Vijay Kelkar Committee on Revisiting and Revitalising the PPP model

Several infrastructure projects in India have been hit by various issues related to Public-Private-Partnership (PPP) model. It is in this context, the Vijay Kelkar panel recommended various measures for revival of PPP model. The panel was appointed by the Union Finance Ministry in the Union Budget 2015-16. Its recommendations are made available for public.

Some of the major recommendations include:

• It recommended for 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) for supporting institutional capacity building activities.
• 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.
• For sourcing long-term capital at low-cost, banks and financial institutions should be encouraged to issue deep discount bonds, also known as zero coupon bonds. 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-size-fits-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.
• Private sector should be protected against any abrupt changes in the economic or policy environment.
• 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.
• A dispute resolution mechanism that is quick and flexible is needed to allow restructuring within the commercial and financial boundaries of the project.
• PPP model is not recommended for small scale projects in view of the transaction costs involved.