Answer ... The Seventh Schedule of the Indian Constitution has granted legislative and executive powers to the central and state governments over various sectors. Every category of the infrastructure sector is governed by the applicable statute enacted by the relevant legislature vested with the jurisdiction over the particular sector.
With a view to facilitating PPP initiatives, various guidelines have been issued by the government from time to time to boost private investment, such as:
- sector-specific model concession agreements;
- the updated Harmonised List of Infrastructure Sectors;
- guidelines for the formulation, appraisal and approval of PPP projects;
- the Viability Gap Funding Scheme; and
- the India Infrastructure Project Development Funding Scheme.
Certain sector-specific laws have also been passed over time with the aim of promoting private sector participation in the power, highways and airport sectors, such as:
- the Electricity Act 2003;
- the National Highways Act 1956;
- the Airports Authority of India Act 1994;
- the Metro Railways (Operation and Maintenance) Act, 2002;
- the Railway Act 1989.
With the opening up of the infrastructure sector to private investment, a huge pool of private capital in the form of sponsor equity and bank lending was unlocked, prompting an exponential boom in the sector. However, given the inherent risks and long gestation periods involved in typical infrastructure projects, over time lenders noticed the number of non-performing assets beginning to mount and banks being stretched to capacity. For projects that are vital but financially unviable, the government’s Viability Gap Funding Scheme is one example of an institutional mechanism that provides financial support to infrastructure PPPs.
The last two decades have seen rapid infrastructure development in sectors such as:
- roads and highways;
- airports in both metro areas and non-metro areas;
- power;
- telecommunications;
- transportation;
- urban mobility;
- water supply;
- sanitation; and
- renewable energy.
India has experimented with the PPP model on a large scale – although with mixed results, as is the case with any asset financing model. However, over the years, the PPP models have been refined, reworked and renewed in order to encourage long-term capital investment by the private sector.
The Cabinet Committee on Economic Affairs approved the procedure for the approval of PPP projects in 2005 with the aim of developing the power sector, the transport sector, certain utilities (greenfield airports and urban rail infrastructure), the telecommunications sector and the ports sector.
The Public-Private Partnership Appraisal Committee was set up in 2006 to:
- ensure the speedy appraisal of projects;
- eliminate delays;
- adopt international best practices; and
- ensure uniformity in project appraisal mechanisms and guidelines.
Certain sector-specific laws have also been passed over time with the aim of promoting private sector participation in the power, highways and airport sectors, such as:
- the Electricity Act 2003;
- the National Highways Act 1956;
- the Airports Authority of India Act 1994; and
- the Metro Railways (Operation and Maintenance) Act, 2002.
Both the central and state governments have worked tirelessly to attract private investment in infrastructure development. Such projects were traditionally government sponsored, but this model suffered from delays, inefficient deployment of capital, systemic inefficiencies and chronic time overruns. With the opening up of the infrastructure sector to private investment, a huge pool of private capital by way of sponsor equity and bank lending was unlocked, prompting an exponential boom in the sector. However, given the inherent risks and long gestation periods involved in typical infrastructure projects, over time lenders noticed the number of non-performing assets, beginning to mount and banks being stretched to capacity. For projects that are vital, but financially unviable, the government’s Viability Gap Funding Scheme is one example of an institutional mechanism that provides financial support to infrastructure PPPs.
The last two decades have seen rapid infrastructure development in sectors such as:
- roads and highways;
- airports in both metro areas and non-metro areas;
- power;
- telecommunications;
- transportation;
- urban mobility;
- water supply;
- sanitation; and
- renewable energy.
India has experimented with the PPP model on a large scale – although with mixed results, as is the case with any asset financing model. However, over the years, the PPP models have been refined, reworked and renewed in order to encourage long-term capital investment by the private sector.