Public private partnership is a key model of infrastructure development in India today but there is a need to mature it to deliver infrastructure projects better and faster. Discuss in light of the Kelkar Committee’s recommendations.

Approach

  • Give a brief introduction about PPP
  • Highlight the various shortcomings in PPP
  • Discuss the important recommendation of Kelkar committee
  • Conclude appropriately.
Model Answer :

Public private partnership (PPP) is a long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility, and remuneration is linked to performance. A large number of key infrastructure projects today are being implemented in a PPP mode, including airports, highways, ports etc. However, various shortcomings of this model have impacted this model’s effectiveness.

Various shortcomings in the PPP projects:

  • Delay in projects lead to cost overrun due to which customers have to pay higher charges for the services.
  • Due to economic conditions like Non-performing assets, private entities are not able to get long term credit.
  • Elongated timelines due to lack of institutional capacity in the project-award process have been hurting.
  • Weakening economic growth and the debt overhang problem have constrained both the capacity and flow of private investment in asset creation.
  • Complex government rules sometimes force private companies to withdraw

In light of this, the Union Finance Minister’s had set up the Committee on Revisiting and Revitalizing the PPP model of Infrastructure Development (Chair: Dr. Vijay Kelkar) in 2015. The committee submitted its report the same year.

Kelkar committee recommendations to revitalize PPP in infrastucture:

  • Set up an institution for invigorating private investments in infrastructure, providing guidance for a national PPP policy and developments in PPP.
  • An institutionalized mechanism like the National Facilitation Committee (NFC) to ensure time bound resolution of issues including getting timely clearances.
  • Essential to set up independent Regulators in sectors going in for PPP.
  • Build up capacity in all stakeholders, including regulators, authority, consultants, financing agencies, developers
  • Amend the Prevention of Corruption Act, 1988 to distinguish between genuine errors in decision-making and acts of corruption.
  • Pre-qualified PPP consultancies could be empanelled.

PPPs are an important policy instrument that will enable India to compress time in this journey towards economic growth and development. A successful and growing stream of PPPs in infrastructure will go a long way in accelerating the country’s development process.

Subjects : Economy