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| Prof. M. Guruprasad, AICAR Business School / 12:49 , Oct 26, 2010 |
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According to experts if India has to scale up to the levels seen in other countries, PPPs would make a major contribution to closing the investment and service delivery gaps in infrastructure. This would also require more role for the private sector and appropriate regulatory mechanism. |
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Context 1:
An American company is set to bag a Rs 30,000-crore project to build locomotives for the Indian Railways, a much-delayed mega-deal that is likely to be catalysed by the visit of President Barack Obama next month. The U.S. President visit is also expected to see the signing of the largest ever defence agreement between India and the US. The company will build 1,000 mainline diesel electric locos — engines in which diesel is the prime mover — over 10 years, and provide maintenance support over a period of time in a public-private partnership with Indian Railways, with the latter holding 26% stake.
Context 2:
Taking serious cognizance of the deteriorating standard of school education, the Maharashtra government has drafted an ambitious public-private partnership plan to set up a network of English-medium "model schools'' providing "world-class education'' across the state.
Context 3:
The Planning Commission has acknowledged to state governments that funds provided under plan schemes are “inadequate” for achieving the goal of universalising school education. To help the government meet this goal, the commission is reaching out to the states to put in place a public-private partnership scheme for schools.
Background:
The most significant criteria for a continued growth rate of an economy rest on the provision of a quality infrastructure. According to the Planning Commission, an approximation of 8 percent of the Gross Domestic Product or GDP needs to be invested. This would help in acquiring a prospective economy as stated in the 11th Five Year Plan. Fund investment of over US $ 494 billion has been conceived of according to the 11th Five Year Plan with effective from 2007 to 2012. The investment sectors under consideration are inclusive of telecommunications, electric power, water transport, road, rail, air, water supply as well as irrigation amounts to about Rs. 20,27,169 crore according to 2006-07 prices.
In order to meet such demands, various Public Private Partnerships or PPPs are being promoted for implementation of infrastructure projects. Several initiatives have been undertaken by Government of India to enable a greater PPP framework.
What is PPP:
Public-private partnership (PPP) describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. These schemes are sometimes referred to as PPP. Thus, PPP involves a contract between a public sector authority and a private party, in which the private party provides a public service or project and assumes substantial financial, technical and operational risk in the project.
Definition of PPPs in India:
“PPP means an arrangement between a government or statutory entity or government owned entity on one side and a private sector entity on the other, for the provision of public assets and/ or related services for public benefit, through investments being made by and/or management undertaken by the private sector entity for a specified time period, where there is a substantial risk sharing with the private sector and the private sector receives performance linked payments that conform (or are benchmarked) to specified, pre-determined and measurable performance standards”.
Essential conditions in the definition:
- Arrangement with Private Sector Entity: The asset and/or service under an arrangement will be provided by the Private Sector Entity1 to the public.
- Public asset or service for public benefit: Has the element of facilities/ services being provided by the Government as a sovereign to its people. To better reflect this intent, two key concepts are elaborated below:
‘Public Services’ are those services that the State is obligated to provide to its citizens (towards meeting the socio-economic objectives) or where the State has traditionally provided the services to its citizens. For example, provision of security, law and order, electricity, water, etc. to the citizens.
Why do we need PPPs?
Development of infrastructure and provision of basis civic services has always been considered a very important public sector activity for the following reasons
- Governments have recognised the crucial role of infrastructure in fostering economic growth and reducing poverty.
- Because of its ‘public good’ and ‘essential’ nature, Governments have attempted to ensure availability of basic civic services irrespective of market conditions.
- For a number of economic, social and political reasons, private sector involvement in these important areas was slow to develop and thus uneven.
Provision of public services and infrastructure has traditionally been the exclusive domain of the government. However, with increasing population pressures, urbanisation and other developmental trends, government’s ability to adequately address the public needs through traditional means has been severally constrained. This has led the Government’s across the world to increasingly look at the private sector to supplement public investments and provide public services through Public Private Partnerships.
- PPPs (Public Private Partnership) is very useful for infrastructure sector as Enhanced quality and quantity of infrastructure services
- To release full potential of public sector assets - provide value for the taxpayer and wider benefits for the economy
- Ensure stakeholders receive a fair share of benefits of PPP – as citizen, customers, taxpayers and employees
- Value creation by better management and delivery.
Asian Development Bank
The term “Public–Private Partnership” describes a range of possible relationships among public and private entities in the context of infrastructure and other services. PPPs present a framework that—while engaging the private sector—acknowledge and structure the role for government in ensuring that social obligations are met and successful sector reforms and public investments achieved. A strong PPP allocates the tasks, obligations, and risks among the public and private partners in an optimal way. The public partners in a PPP are government entities, including ministries, departments, municipalities, or state-owned enterprises. The private partners can be local or international and may include businesses or investors with technical or financial expertise relevant to the project.
PPPs can follow a variety of structures and contractual formats. However, all PPPs incorporate three key characteristics:
- A contractual agreement defining the roles and responsibilities of the parties,
- Sensible risk-sharing among the public and the private sector partners, and
- Financial rewards to the private party commensurate with the achievement of pre-specified outputs.
Public-Private Infrastructure Advisory Facility (World Bank Group)
A public-private partnership (PPP) involves the private sector in aspects of the provision of infrastructure assets or of new or existing infrastructure services that have traditionally been provided by the government.
PPP Projects in India
In India the PPP projects include Urban Infrastructure, Airport, Ports, and Railways, Roads, Health, water supply and sanitation and even to schools now. Let us briefly see some of the cases.
“PPPs are best implemented through standardized arrangements that constitute a stable policy and regulatory regime where private capital derives greater comfort and seeks the least possible risk premium. Model Concession Agreements (MCAs) would be used for providing a stable regulatory and policy framework.”
— Approach Paper to the Eleventh Plan
ROAD INFRASTRUCTURE:
In India, the central as well as a few state governments have successfully harnessed private sector partnership in road development. At the central level, as part of the first and second phases of the National Highways Development Project (NHDP) — a flagship program with an estimated requirement of US$ 50–60 billion investment over the next five years — 66 projects with a total value of about US$ 6 billion were implemented through the BOT route (42 toll projects and 22 annuity projects).The response from the private sector to these initiatives has been very encouraging. In 19 projects, private operators offered to pay upfront for the road concessions.
INDIAN RAILWAYS:
The Indian railways plan to invest around Rs 14,00,000 crores (cr), as stated in the Vision 2020, brought out by the Ministry of Railways (MoR) in December 2009. With whatever level of optimistic projections for the internal resources and borrowings for the coming decade, clearly, PPPs would have to be a significant source. This makes it imperative for the IR to create a policy framework that would attract PPPs, especially in the context that the PPPs in IR have not taken off as projected.
Over the years a large number of PPP models came into play. Since Independence, all railway projects, manufacturing and operations were solely developed and managed by the MoR through internal resources and budgetary support. Private parties were involved significantly in construction, wagon manufacturing, stores and component supplies, and catering, through a tendering process. Freight end users could have their own sidings for captive use, and engage handling contractors for loading and unloading even at railway terminals. An insignificant number of private railway lines and ‘out agents’ at certain important towns outside the railway network continued, but in a reducing manner.
The first involvement in a project from outside the IR happened when, in 1986, City Industrial and Development Corporation (CIDCO) of the Maharashtra Government got involved in contributing financially (two third of the project cost) for providing rail connectivity to Navi Mumbai. CIDCO had the right of commercialization of non railway operating parts of the station area and the air space, and had to bear the relevant maintenance cost. A surcharge of Rs 1 was per ticket was levied for additional revenue to CIDCO. This was an example of a public-public partnership.
Following this, the Konkan Railway Corporation (KRC) was formed as a joint venture (JV) company between MoR and the state governments of Maharashtra, Goa, Karnataka and Kerala, to Build, Operate and Transfer (BOT) a 738 kms coastal rail connectivity project between south of Mumbai and Mangalore.
AIRPORT:
The recent Delhi and Mumbai airport deals had created a very high visibility internationally for the Government’s airport reform process.
POWER:
Maharashtra’s recent experience of signing a distribution franchisee contract with an Indian private company (Torrent) in Bhiwandi circle, which is a textile manufacturing hub with 1.6 lakh electricity consumers and very low operational efficiency. This is the first distribution franchisee pilot in India where a private company has been awarded a ten-year contract to undertake planning, operations & Maintenance, metering, billing, collection, customer care, and investments required for system expansion and upgradation. The franchisee has exclusive rights to supply power, which it purchases at pre-determined prices from the government-owned state-wide distribution company.
HEALTH SECTOR:
Currently several private partnership initiatives in the Health sector are under implementation in the states of India. The scope of these initiatives span disease surveillance; purchase and distribution of drugs in bulk; contracting specialists for high risk pregnancies; national disease control programs; social marketing; adoption and management of primary health centers; collocation of private facilities (blood banks, pharmacy); subsidies and duty exemptions; joint ventures; contracting out; medical education and training; engaging private sector consultants; pay clinics; discount vouchers; self- regulation; R&D investments; telemedicine; health cooperatives; and accreditation.
Some examples include:
- Partnership; initiatives ranged from super-specialty tertiary-care hospitals to primary care (Karuna Trust in Karnataka)
- Slum communities (Arpana Swasthya Kendra, Delhi;
- Urban slum care in the district town of Adilabad, Andhra Pradesh).
- Community health insurance initiatives (Arogya Raksha scheme in Andhra Pradesh; Yeshasvini scheme in Karnataka).
- Mobile health services (emergency ambulance, diagnostic and general health care) in Tamil Nadu, Uttaranchal, and West Bengal.
- Telemedicine and tele-health project in (Karnataka)
- Contracting-out cleaning, kitchen and laundry services in West Bengal.
- Rogi Kalyan Samiti, or hospital autonomy in a decentralised context by local self government in the city of Bhopal (Madhya Pradesh).
More recently, GOI has taken several additional measures for facilitating PPPs.
The key ones are the VGF scheme, IIFCL to provide long-term capital, and capacity building and other assistance. These initiatives are aimed at covering PPP projects where the private sector provides infrastructure for a fee under a concession agreement. Concession is granted on the basis of a transparent bidding process.
The multilateral agencies have welcomed the recent steps taken by GOI with respect to VGF and IIFCL. ADB and the World Bank will assist GOI in promoting PPPs across sectors and regions of India, through a range of financing, advisory and technical assistance (TA) measures. Most importantly, these agencies would be able to assist governments in tailoring the PPP solutions to specific demands of the individual states, sectors, and projects
The government has engaged consultants for preparing a policy framework on PPP. The key issues identified by the consultants were:
- Is cross-sectoral law required?
- Is cross-sectoral agency required?
- Provide financial support to PPPs?
- What project development modes?
- How to manage unsolicited bids?
- How to manage contracts?
- How to resolve disputes?
- Role of independent regulation?
“Public–private partnerships should not be seen as public partnerships and private projects. They should rather be viewed as private partnerships and public projects ...”
— Dr. Montek Singh Ahluwalia,
Deputy Chairman, Planning Commission, Government of India
Global experience:
The experience of other countries suggests that it should be possible to increase private investment in infrastructure in India from its current level of 1% of GDP (Gross Domestic Product) to 2% of GDP. Chile has succeeded in increasing its infrastructure investments to a level of 5% of GDP, in good part through encouraging private participation in almost all infrastructure sectors. Today, in Chile, investments and operations in power, gas, telecom, airports, major highways, rail freight services and water and sanitation are mostly in the realm of the private sector, and the presence of the government in service provision is limited to a few areas, such as passenger rail services and small airports. In the United Kingdom a focused effort by the government was required to expand the program, resulting in the signing of over 700 PPP projects in various sectors by 2006. The volume of transactions has meant that a new class of investors has come in to invest in them through the secondary market.
Brazil opted for private participation in roads like many other countries, as a way to overcome its budget constraints, and its experience has been very encouraging. Today, nearly 6% of its paved roads (164,000 km) are under private administration through 36 state and federal toll road concessions, and the share of the private sector is expected to be doubled in the near future. In Korea, PPPs in roads form part of a wider government initiative, called Private Participation in Infrastructure (PPI), which led to an increase in the share of private investment in infrastructure from 0.2% in 1995 to 14.4% in 2005. Of the total 141 Build-Transfer-Operate (BTO) projects under various stages of implementation and review across different sectors, road sector projects account for 27% in terms of number and 57% in terms of volume.
Take the case of affermage (Lease) in Senegal, which has led to substantial improvement in services. Both production capacity and number of connections have been increased by around 50% in Senegal by the private operator. Simultaneously, non-revenue water has been reduced from 32% to 20%, representing annual savings of more than 12 million cubic meters of water. All this has been achieved with the existing Government staff and only a 3% annual tariff increase. Key factors contributing to the success of these PPP projects include a high level of political commitment and focus on improvements related to customer servicing.
A different approach to PPP was adopted in Manila where the city was carved out into two zones and 25-year concessions were awarded to two different operators. Manila Water Company (MWC) successfully bid for the East Zone; its majority shareholding is now with the public, while a local conglomerate, Ayala — is the largest shareholder. A local bank, employees, and multinational corporations are other key shareholders. MWC provides a good example of a private sector utility co-owned by key stakeholders. MWC, within 10 years of operation, has increased the area under 24 x 7 supply from 26% to 98% while reducing water losses.
NCPPP (USA)
The National Council for Public-Private Partnerships is a non-profit, non-partisan organization founded in 1985. The Council is a forum for the brightest ideas and innovators in the partnership arena. Its growing list of public and private sector members, with experience in a wide variety of public-private partnership arrangements, and its diverse training and public education programs represent vital core resources for partnering nationwide. The Council's members bring an unmatched dedication to providing the most productive and cost-effective public services.
Key lessons from global experience with PPP
• detailed policy for implementing PPP
• proper planning by government
• project development by government
• full support by government
• proactive public communication
• transparent bidding process
• clear policy on unsolicited proposals
• defined sources of revenue
• proper allocation of risk
• adequate protection for lenders
(Source: ADB)
Different types of PPP
The PPP models vary from short-term simple management contracts (with or without investment requirements) to long-term and very complex BOT form, to divestiture.
These models vary mainly by:
- Ownership of capital assets
- Responsibility for investment
- Assumption of risks, and
- Duration of contract.
Thus the PPP models can be classified into the following broad categories in order of generally increased involvement and assumption of risks by the private sector. The four broad categorisations of participation are:
- Supply and management contracts
- Turnkey projects
- Lease
- Concessions
- Private ownership of assets.
- Therefore there is varying understanding amongst stakeholders as to what constitutes a Public Private Partnership.
- In some types of PPP, the cost of using the service is borne exclusively by the users of the service and not by the taxpayer.
- In other types (notably the private finance initiative), capital investment is made by the private sector on the strength of a contract with government to provide agreed services and the cost of providing the service is borne wholly or in part by the government. Government contributions to a PPP may also be in kind (notably the transfer of existing assets).
- In projects that are aimed at creating public goods like in the infrastructure sector, the government may provide a capital subsidy in the form of a one-time grant, so as to make it more attractive to the private investors.
- In some other cases, the government may support the project by providing revenue subsidies, including tax breaks or by providing guaranteed annual revenues for a fixed period.
- To cater to such different objectives and context, each competent government authority that uses the PPP definition (different definitions) to designate projects as PPP would need to specify its own set of essential conditions. Such conditions should be in addition to the common definition
Accordingly the differences in the definitions stem from mainly the following parameters:
a. Investment by private sector:
b. Private sector provision of public infrastructure or public service:
c. Original mandate of government:
d. Remuneration to the private sector based on output or performance:
KEY CONCEPTS/TERMS
Public Private Partnership (PPP)
Partnership between a public sector entity (Sponsoring Authority) and a private sector entity (a legal entity in which 51 percent or more of equity is with the private partner/s) for the creation and/or management of infrastructure for public purpose for a specified period of time (concession period) on commercial terms and in which the private partner has been procured through a transparent and open procurement system.
Public Private Partnership (PPP) Project
A project based on a contract or concession agreement, between a Government or statutory entity on the one side and a private sector company on the other side, for delivering an infrastructure service.
Public Sector Company
A company in which 51 percent or more of the subscribed and paid up equity is owned and controlled by the Central or a State Government, jointly or severally, and includes any undertaking designated as such by the Department of Public Enterprises and companies in which majority stake is held by Public Sector Companies other than financial institutions.
Sponsoring Authority(ies)
Central Government Ministries/Departments, State Governments, Municipal or Local Bodies, PSUs or any other statutory authority (such as the Delhi Development Authority).
CAPACITY BUILDING
Capacity building at the state and central level. GOI is working on a number of initiatives to assist and encourage capacity building at the state and central levels. It is identifying the capacity building needs of state governments, providing assistance for the creation of state-level PPP cells as nodal agency, streamlining PPP approval process, developing PPP toolkits, model concession agreements (MCAs), bidding documents, and project preparation manuals. It is also building a central database and website on PPPs to disseminate updated information to the states and the private sector. Arrangements are being finalized under which state governments would be able to avail of consultancy support for developing PPP projects. Institutions like the ADB have begun supporting the capacity building process through these workshops and proposed technical assistance projects.
VGF (Viability Gap Funding)
Viability Gap Funding means a grant one-time or deferred provided under the Government of India’s Scheme for Financial Support to PPPs in Infrastructure, with the objective of making a project commercially viable.
VGF is a special facility to support PPP projects. This facility is housed in the DEA. Infrastructure projects are often economically justifiable but not viable commercially, at least in the initial years, due to long gestation periods and economic externalities. In large-scale infrastructure projects, the commercial viability is difficult to establish, especially at the beginning of the project. Therefore, there is a need for providing some upfront assistance to make the project commercially or financially viable, if it is otherwise economically viable or desirable for the state. The GOI therefore has operationalized VGF to provide grant support to such PPP projects. Financing. The VGF scheme provides funding for state or central PPP projects implemented by the private sector developer on a BOT basis (selected through a process of competitive bidding). Funding is available for 20% of the project cost. If required, an additional 20% can be made available by the sponsoring Ministry/ agency or it can come from the state government or any sponsoring statutory agency like local bodies. An Empowered Committee has been set up for quick processing of cases. In-principle approval has been granted for twelve projects.
Build-and-Transfer (BT): A contractual arrangement whereby the Developer undertakes the financing and construction of a given infrastructure or development facility and after its completion hands it over to the Government, Government Agency or the Local Authority. The Government, Government Agency or the Local Authority would reimburse the total Project investment, on the basis of an agreed schedule. This arrangement may be employed in the construction of any infrastructure or development Projects, including critical facilities, which for security or strategic reasons, must be operated directly by the Government or Government Agency or the Local Authority.
Build-Lease-and-Transfer (BLT): A contractual arrangement whereby a Developer undertakes to finance and construct Infrastructure Project and upon its completion hands it over to the Government or Government Agency or the Local Authority concerned on a lease arrangement for a fixed period, after which ownership of the facility is automatically transferred to the Government or Government Agency or the Local Authority concerned.
Build-Operate-and-Transfer (BOT): A contractual arrangement whereby the Developer undertakes the construction, including financing, of a given infrastructure facility, and the operation and maintenance thereof. The Developer operates the facility over a fixed term during which he is allowed to a charge facility users appropriate tolls, fees, rentals and charges not exceeding those proposed in the bid or as negotiated and incorporated in the Contract to enable the recovery of investment in the Project. The Developer transfers the facility to the Government or Government Agency or the Local Authority concerned at the end of the fixed term that shall be specified in the Concession Agreement. This shall include a supply-and-operate situation which is a Contractual arrangement whereby the supplier of equipment and machinery for a given infrastructure facility, if the interest of the Government, Government Agency or the Local Authority so requires, operates the facility providing in the process technology transfer and training to Government, Government Agency or the Local Authority nominated individuals.
Build-Own-and-Operate (BOO): A contractual arrangement whereby a Developer is authorised to finance, construct, own, operate and maintain an Infrastructure or Development facility from which the Developer is allowed to recover this total investment by collecting User Levies from facility users. Under his Project, the Developer owns the assets of the facility and may choose to assign its operation and maintenance to a facility operator. The transfer of the facility to the Government, Government Agency or the Local Authority is not envisaged in this structure; however, the Government, Government Agency or Local Authority may terminate its obligations after specified time period.
Build-Own-Operate-Transfer (BOOT): A contractual arrangement whereby a Developer is authorised to finance, construct, maintain and operate a Project and whereby such Project is to vest in the Developer for a specified period. During the operation period, the Developer will be permitted to charge user levies specified in the Concession Agreement, to recover the investment made in the Project. The Developer is liable to transfer the Project to the Government, Government Agency or the Local Authority after the expiry of the specified period of operation.
Build-Transfer-and-Operate (BTO): A contractual arrangement whereby the Government or Government Agency or the Local Authority contracts out an infrastructure facility to a Developer to construct the facility on a turn-key basis, assuming cost overruns, delays and specified performance risks. Once the facility is commissioned satisfactorily, the Developer is given the right to operate the facility and collect user levies under a Concession Agreement. The title of the facilities always vests with the Government, Government Agency or the Local Authority in this arrangement.
Contract-Add-and-Operate (CAO): A contractual arrangement whereby the Developer adds to an existing infrastructure facility which it rents from the Government, Government Agency or the Local Authority and operates the expanded Project and collects user levies, to recover the investment over an agreed franchise period. There may or may not be a transfer arrangement with regard to the added facility provided by the Developer.
Develop-Operate-and-Transfer (DOT): A contractual arrangement whereby favourable conditions external to a new Infrastructure Project which is to be built by a Developer are integrated into the BOT arrangement by giving that entity the right to develop adjoining property and thus, enjoy some of the benefits the investment creates such as higher property or rent values.
Rehabilitate-Operate-and-Transfer (ROT): A contractual arrangement whereby and existing facility is handed over to the private sector to refurbish, operate (collect User Levies in operation period to recover the Investment) and maintain for a franchise period, at the expiry of which the facility is turned over to the Government or Government Agency or the Local Authority. The term is also used to describe the purchase of an existing facility from abroad, importing, refurbishing,
erecting and consuming it within the host country.
Rehabilitate-Own-and-Operate (ROO): A contractual arrangement whereby an existing facility is handed over to the Operator to refurbish and operate with no time limitation imposed on ownership. As long as the operator is not in violation of its franchise, it can continue to operate the facility and collect user levies in perpetuity.
SPECIAL PURPOSE VEHICLE:
Typically an SPV is employed to purchase the assets from the Originator and issue securities against these assets. Such a structure provides a comfort to the investors that they are investing in a pool of assets which is held on their behalf only by the SPV and which is not subject to any subsequent deterioration in the credit quality of the Originator. The SPV is usually a thinly capitalised vehicle whose ownership and management are independent of the Originator. The main objective of SPV is to distinguish the instrument from the Originator.
IIFCL:
India Infrastructure Finance Company Limited (IIFCL) has been set-up with the specific mandate to play a catalytic role in the infrastructure sector by providing long-term debt for financing infrastructure projects in India. IIFCL raises funds both from the domestic as well as external markets on the strength of government guarantees.
TYPES OF RISKS:
The various types of risks associated with the PPP projects can be classified into the following:
I. Construction Period Risks
i. Land expropriation
ii. Cost overruns
iii. Increase in financing cost
iv. Time and quality risk
v. Contractor default
vi. Default by the Developer
vii. Time, cost and scope of identified but related work, and variations
viii. Environmental damage-subsisting/on going
II. Operation Period Risks
i. Government agency default
ii. Developer default
iii. Termination of Concession Agreement by Infrastructure Authority or Government or Government Agency
iv. Environmental Damage – Ongoing
v. Labour risk
vi. Technology risk
III. Market & Revenue Risks
i. Insufficient income from user levies
ii. Insufficient demand for facility
IV. Finance Risks
i. Inflation
ii. Interest rate
iii. Currency risk
V. Legal Risk
i. Changes in Law
ii. Title/Lease rights
iii. Security structure
iv. Insolvency of Developer
v. Breach of financing documents
VI. Other Risks
i. Direct political Force Majeure (an unexpected and disruptive event that may operate to excuse a party from a contract).
ii. Indirect political Force Majeure
iii. Natural Force Majeure
iv. Sequestration
v. Exclusivity
vi. Development approvals
vii. Adverse Government action/in action
viii. Provision of utilities
ix. Increase in taxes
x. Termination of concession by the Government
xi. Payment failure by the Government
The Road ahead:
The increases in investment called for by the 11th Plan Approach Paper foresee a major role for the private sector. If investment is to increase to 7-8% of GDP, the amount contributed from the private sector has to rise from the average of 1% of GDP to the range of 2% of GDP or more. The experience of other countries shows that much higher private investment levels — as a percentage of GDP — can be achieved with the right policies and institutions in place.In this context it is important to note that, according to the Deepak Parekh Committee on infrastructure financing, the financing system of infrastructure projects will be constrained by two sets of factors: macroeconomic and institutional.
Macroeconomic:
Nature of savings
Fiscal discipline
Availability of risk capital
Concentration of risk
Capacity to absorb capital inflows
Institutional:
- Commercial Banks
- Insurance companies
- Specialized NBFCs
- Infrastructure focused central PSUs
- To advance these objectives, the Committee proposes several initiatives which are classified under the following major heads.
- Development of domestic debt capital market
- Tapping the potential of insurance sector
- Rationalizing banks’ and NBFCs’ participation in infrastructure financing
- Fiscal recommendations
- Facilitating equity flows into infrastructure
- Inducing foreign investments into infrastructure
- Utilizing foreign exchange reserves
According to experts if India has to scale up to the levels seen in other countries, PPPs would make a major contribution to closing the investment and service delivery gaps in infrastructure. This would also require more role for the private sector and appropriate regulatory mechanism.
- Prof. M. Guruprasad
AICAR Business School
Sources: Asian Development Bank, Government of India, Planning Commission, Government of India, Ministry of Finance, Department of Economic Affairs, World Bank, Times of India.
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