Economic Survey 2013: Flexibility needed in PPP arrangement to rebid projects

"India should be careful not to undertake PPPs that do not

apportion risks and responsibilities sensibly. Moreover flexibility needs to be built into arrangements so that the contract can be withdrawn and put up for rebid when the private party underperforms," the Survey said.

Global experience indicates that public private partnerships (PPP) work well when they combine the efficiency and risk assessment of the private sector with the public purpose of the government sector, it added.

At the same time they work poorly when they rely on the efficiency and risk assessment of the government sector and the public purpose of the private sector it said stressing, the survey said.

"The government needs to study the PPP experience and build some central capacity to help ministries, authorities, and states structure contracts and renegotiate troubled ones."

The announcement comes against a backdrop of majority of contracts awarded last year under PPP specially in the highways sector remaining stuck for want of funds. On other hand, bidders including big infrastructure players like GVK and GMR have even walked out of projects midway.

The government has been promoting PPPs as an effective tool for bringing private-sector efficiencies in creation of economic and social infrastructure assets with the country emerging as one of the leading PPP markets in the world.

By end December 2012 there were over 900 PPP projects in the infrastructure sector with total project cost of Rs 5,43,045 crore compared to over 600 projects with TPC of Rs 333,083 crore on 31 March 2010.

These projects are at different stages of implementation.

The Public Private Partnership Appraisal Committee (PPPAC), since its inception in 2006 has approved 307 central project proposals with TPC of Rs 2,97,856.58 crore.

These include 242 projects of National Highways, 29 proposals from ports, two airports schemes and 27 housing projects.

The Survey said government under the Scheme for Financial Support to PPPs in Infrastructure have approved viability gap funding (VGF) to the tune of Rs 89,203 crore to 145 projects. It has included 13 new sub-sectors in the list of sectors eligible for VGF support including education and health.

Detailing steps in regard to framing of policies for better implementation of projects, it said, "following recommendations of the Committee on Public Procurement, the Prime Minister's announcement regarding transparency and accountability in procurement..., the draft PPP Rules and PPP Policy have been prepared."

These have undergone extensive consultation process at central and state government levels for finalisation, it added.

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