National Public Private Partnership Policy

Draft for consultation

Department of Economic Affairs

Ministry of Finance

Government of India

2011

4. Enabling Frameworks  

4.1 The government is committed to continue to create an enabling environment for PPPs across the country, through initiatives including enabling funds and schemes, guidelines, institutional structures as well as processes. Some of these critical enabling elements are elaborated below and would be explored and extended as relevant to applicable sectors, geographies and projects.  

4.2 Financing Mechanisms  

4.2.1 The Government of India has a progressive financial support system for PPP projects. Government has put in place a number of schemes, to support PPPs either for project development or for gap financing capital and life cycle investments. A few key initiatives include the India Infrastructure Project Development Fund (IIPDF), Viability Gap Funding (VGF), resources for annuities / availability based payments, long tenor lending, re-financing facility, infrastructure debt funds, etc. The Government shall explore and provide more interventions to facilitate more PPP projects as relevant from time to time. The Government of India recognizes that in new sectors seeking PPPs, such as in health and education sectors, annuity based PPPs can make a significant impact.  

4.2.2 Government would continue to provide, legislative and policy support for developing equity, debt, hybrid structures and appropriate credit enhancement structures targeted towards various domestic and international financial investors such as equity providers, debt and capital markets, insurance sector etc.  

4.2.3 The implementing agencies would encourage leveraging monies available from schemes such as JNNURM, Bharat Nirman etc., and alternate sources of finance like Municipal Bonds, Pooled Finance Structures, Pension Funds, etc. for PPP.  

4.2.4 The Government, where necessary and appropriate, would consider levy of user fees to generate financial resources for rehabilitation or redevelopment or construction or replacement of project assets and their ongoing operations and maintenance in order to provide good quality public assets and/ or related services. The determination of such user charges, where there is no regulator, would be based on the principles including, but not limited to, partial or full recovery of the costs, savings to users, efficiency gains, willingness to pay, need for explicit subsidies, and affordability.  

4.2.5 In order to facilitate quick mobilization of financial resources and to develop new innovative financial instruments for the PPP projects, the Government shall have regular interface with banks, financial institutions and the private sector.  

4.3 Land  

4.3.1 Expeditious legal and physical provision of unencumbered land/ right of way in a time bound manner is critical for provision of public assets and/or related services. Government agencies sponsoring the PPP project, while retaining all responsibility for making available unencumbered land for the project and obtaining clearances from relevant regulatory authorities, shall also ensure that the interest of land owners are fully protected under the extant laws.  

4.3.2 In cases, where the asset need not be located on a particular site, bidders may be allowed to propose various location specific solutions and to take responsibility for acquiring the site. The risk associated with the ground condition, geology and other factors will be preferably passed on to the private entity.  

4.4 Capacity Building Measures

The Government recognizes that to identify projects that are amenable to PPPs, to structure them in a commercial format, creating contract documents that apportion appropriate risk to the public and private partners and to manage the transaction for bidding out such projects in a transparent manner, capacities have to be built in public institutions, public officials, private sector, users and other stakeholders. A number of capacity building interventions have been initiated by the Government to develop organisational and individual capacities for identification, procurement and managing PPPs. A few illustrations of the measures initiated are the strengthening of PPP Cells, establishment of online toolkits and manuals and the National PPP Capacity Building Programme for providing training on PPPs in a phased manner to State Governments, Urban Local Bodies and Central Government departments. The Government is committed to increasing efforts at building capacities whether at sponsor agency, community or private sector levels so that increasing understanding of the benefits of PPPs leads to a robust PPP project pipeline across diverse sectors.  

4.5 Participation and Communication Mechanisms  

The Government recognizes the need for clear and consistent communication while developing PPP projects PPPs often generate a range of responses among stakeholders. A coherent and strategic approach to communication so as to inform and engage stakeholders is critical for mobilising a broad-based support for successful project development and implementation. The public would be engaged during the project development process and the implications of a project would be explained and opportunity given to all stakeholders to raise their concerns. The regulatory and legal framework would also promote and protect the wider public interest, including users of public services.  

4.6 Public Private Partnership Cell in the Department of Economic Affairs will provide a center of expertise and technical support to government ministries and other authorities developing PPPs. It will have specialists from different areas (finance, law, engineering, planning, etc.) and will have mixture of experience in both public and private sectors. The PPP Cell will be entrusted with – capacity building, developing initial pilot projects to test PPP models, providing technical advice and support, communicating lessons from project evaluations and coordinating the PPP programme of the country. In due course, a company in PPP mode may be created by Ministry of Finance, with both private and public sector shareholders, which will provide support to the PPP Cell in effective discharge of its responsibilities. The PPP Cell will also facilitate independent review of projects at each stage, which includes bid evaluation stage, and just prior financial closure to reconfirm that the final results offer Value for Money for the public authority. The ministry concerned will continue audit and evaluation of the projects to review whether the original objectives as to costs, service delivery and risk transfer have been met. 

PPP enabling frameworks strengthen financing, land provision, capacity building and stakeholder engagement to support project implementation. The policy establishes an enabling framework to facilitate PPPs by coordinating financing mechanisms (including Viability Gap Funding, annuity/availability payments, long tenor lending and credit enhancement), supporting equity/debt/hybrid structures and alternative finance sources, permitting considered use of user fees based on cost recovery and affordability, requiring sponsoring agencies to provide unencumbered land or allow bidder proposed acquisition with risk allocation, mandating capacity building through strengthened PPP cells and toolkits, and creating a specialist PPP Cell to provide technical support, independent project review and programme coordination.