PPP Current Affairs

India’s first STP under Hybrid Annuity Mode to come up in Haridwar and Varanasi

India’s first Sewage Treatment Plant (STP) under Hybrid Annuity Mode will come up in Haridwar (Uttarakhand) and Varanasi (Uttar Pradesh).

In this regard, a tripartite agreement was signed between National Mission for Clean Ganga (NMCG) and state level executing agencies Uttar Pradesh Jal Nigam and Uttarakhand Pey Jal Nigam and with concessionaires.

Key Facts

The agreement is major step forward in realizing dream of Nirmal Ganga as it is first time ever in India that Hybrid Annuity-based Public Private Partnership (PPP) mode is being applied in sewerage sector. Under this agreement maintenance of project will be responsibility of concessionaire. They will be paid based on performance in phased manner. This will ensure continued performance of sewage infrastructure assets created due to better ownership, accountability and optimal performance.

 Hybrid Annuity Model

The Union Cabinet had approved to Hybrid Annuity-PPP model in January 2016 with 100% central sector funding. Under this model, development, operation and maintenance of STPs will be undertaken ba Special Purpose Vehicle (SPV) created by winning bidder at local level.

As per this model, 40% of capital cost quoted will be paid on completion of construction while remaining 60% cost will be paid over life of project as annuities along with operation and maintenance cost (O&M) expenses. In this model, Annuity and O&M payments are linked to performance of STP mainly to ensure continued performance of assets created due to better accountability, ownership and optimal performance.

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Union Government constitutes Committee headed by Vijay Kelkar to revisit PPP infra model

Union government has constituted a 10-member committee to review and revitalise public private partnership (PPP) mode of infrastructure development.

The committee will be chaired by former finance secretary Vijay Kelkar and submit its report within a period of 3 months from the date of its Constitution.

Members of Committee: C.S. Rajan, Dr. Shekhar Shah, S.B. Nayar, Pradeep Kumar, Vikram Limaye, Sudipto Sarkar, P.S. Behuria, Sharmila Chavaly, Representative of Ministry of Road Transport & Highways.

Terms of Reference of the Committee

  • Review of the experience of PPP Policy. It will also include the variations in contents of contracts and difficulties experienced with particular conditions.
  • Suggest optimal risk sharing mechanism by analyzing risks involved in PPP projects in different sectors. It will also look into existing framework of sharing of such risks between the Government and project developer.
  • Propose design modifications to the contractual arrangements of the PPP based on best international practices and in correspondence with our institutional context.
  • Suggest measure to Government in order to improve capacity building for effective implementation of the PPP projects.
  • For firming-up its recommendations, the Committee may consult various stake holders in the different sectors including private, government sector, legal experts, banking and financial institutions and academia.

Background

Union Finance Minister Arun Jaitley in his budget speech of February 2015 had announced that the PPP mode of infrastructure development has to be revitalized and revisited in which the major issue involved is rebalancing of risk.

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