The Government is working on a sophisticated and flexible framework for the Public Private Partnership (PPP) model to boost infrastructure development, said a senior Government official even as Union Minister for Road Transport, Highways and Shipping Nitin Gadkari felt the private sector too was partly to blame for the failure of the PPP model in the roads sector.
“What we need is a more sophisticated PPP framework which we are working on now. This framework will looks at PPPs in a manner where there is flexibility to factor in the changes in the circumstances that run over a period of 25-30 years,” said Finance Secretary Arvind Mayaram at a seminar on PPP organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) in New Delhi on Wednesday.
Dr. Mayaram also seemed to apportion part of the blame on private sector by observing that the problem arises due to vigorous bidding by the private sector which overestimates its capacity and is unable to assess the potential of project on a 30-year basis.
Another reason was the over exposure of companies in project construction. About a dozen companies repeatedly bid for projects which stretches their resources. There was a strong case for creation of joint ventures even with foreign companies as the portfolio of infrastructure projects was huge, he observed.
Both Mr. Gadkari and Dr. Mayaram felt bidding should start only after statutory clearances were received. Mr. Gadkari did not agree with the current practice of inviting tenders for road highway projects before land had been acquired for the project. “Part of the blame must rest with the private sector which bids in the tendering process in the absence of land and forest clearances,” he said.
The Minister hoped to resolve all issues with road infrastructure projects before August 15 this year which will include meetings with construction companies and banks to resolve financing issues. The Ministry also intends to procure Detailed Project Reports in advance for 300 new road projects to cut down the waiting time.
The Government is pinning high hopes on the PPP mode to speed up infrastructure development, especially in surface transport including the railways.
The Finance Secretary also called for definition of a stressed project, identification of the cause for stalling of projects and a methodology for stress assessment and risk apportionment.
FICCI Vice President Jyotsna Suri felt one of the key challenges in promoting infrastructure projects was a conducive policy, institutional and legal framework.
But industry analyst and senior E & Y official Abhaya Agarwal felt the last decade had seen a tremendous growth in the PPP model and hoped the new Government would simplify procedures, expedite ongoing projects and develop new ones.
“Corrective measures taken at the right time can be a boon to the industry. Risks and rewards can be shared to produce a sound outcome. Considering that the fundamentals of the sector’s growth are in place, timely and innovative initiation and implementation of policy measures can go a long way in facilitating its journey,” he added.
