Easier funding and amending the anti-corruption law to make allowances for genuine errors by officials topped the recommendations of an expert panel looking at ways to revitalise the public-private partnership (PPP) model of infrastructure development.

The committee, led by Vijay Kelkar, a former Finance Secretary, called for moving away from a transaction-based relationship to one focussed on improved service delivery and suggested Deep Discount or Zero Coupon Bonds for low-cost and long-term funding.

“These will not only lower debt servicing costs in an initial phase of project but also enable authorities to charge lower user charges in initial years,” said the report, which called for divesting equity in completed projects to help fund new ones.

“Monetisation of viable projects that have stable revenue flows after EPC (engineering, procurement, construction) delivery may be considered,” it noted, while proposing to restrict the number of lenders in a consortium.

The report, which was made public by the government on Monday, was submitted to Finance Minister Arun Jaitley on November 19 and is expected to push through new investments in the sector. At present, over 12,007 PPP projects are being implemented, involving about ₹7.2-lakh crore.

Underlining the need to rebuild PPP capacity, the report called for setting up the ‘3PI’ as a Centre of Excellence in PPPs to enable research and roll out activities to build capacity, and support more sophisticated models of contracting and dispute redress mechanisms. Jaitley had first proposed the setting up of the ‘3P India’ to mainstream PPPs in Union Budget 2014-15 with an allocation of ₹500 crore.

Renegotiation clause Significantly, the Kelkar panel favours a review of next-generation PPP contracts to allocate and manage risks by including an ex-ante provision for a renegotiation framework in the bid document itself.

It has suggested that model concession agreements be issued only when 80 per cent of the land for a project has been acquired.

Noting that infrastructure PPP projects span over 20 years and a developer often loses bargaining power on various issues such as tariffs, the report said the private sector must be protected through an “Obsolescing Bargain” by independent regulators.

The report called for a provision to renegotiate contracts in case of new risks, and a faster dispute resolution mechanism.

Opportunity for Railways The report called for sector-specific interventions, such as encouraging the PPP model in greenfield and brownfield projects, setting up an independent tariff regulatory authority for the Railways to help it tap PPP opportunities, electronic tolls in new highway projects and addressing power sector loans.

The report proposed that regulators of pension, insurance and long-term funds should be encouraged to allow investments in PPP Special Purpose Vehicles with a lower than ‘AA’ rating if developers access credit guarantee instruments.

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