In an attempt to increase the number of urban development projects where state governments or local administrations partner with private companies, the finance ministry is helping the urban development ministry create a PPP or public-private partnership cell.
The cell will help identify projects that are suitable for private investments and get states to consider partnering with the private sector to run certain utilities. Eventually, this will free up the resources of state and local administrations for other social development projects.
Urban development secretary M. Ramachandran
“There has been a proposal to set up the cell,” confirmed urban development secretary M. Ramachandran. He said there has been no decision as to when it will be created.
The ministry administers a Rs50,000 crore Centrally funded programme called the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), which gives state governments and local administrations grants of between 35% and 90% of the cost of urban development projects in areas such as waste management and water supply and sewerage.
The rest of the project cost has to be borne either by the state and local governments or by companies that are willing to bid for concessions to run the project.
Encouraging public-private partnerships is one of the optional reforms that states have to agree to in order to be eligible for funds under the JNNURM scheme.
Mint had earlier reported that only 14 out of 28 states and four out of seven Union territories have ongoing public-private partnership projects on roads, ports, airports, railways, power and urban infrastructure (the total number of such projects is 476).
The finance ministry recently identified 11 transaction advisers who could help state governments identify projects that could be given out to private operators for a specified time.
The JNNURM scheme, which runs through 2012, has so far approved projects with a total investment of approximately Rs40,000 crore across the 63 cities covered by it. Around Rs21,000 crore of this amount will be paid under the mission, with the remaining funds generated from either state or local government resources or the private sector, Ramachandran said.
The government has so far approved 245 projects to be undertaken by the 63 cities.
“It (the PPP model) is so far being attempted only in sectors relating to water, power and roads, but not for urban development projects per se,” said N. Rama Krishna, who heads the infrastructure and environment practice at Hyderabad-based think tank Center for Good Governance.
“Urban development requires very different models. We should look at how it works in other counrties. The cell can certainly be helpful provided it procures this information and uses it because models used in other sectors cannot always work,” he added.