The Hindu Business Line : New co for providing advisory services likely

New Delhi, Jan 17 Plans are afoot to set up a company for providing advisory services to Central and State Governments for structuring public private partnership (PPP) projects, after the pattern of Infrastructure Development Finance Corporation (IFDC), to kickstart a slew of infrastructure projects under the PPP route.

Official sources told Business Line here that the Empowered Sub-Committee of the Committee on Infrastructure (CoI) under the aegis of the Planning Commission, which quarters the Secretariat for CoI, recently discussed the issue.

Expertise

They said structuring of PPP projects normally entails a set of advisers with financial, legal and technical expertise who could bring to bear global best practices, while identifying the potential constraints and challenges. Their role covers development of bid documents including the concession agreement, project structuring, financial modelling, and advice on bidding process.

The sources said the investment needed in infrastructure — defined broadly to cover roads, railways airports, power, telecom, water supply and sanitation, gas, irrigation and storage — is about Rs 29,32,193 crore over the Eleventh Plan period. In view of the competing demands on public resources, a preponderant part of this share investment would have to be marshalled through PPP. It is reckoned that about 30 per cent of the aggregate investment, i.e., Rs 6,11,591 crore would have to be sourced from the private sector during the 11th Plan span.

The sources said that since expertise and domain knowledge within the Government is limited, there is a major reliance on external consultants who are employed on a case-to-case basis without any accountability pertaining to the outcome. Some time the advisers are not sensitive to user concerns and public interest as their orientation is often in favour of private investors and the profitability of the project.

They further note the desired end-result from consultancy assignments could not be obtained due to ill-structured selection processes and terms of reference (ToR). An inadequate process of selection could not only lead to a poor choice of consultants at comparatively exorbitant prices, it could also imperil the quality of advice and the consequent project structure.

When contacted, the Planning Commission Deputy Chairman, Mr Montek Singh Ahluwalia, said that international experience including the UK suggest that in order to streamline and accelerate the process of project formulation, the respective Governments have set up dedicated corporate entities for providing advisory services to the Government departments, seeking to structure PPPs.

He said a number of State governments also had pleaded for advice in the structuring and implementation of PPP projects by way of technical consultancy. Mr Ahluwalia conceded that there was a broad support to the proposal for a new company, while there were also reservations and a final call on the proposal has not yet been taken. He said the proposed company would not be Government-run or managed.

The sources said the salient features of the proposal include a one-time grant by the Central government, equity contribution of shareholders and revenues generated from the advisory services. They said the new company would provide advisory services to only Government and statutory entities. It might either secure its business through participation in bids invited by Government entities or enter into MoUs for providing advisory services on a project-specific or continuing basis.

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