Vijay Kelkar Committee on PPP

 Introduction 

Government constituted a Committee on Revisiting & Revitalising the PPP model of Infrastructure Development which was chaired by Dr. Vijay Kelkar. 

Term of Reference 

To review the experience of PPP Policy and suggest measures to improve capacity building in Government for their effective implementation. 

Recommendations 

Committee presents a simple definition of PPP : “A PPP is a large project in which the government, or a subordinate authority of the government, has not more than a minority share; which provides a public good or service; which is operated for a defined time period - usually medium term - by a private firm, under a “concession”, which defines contractual, mutually binding obligations and provides to the concessionaire a market-determined revenue stream to ensure commercially viability.” 

• Contracts need to focus more on service delivery instead of fiscal benefits 

• Better identification and allocation of risks between stakeholders 

• Prudent utilization of viability gap funds where user charges cannot guarantee a robust revenue stream. 

• Strengthening of 3 main pillars of the PPP framework viz. Governance, Institutions and Capacity. The report endorsed setting up of a 3PI (a PPP institute of excellence) which can, in addition to functioning as a centre of excellence in PPPs, enable research, review and roll out activities to build capacity, etc. 

• Independent regulators should be set up with a unified mandate that encompasses activities in different infrastructure sub sectors to ensure harmonized performance by the regulators. 

• Model concession agreements be issued only when 80 per cent of the land for a project has been acquired.
  
• The Prevention of Corruption Act, 1988 should be amended at the earliest to punish corrupt practices while saving those who made genuine mistakes in decision-making.
  
•  Swiss Challenge Method of awarding contracts should be avoided as it discourages transparency. Unsolicited Proposals encourages unequal treatment of potential bidders in the procurement process, so they should be discouraged.
  
• Since state owned entities SoEs/PSUs are essentially Government entities and work within the government framework, they should not be allowed to bid for PPP projects.
  
• The Committee 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. 

• Banks and financial institution should be encouraged to issue Deep Discount Bonds or Zero Coupon Bonds (ZCB) to mobilise long term capital at low cost. This will reduce the debt servicing charges during the initial period of the project.
  
• After successful completion of the projects, equity in the project may be offered to long-term investors including overseas institutional buyers. The divestment amount would be utilised for new infrastructure projects.
  
• Independent sectoral regulators should be set up as and when a new sector is declared to adopt PPP model. The regulators should follow a unified approach. Without the independent regulators, the projects would be subjected to bureaucratic and political pressure.
  
•  For rational allocation of risks among various stakeholders, the Model Concession Agreement (MCA) should be revisited. The “One-sizefits-all” approach should be avoided and project-specific risk assessment should be undertaken.
  
•  It should be explored for extension of PPP into new sectors such as health, other social sectors, and urban transport.
  
• Government may develop a PPP law with endorsement from Parliament. It gives an authoritative framework to implementing executives along with an oversight responsibility to legislature and regulatory agencies.
  
•  Infrastructure PPP Project Review Committee (IPRC) should be set up for evaluating and sending recommendations in time-bound manner for a stress in projects under PPP model.
  
• An Infrastructure PPP Adjudication Tribunal (IPAT) should be set up and its benches will be constituted by the Chairperson as per needs of the matter in question.
  
• The state owned enterprises and public sector undertakings should not be allowed to bid for PPP projects. The PPP model meant for leveraging the managerial and operational efficiency of private sector.
  
• The committee advised 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.