{"id":177902,"date":"2022-04-06T20:16:58","date_gmt":"2022-04-06T14:46:58","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=177902"},"modified":"2022-04-06T20:16:58","modified_gmt":"2022-04-06T14:46:58","slug":"measures-to-rejuvenate-public-private-partnerships","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/measures-to-rejuvenate-public-private-partnerships\/","title":{"rendered":"Measures to rejuvenate public-private partnerships\u00a0"},"content":{"rendered":"

<\/p>\n

News<\/span><\/b>: Recently, the <\/span>New Monetisation Pipeline (NMP<\/b><\/a><\/span>)<\/strong><\/a><\/span> and <\/span>the National<\/a><\/span><\/span><\/b> Infrastructure <\/b>Pipelin<\/b><\/a><\/span>e<\/strong><\/a><\/span> were launched by the central government. <\/span><\/p>\n

As a result, <\/span>Public-private partnership (PPP) models<\/span><\/b> have come under the focus as various projects will be funded under PPP.\u00a0<\/span>\u00a0<\/span><\/p>\n

What have been the Indian expereince with various PPP models?<\/span><\/b>\u00a0<\/span><\/h5>\n

(A) Indian experience:<\/span><\/b>\u00a0<\/span><\/p>\n

Almost all <\/span>Indian companie<\/span><\/b>s<\/strong> and <\/span>commercial lending institutions<\/span><\/b> are concerned of investing in greenfield PPP projects. In fact, foreign investors also prefer to invest in the brownfield assets.\u00a0<\/span>\u00a0<\/span><\/p>\n

In recent years, the government has received <\/span>poor responses<\/span><\/b> from private players in PPP bids. <\/span><\/p>\n

–<\/strong> For example: (1)<\/strong> the <\/span>Indian Railway<\/span><\/b> could not attract many private players for passenger-train operations, and (2) The <\/span>Bharat Broadband Nigam Ltd (BBNL<\/span><\/b>) cancelled a tender for connecting villages due to the lack of participation of eligible bidders.\u00a0<\/span>\u00a0<\/span><\/p>\n

Various PPP models including the <\/span>Build-operate-transfer<\/span><\/b> (<\/span>BOT)<\/span><\/b> and the <\/span>Engineering, Procurement and Construction (EPC)<\/span><\/b> have been examples of classic failure of PPP model in India. <\/span><\/p>\n

–<\/strong> For example, the share of the BOT model in road investments in India declined from 85% in 2013 to almost zero in 2020. <\/span>\u00a0<\/span><\/p>\n

PPP Models have performed well in sectors like telecom, ports, airports, electricity transmission and renewable energy.<\/span>\u00a0<\/span><\/p>\n

(B) International xeperience:<\/span><\/b>\u00a0<\/span><\/p>\n

Recently, Britain renationalised the British Rail, after being operated on a PPP model after a period of 25 years.<\/span>
\n<\/span><\/p>\n

What are the suggestions for PPP reforms?<\/span><\/b>\u00a0<\/span>\u00a0<\/span><\/h5>\n

Kelkar Committee submitted a report titled as <\/span>\u201c<\/span><\/b>Revisiting and Revitalizing PPP Model of<\/span><\/i><\/b> Infrastructure <\/span><\/b>Development<\/span><\/i><\/b>\u201d (2015). It recommended some of the following measures in this regard<\/span>\u00a0<\/span><\/p>\n

(1) The report recommended setting up \u201c3P India<\/strong>\u201d. It would function as a centre of excellence in PPPs.<\/span>\u00a0<\/span><\/p>\n

(2) The report proposed to address complex issues like renegotiation, independent regulation, equitable risk-allocation, amendments to Prevention of Corruption Act, 1988, and expeditious redressal of disputes.\u00a0<\/span>\u00a0<\/span><\/p>\n

Regulatory bodies<\/span><\/b> can be established for administration of PPPs. Such bodies have also been established in other countries. <\/span><\/p>\n

–<\/strong> For example, there is the <\/span>Infrastructure Concessions Regulatory Commission <\/span><\/b>in Nigeria, the <\/span>PPP Advisory Unit<\/span><\/b> in Ghana, the <\/span>PPP Centre<\/span><\/b> in the Philippines and the PPP Unit in South Africa, and the <\/span>National Infrastructure Commission <\/span><\/b>of the United Kingdom<\/span>\u00a0<\/span><\/p>\n

A <\/span>Special Purpose Vehicle (SPV)<\/span><\/b> which is <\/span>100% owned by the government<\/span><\/b> can be established for the PPP project. It can perform the <\/span>sovereign function<\/span><\/b> like land acquisition and securing all permissions. Subsequently, the SPV\u2019s share will be sold to the <\/span>highest private bidder<\/span><\/b>. It will reduce the development risk.\u00a0<\/span>\u00a0<\/span><\/p>\n

The <\/span>Least Present Value Method (LPVM) <\/span><\/b>can be adopted. In this, the <\/span>time-period of a concession<\/span><\/b> is kept open-ended and flexible. It helps the concessionaire who bid with the lowest amount of revenue share. It will remove the <\/span>revenue risk<\/span><\/b> in the long term PPP projects to a substantial level.<\/span>\u00a0<\/span><\/p>\n

In addition, a <\/span>bespoke credit-rating system<\/span><\/b> can be adopted. It requires embracing the \u201c<\/span>expected loss\u201d (EL) approach<\/span><\/b> instead of the <\/span>\u201cprobability of default\u201d approach.<\/span><\/b>\u00a0<\/span>\u00a0<\/span><\/p>\n

Way Forward<\/span><\/b>\u00a0<\/span><\/h5>\n

In response to the latest Budget speech, the Department of Economic Affairs is required to take a fresh approach for \u201ccapacity building\u201d for PPPs.\u00a0<\/span>\u00a0<\/span><\/p>\n

Source<\/span><\/b>: The post is based on an article \u201cMeasures to rejuvenate public-private partnerships<\/strong>\u201d published in the Business Standard<\/strong> on 6<\/strong><\/span>th<\/strong> Apr 22<\/strong>.<\/span>\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

News: Recently, the New Monetisation Pipeline (NMP) and the National Infrastructure Pipeline were launched by the central government. As a result, Public-private partnership (PPP) models have come under the focus as various projects will be funded under PPP.\u00a0\u00a0 What have been the Indian expereince with various PPP models?\u00a0 (A) Indian experience:\u00a0 Almost all Indian companies… Continue reading Measures to rejuvenate public-private partnerships\u00a0<\/span><\/a><\/p>\n","protected":false},"author":10328,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[10503,216],"class_list":["post-177902","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-business-standard","tag-gs-paper-3","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/177902","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10328"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=177902"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/177902\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=177902"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=177902"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=177902"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}