Many a slip between planning,commissioning

If one looks at just the Ministry of Road Transport and Highways,the panel’s reluctance to alter the sector’s model concession agreement (MCA) — and treating it as a sanctimonious document — has led to a delay of over two years in the award of highway projects worth Rs 40,000 crore,say officials.

The model concession agreement (MCA) is the basic bidding document used for award of PPP projects. The shortcomings of MCA was out in the open when in 2008,developers went to the court seeking changes in its shortlisting norms and cross-shareholding rule that were seen as irritants stalling road projects. Cross-shareholding is the stake that a company has in another company.

After months of litigation,the Commission agreed to drop the condition that only top five bidders at the technical stage would be allowed to submit financial bids. The developers claimed such a clause favoured only the big players and left medium players out of the process while the Commission said that the top five conditions would keep only serious players with strong financial and technical fundamentals in the fray.

The Commission also agreed to relax the cross-shareholding clause,sparking off commotion not only in short-listing of players for the roads sector but also in award of PPP projects in the Railways. In the roads sector,the cross-shareholding limit has now been raised to almost 25 per cent.

Even though administrative ministries have been facing problems on the ground making it difficult to implement the MCA and its associated request for qualification (RFQ) and request for proposal (RFP) documents,the Commission needs to be applauded to the extent that it gave the country basic standards and well researched procedures,all in the form of MCA,to kick-start the PPP process.

PPP,as a concept,had been doing rounds in Indian economic parlance for almost two decades,it was only under the Planning Commission,primarily during UPA-I,that the concept got an Indian face.

Despite this,there have been issues that irk administrative ministries who see the criticism of the Commission as interference. The case in point being the bidding process for the Mumbai and Delhi airports where the Commission claimed that the ministry’s selection committee did not follow all the rules for shortlisting players,leading to the creation of an empowered group of ministers in 2005 that had to finalise the names of the top six bidders for the Delhi airport modernisation project. In fact,the Commission wanted the ministry to re-issue the bids,causing much resentment in the civil aviation ministry.

The Prime Minister’s Office and the Cabinet Secretariat had to intervene to resolve the differences when Kamal Nath took over as road transport and highways minister in 2009. With the ministry and road developers claiming interference from the Commission on various aspects of the PPP process,Nath convinced the government to create an EGoM under UPA’s veteran dispute resolver Pranab Mukherjee to bring the Commission under its ambit.

“This was one of the most astute moves by the minister leading to fast-tracking of projects. The other move,which involved the setting up of a committee within the Planning Commission under member B K Chaturvedi,was also a smart initiative. The minister managed to get the Commission make sweeping changes in the MCA through the committee even as other sections of the panel had been opposing it,” a senior infrastructure expert who did not want to be quoted said. This included changes to the cross-shareholding norm,the prohibitive termination clause and the selection process,which took a final shape in November last year speeding up the award process. “The response to project bids almost doubled after the changes to the MCA. From receiving 3 or 4 bids per project,the number of bidders went up to 10 or 12 in certain cases,” a National Highways Authority of India (NHAI) official said while supporting the stance of the ministry.

But even as some issues have been resolved,new battlefronts have opened up,says a senior government official from one of the infrastructure ministries. Take,for instance,the case of the ports sector. The reason,once again,is the MCA. But the difference here is that the MCA being currently followed has not been prepared by the Planning Commission but by the ministry in January 2008. The Commission’s major objection to the MCA was the kind of cost that should determine the concession period. When a project is estimated,there are two kinds of costs — total project cost (TPC-cost estimate of the bidder and financier) and the approved project cost by the government. Currently,the concession period or the period for which the private developer can charge for their services is determined on the TPC.

The Commission,however,wants it changed to whichever is lower of the two so that the liability to the port trust is minimal in case a project is terminated mid-way. But such issues are bound to crop up because when matters are referred to the Commission as consultant and supreme policy advisor of the government,it is bound to take a holistic view.

The ministries also say that the Commission is taking its job too seriously and in the process stepping on their toes.

For instance,in May this year,the Cabinet Secretariat issued a circular asking all infrastructure ministries to fix quarterly and annual targets in consultation with the Plan panel. The Commission,say officials,decided to overstep its role as advisor and prepared a draft Cabinet note with targets for almost all infrastructure ministries asking them to give comments.

“We are left wanting for instructions and will consult the Cabinet Secretariat on which of the two sides will actually implement the orders,” a government official in the shipping ministry said.

Infrastructure ministries also consider the Commission’s views on procedures as interference,claiming that implementation falls under the scope of the executing agency. One such case was the opposition of the Plan panel in 2007 to the proposal to impose an airport development fee (ADF) on passengers by the civil aviation ministry,which mooted the levy of development fee in the case of airports where annual passenger turnover is over 15 lakh.

The Plan panel had said since PSF (passenger service fee) is meant for providing facilities at airports,there is no need to impose a separate ADF.

In another instance,the civil aviation ministry was at loggerheads with the panel over the open skies pact with Association of South East Asian Nations (Asean). While the Commission supported the pact,the ministry said foreign competition from mega carriers such as Singapore Airlines,Malaysia Airlines and Thai Airways would jeopardise the Indian aviation industry,which was not ready for competition. However,the Plan panel said air traffic between India and Asean should be gradually opened up to put in place an open skies policy by 2012.