NEW DELHI: The government may dismantle the finance ministry committee that approves public-private partnership (PPP) projects and hand over that duty to Niti Aayog. Scrapping the PPP Approval Committee (PPPAC) will help speed up the process, government officials told ET.
Aimed at improving the ease of doing business, the move follows the planned scrapping of the Foreign Investment Promotion Board (FIPB) as announced in the February 1 Budget. That’s part of efforts to ease overseas investment.
The PPPAC proposal was discussed at a meeting of the committee of secretaries headed by the cabinet secretary this week, said the officials cited above. The committee of secretaries had been formed with a mandate to find ways of expediting approval for PPP projects.
“It was discussed that sending projects to PPPAC for approval consumes a lot of time, which can be reduced substantially by making Niti Aayog the approval authority,” said one of the persons. “However, a final decision has not been taken on it yet, as a lot of details need to be discussed.”
According to current rules, PPP projects above Rs 1,000 crore in value are sent to PPPAC and then to the cabinet for final approval.
The meeting also debated raising the limit so that ministries would have more of a role in approvals.
“It was also discussed that the cost limit of PPP projects should be increased from the current Rs 1,000 crore so that the respective ministry can clear more projects on its own, thus making the approval faster,” said an official.
PPPAC, a wing under the Department of Economic Affairs (DEA) in the finance ministry, was created in 2006 and is “responsible for the appraisal of PPP projects in the central sector”, according to its website.
It comprises secretaries of economic affairs, expenditure and legal affairs along with the department sponsoring the project and the Niti Aayog CEO.
There appears to be some resistance to the move to scrap PPPAC. DEA officials feel they have attained an expertise in dealing with PPP projects as they have been doing it for over 10 years now and the committee plays an important role in appraising projects.
“A lot of departments want to skip scrutiny by PPPAC,” said a senior DEA official, who did not want to be identified.
Analysts however welcomed the proposal and said it would hasten project award process and save cabinet’s time, which can be used for more constructive work. “It is high time the government increased the limit of projects to be sent to cabinet for approval from Rs 1,000 crore as a large number of projects are now above that limit,” said Sanjay Sethi, CEO of Nestor Consulting, an infrastructure advisory.
The government should also look at reducing the number of approvals required after the project is awarded, he said. “That consumes a lot of time and energy of the companies involved in infrastructure projects,” Sethi said.
ET View: Guidelines Must Be Clear
The plan to make NITI Aayog approval authority for PPPs is sensible. But we also need to have clear-cut guidelines in place, as called for by Kelkar committee report. What’s required is proactive capacity building so as to have sophisticated contracting standards and sound dispute resolution norms. India is the largest market for PPPs and we need for- wardlooking public policy.