New draft rules issued for PPP projects

A government under cloud on

corruption charges today released

the draft of a national

Public-Private Partnership

(PPP) policy seeking to ensure

transparency. The ministry

of finance released the

draft for discussion, while

stating it would publish separate

mandatory disclosure

norms for projects and also

set up a dedicated dispute resolution

mechanism to address

issues related to bidding and

award of PPP projects.

The policy talks of risk allocation

between the public

and private entities, while taking

care of the controversial

land use issue. Wherever natural

resources are provided

for a specific use, alternative

exploitation of the land will be

prohibited and this would be

a non-negotiable position,

says the draft.

The draft says every PPP

project would be vetted at the

central government level,

even where no capital subsidy

is expected to obtain clearance

from the relevant authorities.

The oversight would

extend to the manner of selection

of the private entity,

procedures observed in releasing

payments from time

to time and review of quality

of service.

Though PPP Approval

Committee functions under

the finance secretary, its policy

making agenda was so far

being coordinated by the PPP

cell in the Planning Commission.

With the finalisation of

the policy, the latter might not

have much say in PPP norms.

Identification of risks has

been given importance. The

government would identify

different types and degrees of

risk during the project lifecycle

and configure appropriate

mitigation measures.

At the same time, the legitimate

concerns of stakeholders

would be kept in

mind. The draft said the risks

that the public sector was

more competent to bear in the

normal course of its business

“would be retained by the

public sector”. It also said the

public sector would not retain

the risk that the private sector

had better ability to bear.

The policy said it would

support the creation of nodal

agencies such as PPP Cells at

state or sector levels to look after

identifying and approving

projects, capacity building and

ensuring transparent tendering.

Such cells have been in

existence for some time.

A provision for competitive

dialogue has been kept to

deal with complex contracts

where an implementing

agency is unable to objectively

establish the parameters

needed to achieve project

objectives.

This would involve working

together of the implementation

agency with likely bidders

to explore all possible

technical, commercial and legal

options and arrive at the

optimal solution through an iterative

procedure.

The government has also

decided to put forward proper

guidelines for the officers. It

will publish a defined set of

PPP rules that will include

identification and procurement

processes, critical clauses

of a contract such as dispute

resolution and arbitration.

WHAT IS PPP?

Public Private Partnership

means an arrangement between

a government and a

statutory or government

owned entity on one side and

a private sector one on the other.

It is aimed at provision of

public assets or services

through private sector investment

and/or management for

a specified period of time.

Risks will be defined and

allocated between the private

sector and the public entity.

The private sector receives

performance-linked payments

that conform to specified performance

standards, measurable

by the public entity or its

representative.

Models where ownership

of the underlying asset remains

with the public entity

during the contract period

and the project is transferred

back to the public entity after

the termination contract

are the preferred forms of

PPP models.