The Hindu Business Line : `Enabling framework needed for pvt participation in core sector'

AN enabling framework is one of the critical factors that ensure the success of private sector participation in infrastructure development, according to a research undertaken in the area.

The other factors are government commitment, risk allocation and mitigation, bankability, transparency of the process and bidding costs, the research, done by Dr K. Sasi Kumar and Mr E. Jayasankar Prasad of Kerala University, has found.

In the case of Kerala, there are no legal and regulatory frameworks for protecting the interests of the investor; neither are there any institutional mechanisms and operating guidelines to ensure the interests of the State.

The legal framework in the form of contractual agreements is essential for risk allocation and mitigation. While Andhra Pradesh and Gujarat are pioneers in establishing build-own-transfer (BOT) Acts, Kerala has yet to formulate a comprehensive framework in this respect, it is pointed out.

The State also needs an efficient regulatory set-up to monitor development of infrastructure and to enforce changes in the current system to suit the private participation.

The regulation will help encourage efficiency and innovation by promoting competition and also ensure the right amount of investment. Besides, it will protect other public policies and public interests such as universal service and access to other public and private services.

The regulatory mechanism can be used to identify infrastructure sectors and the size limits of the projects for different levels of State administration. The "Modernising Government Programme" now underway in the State, attempts to identify the initiatives and chalk out an integrated schedule for implementation, says the research study.

As for the institutional framework, the Government should constitute a special committee or task force to coordinate the planning and development. This is important for projects dealing with multitude of regulatory approvals involving Central, State and local governments/authorities.

The Chief Minister of the State could be the head of the proposed committee or task force with representation of Ministers concerned with infrastructure development. Besides, executive committees, chaired by Ministers, can act as the first stage of approval and a forum for extensive debate on the proposals.

The study notes that when the proposals for Cochin industrial water supply scheme and sea sand mining faced resistance from pressure groups, the agencies involved were unable to counter them mainly due to the lack of authentic technical data like a water balance report. This points to the necessity of a detailed feasibility study covering technical, commercial and environmental aspects.

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