Budget 2016-17 to give some clarity on PPP infra projects

In a move to ‘revitalise’ the PPP business model, which has been losing sheen, Budget 2017 is set to give some clarity on public-private-partnerships in the infrastructure sector,

“We are reviewing the Vijay Kelkar Committee report to see how much of it can be implemented… The Ministry also has had talks with various stakeholders separately… Some views have been formed. We will see what best can be worked out,” Shaktikanta Das, Secretary, Department of Economic Affairs, Ministry of Finance, told BusinessLine .

Declining to elaborate on any specific measures, he said the government will consider the measures suggested by the Kelkar panel to push PPPs in the infrastructure sector.

Indications are that the government will give some guidance in the Budget, while administrative measures will be taken outside of it.

The government is also collecting feedback from all stakeholders, including States, which play a key role on issues like renegotiation and equal sharing of risk between public and private partners. A decision will be taken by the end of this month.

The Kelkar Committee was set up following an announcement in Budget 2016. The Committee, in its report submitted to Finance Minister Arun Jaitley on November 19, had called for a number of measures to revitalise PPIs, including an independent regulator and establishing a relationship of equals between public and private players.

On the issue of a regulator (National Facilitation Centre) for resolution of issues arising in a PPP project, as suggested by the Kelkar Committee and demanded by some private players, Das said: “We have to see whether there is a need for setting up a separate regulator as we do have sector-specific regulators also.”

“Many of the (Kelkar) proposals are aimed at improving the capacity of the public sector agencies for PPP,” he said, noting that the government has also set up a National Investment and Infrastructure Fund to provide finance to core sector projects. The NIIF, a corpus to mobilise funds for infrastructure projects, is “likely to see huge investments from the next fiscal year,” he said.

On the issue of fiscal consolidation, Das said the government was confident of achieving it.

In pre-Budget consultations with Finance Minister Arun Jaitley, economists were divided on the issue given the need for stimulating growth and the additional expenditure requirements of over ₹1,40,000 crore on account of the Seventh Pay Commission and the One Rank One Pension. But Das said: “I would not like to comment on the figures we are looking at, but the current numbers show that it (the commitment in the roadmap) is doable.”

The government is keen to follow the medium-term fiscal consolidation roadmap that aims to lower the fiscal deficit from 3.9 per cent in 2015-16 to 3.5 per cent in 2016-17.

Expenses factored in Asked where the Finance Ministry was getting its confidence from, he said the medium-term fiscal consolidation roadmap had taken into account the need for additional expenditure on higher salaries and pensions following the Seventh Pay Commission report.

Das also stressed that the government would comfortably meet its fiscal deficit targets for 2015-16.

“We are on track to meet the fiscal deficit target. All Budget projections for revenue and expenditure were realistic and this has helped us continue spending as well,” he said.

The need for continued public spending in 2016-17 was raised by the Mid-Year Economic Analysis, which scaled down the growth forecast for the current fiscal year to 7 per cent and cautioned that the next fiscal year would also be challenging.

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