Kelkar Committee’s report on Revisiting & Revitalizing PPP Model

In Banking and Finance
December 29, 2015

The Report of the Committee on Revisiting & Revitalising the PPP model of Infrastructure Development chaired by Dr. V. Kelkar has been issued and also uploaded on the Ministry of Finance’s website.

Committee Formation

In the Union Budget 2015-16, the Finance Minister Arun Jaitley had announced that the PPP mode of infrastructure development has to be revisited and revitalised. In pursuance of this announcement, a Committee on Revisiting & Revitalising the PPP model of Infrastructure Development was set-up which was chaired by Dr. Vijay Kelkar.

Recommendations

PPP model should be executed in India as early as possible considering that it may be beneficial for the development of India.
Contracts under PPP should focus more on service delivery instead of fiscal benefits.
Government must move the PPP model to the next level of maturity and sophistication.
An assessment procedure should be laid down for efficiently managing the risks by the entity involved in the PPP projects.
Government must amend the Prevention of Corruption Act, 1988 in order to appropriately distinguish between genuine errors in decision-making and acts of corruption.
An institution should be set up for providing guidance for a national PPP policy and develop a mechanism for collecting data for decision making in further developing the PPP.
The 3P-I institute for PPPs should be set up as soon as possible. An announcement in this regard was made in 2014.
An institutionalized mechanism like the National Facilitation Committee (NFC) should be established to ensure speedy resolution of issues related to the approvals required for the Projects to run smoothly.
Independent Regulators should be formed in the sectors that are involved in PPP.
It recommended Government to encourage further use of PPPs in sectors like Railways, Urban, etc.
Railways can have an independent tariff regulator.
Model concession agreements should be issued only when 80 per cent of the land for a PPP project has been acquired.
It also recommended not to evolve a small project under PPP model.
Unsolicited Proposals (Swiss Challenge) should be discouraged to avoid lack of transparency.
State owned entities like SoEs/PSUs should not allowed to take PPP Project as these entities are Government entities.
Ministry of Finance should encourage banks and financial institutions to issue Zero Coupon Bonds which will help to achieve soft landing for user charges in infrastructure sector.
The Committee feels strongly that the private sector must be protected against what have been called “Obsolescing Bargain – the loss of bargaining power over time by private entity.
PPPs should not be used as the first delivery mechanism without checking its suitability for a particular project.