Ministry of Finance06-December, 2007 13:34 IST
Government Initiatives to Promote PPP
The Union Finance Minister in his Budget Speech for 2007-08 announced in the Parliament the setting up of a Revolving Fund with a corpus Rs. 100 crore to accelerate the process of project preparation. To fulfil the commitment, Department of Economic Affairs has notified the Guidelines for India Infrastructure Project Development Fund Scheme to provide financial support for quality project development activities to the States and the Central Ministries through ‘India Infrastructure Project Development Fund (IIPDF)’ Scheme. Public Private Partnerships (PPPs) are being encouraged by Government of India as the preferred mode for execution and operation of infrastructure projects.

Several initiatives have been taken by the Central Government to promote PPPs. These include streamlining and standardising the process of appraisal and approval of PPP projects in the Central sector through setting up of the PPP Appraisal Committee (PPPAC); providing Viability Gap Funding (VGF) to projects under the Scheme for Financial Support to PPPs in Infrastructure; setting up India Infrastructure Finance Company Ltd (IIFCL) as a Special Purpose Vehicle (SPV) to meet the long term financing requirements of potential investors; and facilitating dissemination of information on PPPs as well as capacity building of officers of Central Ministries and State Governments to develop, appraise and execute PPP projects. The overall response to PPP as the preferred mode for the implementation of infrastructure is encouraging.

Project development has been identified as a critical area of attention to enable creation of a shelf of bankable Public Private Partnership projects that can be bid out. Accordingly, the Department of Economic Affairs (DEA) has embarked on a technical assistance programme, which provides the selected State Governments with in-house consultants to manage the process for project development. Fourteen states have indicated their requirement to avail of this technical assistance programme.

The IIPDF Scheme aims to put in place a mechanism to fund potential Public Private Partnership projects’ project development expenses including cost of engaging consultants and transaction advisor, thus increasing the quality and quantity of successful PPPs and allowing informed decision making by the Government based on good quality feasibility reports. The IIPDF Scheme will assist projects that closely support the best practices in PPP project identification and preparation.

The salient features of the Scheme are:

• IIPDF will be available to the Sponsoring Authorities for PPP projects for the purpose of meeting the project development costs including expenses incurred by the Sponsoring Authority in respect of feasibility studies, environment impact studies, financial structuring, legal reviews and development of project documentation including concession agreement, commercial assessment studies grading of projects.

• IIPDF would finance an appropriate portion of the cost of consultants and transactions advisors on a PPP project where such consultants and transaction advisors are appointed by the Sponsoring Authority either from amongst the transaction advisers empanelled by Department of Economic Affairs or through a transparent system of procurement under a contract for services.

• IIPDF will not finance the expenses incurred by the Sponsoring Authority on its own staff.

• Sponsoring Authority will create and empower a PPP Cell to undertake PPP project development activities and larger policy and regulatory issues to enlarge the number of PPP projects in Sponsoring Authorities’ shelf.

• IIPDF will be a grant and will ordinarily fund upto 75% of the project development expenses. On successful completion of the bidding process, the project development expenditure would be recovered from the successful bidder.

• In case of failure of bid, the assistance would be recovered and Sponsoring Authority would be liable to refund the amount of assistance received. Balance 25% will be co-funded by Sponsoring Authority. Assistance from IIPDF would be released after the share of the Sponsoring Authority has been released.

• The IIPDF would be on budgetary outlay of Ministry of Finance, Government of India. This would be supplemented through budgetary support by the Ministry of finance.

• The IIPDF would be administered by Empowered Institution under Ministry of Finance with Additional Secretary as Chairperson and Members from Department of Expenditure, Planning Commission, Joint Secretary dealing with the subject in line Ministry and Joint Secretary, DEA.

• Empowered Institution will select projects for which project development costs will be funded, set the terms and conditions under which the fund would be provided and recovered and set milestones for disbursing and recovering the fund.

With the facilitative environment being created by Finance Minister as well as the availability of funds through various Government schemes, PPPs in India are creating a robust enabling framework to catalyse infrastructure development in the country.

(Release ID :33808)