MoF requests NPC to conduct PPP Centre's O&M survey

KATHMANDU:

The Ministry of Finance (MoF) has officially requested the National Planning Commission (NPC), the apex body that frames the country’s development policies, to conduct operations and management (O&M) survey to establish Public Private Partnership (PPP) Centre, as envisaged by the proposed PPP Policy.

“The O&M survey, among others, would identify the number of employees the centre needs and responsibilities that the centre as well as its staff should undertake,” said Surya Prasad Acharya, chief of the Economic Policy Analysis Division at MoF.

The draft of PPP Policy says PPP Centre would be located at NPC’s Secretariat. It also says the centre would be headed by an executive director and comprise experts from government and private sectors.

“The O&M survey would tell us how many civil servants should be hired as experts and how many need to be mobilised from private sector,” Acharya said.

The main responsibilities of the centre are to conduct feasibility studies of projects that could be built under PPP model. It will also appraise tender documents, and text of concessional agreements, also known as project development agreement, that the government and private sector need to sign prior to implementing projects.

It should also facilitate designing, development and operation of PPP projects and conduct studies on good PPP practices embraced here and abroad.

The government has long been trying to promote construction of public physical infrastructure under PPP model so as to engage the private sector in the nation building process. Under this model, the government does not necessarily have to mobilise its own financial resources and expertise to meet every infrastructure need of the country.

This concept is also popular in many developed and developing countries, where the government only plays the role of the facilitator, while the private sector raises funds to build projects like roads, bridges, hydropower plants and transmission lines.

Once completed, these projects are operated by the developers for certain years, during which they recoup investment and generate some profit. The projects are then handed over to the government free of cost and in a good working condition.

To facilitate the private sector in this front, the government is mulling over providing viability gap funding to project developers.

Viability gap is the difference between revenue required to make a project commercially viable and revenue that is expected to be generated after project’s completion.

In simple words, if the cost of building a toll road stands at Rs five billion and toll collection after a certain period is expected to hover around Rs 3.5 billion, the viability gap is Rs 1.5 billion.

Since the private sector does not want to invest in development of such loss-making projects, the draft of PPP Policy has proposed extending financial support, or viability gap funding, to developers so that projects considered crucial for the country’s development could be built.

Also, the government is planning to create a revolving fund for land acquisition to facilitate project developers. The money in this fund would be used to acquire necessary land prior to awarding the contract to the private sector. “The private developer will then have to recompense the amount after it bags the project,” Acharya said.

Source: THT