| Work Detail |
Accelerate implementation of PPP projects: FICCI-EY Study
Saurabh Gupta | 26 Jul, 2017
A FICCI-EY study titled, Revival of PPP momentum in the transport sector, underlines the need to resolve multiple issues dampening the private sector interest and slowing the rate of private investment in the sector. It calls for key interventions to remove the roadblocks to PPP and accelerate the implementation of PPP projects. These interventions would include policy actions, regulatory changes and push the reforms agenda, which will create conducive environment for bringing investments into the sector.
The study was released in New Delhi on Wednesday by Nitin Gadkari, Minister for Road Transport, Highways and Shipping, Government of India; Amitabh Kant, Chief Executive Officer, NITI Aayog; Dr. Junaid Kamal Ahmad, India Country Director, South Asia, The World Bank, and other dignitaries at the inaugural session of the India PPP Summit, orgainsed by FICCI in association with the International Chamber of Commerce (ICC) India.
The main recommendations of the Study include: Strengthening of lending institutions, Greater participation of insurance and pension funds, Establishment of Infrastructure PPP Project Review Committee (IPRC) and the Infrastructure PPP Adjudicatory Tribunal (IPAT), Setting up of 3P India as proposed in the Union Budget for 2014-15, Mechanism to keep a check on aggressive bidding , Need for independent regulators, Passing and enactment of pending Bills, Strong emphasis on performance-based contracts, Better preparation of DPR and Revisiting the Viability Gap Funding (VGF) Scheme.
Studt recomended that despite the creation of other lending institutions such as IIFCL, IDFs, and IFCs, commercial banks remain a major source of debt financing of PPP projects in India. However, banks are faced with issues such as asset liability mismatch (ALM) and liquidity constraints as they have been funding long-duration infrastructure projects with their short-term deposits. Hence, strengthening of banks and other financial institutions has been long due.
It said, companies need access to long-term funds for infrastructure projects with long gestation periods. Globally, long-term capital is raised via capital markets where major investors are pension and insurance managers. There is an urgent need in India to tap such markets to fund its infrastructure requirement. However, there are regulatory constraints on insurance and pension funds which restricts them to invest in infrastructure sector. It is recommended that investment and exposure norms posed by the Insurance Regulatory and Development Authority (IRDA) and Pension Fund Regulatory and Development Authority (PFRDA) be relaxed in a rational way so as to encourage these funds to actively participate in infrastructure projects.
Further, the government should actively promote and issue rupee denominated Zero Coupon Bonds (ZCB). This will also help promote the general bond market in the country and attract investments from certain categories of investors such as pension funds and insurance companies.
Establishment of Infrastructure PPP Project Review Committee (IPRC) and the Infrastructure PPP Adjudicatory Tribunal (IPAT) |
