This was followed by Urban Development sector with 177 projects (22.4%), Energy sector with 77 projects (8.9%),  Ports with 62 projects (7.2%) and the Tourism sector with 55 projects (6.4%).  225 projects have been completed whereas 410 are under various stages of construction and 184 under bidding stage and the remaining in other various stages. State-wise, Karnataka had the maximum of 105 projects with total cost of Rs. 44,459.85 crore under PPP followed by Andhra Pradesh 98 projects with project cost of Rs. 67,696.31 crore, Madhya Pradesh 86 projects  (Rs. 14,928.7 crore), Maharashtra 76 projects (Rs. 45,916.34 crore), Gujarat 72 projects (Rs. 45,315.02 crore), Rajasthan 65 projects (Rs. 16,479.5 crores), Tamil Nadu 50 projects (Rs. 21,491.04 crores), Haryana 35 projects (Rs. 67,840.57 crore), West Bengal 34 projects (Rs. 6,849.8 crore) and Orissa (Rs. 22,652.88 crore), Kerala (Rs. 22,281.54 crores) and Punjab (Rs. 4,653.7 crores) with  32 projects each.

Viability Gap Funding Scheme

A unique characteristic of infrastructure projects is that the positive externalities caused by projects cannot be captured by project revenues alone. Hence, a project may be economically essential but commercially unviable. Such projects, which are marginally viable or unviable, can be made financially attractive through a grant. Viability Gap Funding (VGF) Scheme was devised for Financial Support to PPPs in Infrastructure. It provides VGF support to PPP projects up to 20 per cent of the Total Project Cost (TPC). So far, 131 projects have been granted approval with TPC of Rs. 67,237.47 crore and VGF support of Rs. 13,077.28 crore. An amount of Rs. 617.00 crore has been disbursed as Viability Gap Funding (VGF) under the Scheme for Financial Support to PPPs in Infrastructure.

The following sub-sectors have been included in the list of sectors eligible for VGF support under the Scheme for Financial Support to Public Private Partnerships (PPPs) in Infrastructure i.e. Viability Gap Funding Scheme.

 “Capital investment in the creation of modern storage capacity including cold chains and post-harvest storage” vide Department of Economic Affairs (DEA) Notification dated March 17, 2011.

“Education, health and skill development, without annuity provision” vide DEA Notification dated May 4, 2011.

 “Infrastructure projects in Special Economic Zones and internal infrastructure in National Invest and Manufacturing Zones” vide Notification dated February 2, 2012.

“Oil/Gas/Liquefied Natural Gas (LNG) storage facility (includes city gas distribution network); Oil and Gas pipelines (includes city gas distribution network); Irrigation (dams, channels, embankments etc.); Telecommunications (fixed Network) (includes optic fibre/wire/cable networks which provide broadband/internet); Telecommunication towers; Terminal markets; Common infrastructure in agriculture markets; and Soil testing laborites” vide Notification dated May 24, 2012.

Scope of Viability Gap Funding (VGF) scheme to support PPP projects in infrastructure has also been extended to attract private investment. The Delhi Mumbai Industrial Corridor (DMIC) is being developed on either side along the alignment of the Western Dedicated Rail Freight Corridor with Central assistance of Rs. 18,500 crore spread over a period of 5 years.

Projects Approved under India Infrastructure Project Development Fund (IIPDF)

The IIPDF assists projects that closely support the best practices in PPP project identification and preparation. The IIPDF supports up to 75% of the project development expenses. So far, 51 projects have been approved with an IIPDF assistance of Rs. 64.51 crore.

National PPP Capacity Building Programme

To intensify and deepen the capacity building of public functionaries at the State and municipal level and to integrate the capacity building programme on PPPs in the ongoing programmes at the State level, a comprehensive National PPP Capacity Building Programme has been developed by Department of Economic Affairs (DEA), which has been rolled out at the State level in collaboration with KfW German Development Bank. Under it, eight different programmes have been conducted and 155 Trainers of Trainers (ToTs) have been covered. 15 States and two Central Training Institutes viz. Indian Maritime University and Lal Bahadur Shastri National Academy of Administration have rolled out training programmes on PPPs and have trained over 700 public functionaries who deal with PPPs in their domain.

National PPP Policy and Rules

Pursuant to the announcement by the Finance Minister in the Budget Speech for the year 2011-12 to come up with a “Comprehensive Policy on PPPs, DEAhas prepared the draft ‘National Public Private Partnership Policy’ which is under finalization. Further, pursuant to the recommendations of the Committee on Public Procurement, and to ensure that the PPP projects are procured and implemented by following laid down process and observing principles of transparency, competitive bid process, affordability and value for money, the draft ‘PPP Rules’ have been prepared. These are undergoing extensive consultation process at the Central and State Governments level before their finalization.

Online Database

An online database on PPP projects  and the website in the country have been developed. The purpose of the website is to provide comprehensive and current information on the status and extent of PPP initiatives in India at the central, state and sectoral level. The potential use of PPPs in e-governance, health and education sectors remains largely untapped across India as a whole, though of late there have been some activities shaping in these sectors.

(Ravinder Singh is the Director (M&C), PIB, New Delhi)





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