45 Infrastructure Sector CEOs gathered under the auspices of Confederation of Indian Industry in New Delhi to interact with Dr Montek Singh Ahluwalia deputy chairman of Planning Commission and discuss issues facing the private sector in the Indian Infrastructure Sector.
The overarching feeling was that PPP was at the cross roads for the following 3 key reasons:
1. Partnership Issues often getting clouded over with Adversarial Approaches
2. Swing towards PSU investments and EPC Contracts
3. Huge Debt Overhang on Infra Balance Sheets and alarmingly high level of Infrastructure NPAs in the financial system
Discussions and deliberations took place across 6 broad areas
1. Restructuring of Legal and Statutory Operating Environment
There was an urgent need to push through a new architecture for regulatory authorities encompassing independence, autonomy and accountability. Planning Commission was requested to push through the draft legislation that it had already prepared towards this end.
Further, it was felt that the need for post award renegotiations had become a fact of life with dynamically changing scenarios facing the private sector whereas the Concession Contracts were typically 20 to 30 years.
In view of dynamically changing circumstances, PPPs over the world had arrangements for renegotiations. Private Sector has thus requested for consideration of a high powered highly respected independent body like the National Infrastructure Redressal Board to handle this aspect in an acceptable manner. It is possible that the same body could also have a redressal mechanism for speedy resolution of disputes.
2. Environment
It was strongly felt that the current forests and environment permissions procedure needs to be re-looked at. The time has thus come for a high powered committee like National Environment Task Force to comprehensively clean up the accumulated and complex body of laws and procedures with a transparent and logical 21st century set of processes.
Alternatively, this could be one of the key early tasks of the proposed National Investment Board/Cabinet Committee on Investments.
3. Restructuring of RBI's definition of Infrastructure Sector NPAs
There was a strong feeling among members that Infrastructure Sector should be given different treatment as compared to the Manufacturing Sector in terms of Non Performing Assets. This becomes even more critical in the wake of the fact that the Project Lifecycle Start and Finish dates of many PPP Infrastructure Projects often gets delayed on account of delays in numerous Government approvals.
4. Clearance Mechanism
Private Sector warmly welcomed the creation of National Investment Board/Cabinet Committee on Investment and strongly recommended that the Government straight away consider the bidding out of projects through SPVs 100% owned by the Government to start with, which would have all key federal and State permissions obtained before starting the actual bidding process.
This, in turn could successfully address the growing problem of increasing delays in project completion and consequent NPAs.
5. Ports Sector
The Ports Sector came up as the predominant sector for immediate and predominant policy clean up with reference to PPP tariff, time taken for decisions, bidding procedure and most importantly, a new Regulatory Authority.
6. Risk Sharing
Private Sector representatives pointed out that the pendulum on risk sharing had moved to an extreme where most of the risks seemed to rest with private sector.
Further, the contemporary Contracts should be better modulated and liquidated damages against Sovereign promises should be affixed. This will restore the risk sharing between Private Sector and the Government.
