The Hindu Business Line : Expert body mooted for PPP in Rlys

An apex body of experts should prepare the guidelines for bidding procedures and lend transparency to a process usually marred by inadequate information.

As Indian Railways increasingly promotes public private partnership, there is a need to set up a specialised public sector body that will prescribe and develop ideal bidding formats, model bid documents, concession agreements and bid processing schedules.

This was mooted by the Railways Finance Commissioner, Mr R. Sivadasan while speaking at a recent seminar on PPP in the Railways.

The Government should immediately consider setting up "Partnerships India Rail" as a dedicated institution, which should be a specialised public sector body in government, like Partnerships UK, said Mr Sivadasan.

THE UK MODEL

Partnerships UK (PUK) was set up by the Treasury in the UK in 2000 with a public sector mission: to support and accelerate the delivery of infrastructure renewal, high quality public services and the efficient use of public assets through better and stronger partnerships between the public and private sectors.

For example, PUK conducted a detailed review of operational PPPs for the Treasury. In the UK, there are over 700 signed and 450 operational PPP projects.

The detailed report, where PUK arrived at "operational issues", is available for all to derive learning from.

As a result of the review, PUK recommended to the Treasury that an operational task-force be established to provide core support in respect of contract variations, benchmarking and market testing, refinancing, contractor and project distress, insurance reviews and forward looking operational reviews.

Similarly, PUK also reworks standard contracts from time to time, based on changing requirements.

All the standard contracts and reports are available on PUK's Web site.

CONTRACT ISSUES

Listing the inadequacies of PPP contracts in use now, Mr Sivadasan pointed out that unclear communication from the Government about project and outcome expectations and the time schedule results in bidders using up their resources, time and money to understand project requirements. And, most often, no deals come through.

Stressing the need for clarity in defining requirements, time schedules and outcomes, he said that only well-conceived projects should be offered.

Moreover, non-standard contracts create confusion in the bureaucracy about the Government rules in force and requirements of PPP procurement rules.

RISK-SHARING

Lack of transparency in risk and benefit apportionment is another inadequacy, as the existing Government policy mandates no risk with the public sector.

At one end, the Government would like to keep all the benefits and expects private partners to take all the risks, while at the other, the private sector would like to pass on all risks to the Government and keep all benefits with itself.

And the public users would like to use all benefits absolutely free.

A quasi-judicial apex body of experts from wide-ranging fields should prepare the guidelines, procedures and benchmarks for bid documents, bidding procedures, methodologies and techniques, he said.

The body should include retired Supreme Court Justices, eminent economists, accounting and rating firms, eminent parliamentarians, environmental experts, industrialists, investment bankers and tax experts.

RATING PPP PROJECTS

PPP projects should be rated by accredited rating agencies before bidding, said Mr Sivadasan. While such project rating is yet to start in India, internationally there are countries where such exercises are undertaken.

Thus, a good rating makes a project attractive in terms of getting investors' attention and lowering finance costs.