Govt prepares draft of PPP Policy
KATHMANDU:
The government has prepared a draft of the Public-Private Partnership (PPP) Policy, which, among others, includes provisions to establish two institutional bodies to create an enabling environment for PPP projects, initiate international competitive bidding in case projects are worth Rs 100 million or more, transfer certain risks, including land acquisition, to the government, and accept proposal of a single party in case of failure to identify successful bidders.
The draft PPP Policy, prepared by international consulting agency, Deloitte Touche Tohmatsu India, in association with Total Management Services of Nepal, is currently being reviewed by high-ranking officials of the Ministry of Finance (MoF) and National Planning Commission. “Once this document is approved, we will prepare the PPP Act,” a high-ranking MoF official said.
The PPP Policy basically provides a framework to enable private sector participation in the development, improvement and management of public infrastructure at both national and local levels. This is expected to eventually help provide quality infrastructure services to the people, which is crucial for the economic development of the country.
“A PPP project can be structured based on different models that can be anywhere on the continuum from operations and management contracts with no private investment to management contracts with relatively low private investment to design-build-finance-operate-transfer contracts with substantial private investment,” notes the draft policy.
Some of the projects where these PPP models can be applied are physical infrastructure and transport, generation, transmission and distribution of electricity, information and communications, solid waste management, water and sanitation, infrastructure required for delivery of health and education services, tourism infrastructure and urban amenities.
“These PPP projects will be prioritised based on economic and social benefits they can deliver, linkages the projects can develop with other sectors of the economy, and magnitude of gap between demand and supply for the asset or service proposed be developed by the project,” says the draft policy.
The PPP Policy envisages creation of two institutional bodies to create enabling environment for PPP projects. First is the PPP Approval Committee, to be formed under the finance secretary. It will provide a single-window for approval of PPP projects. Second is the PPP Centre, which will incorporate a group of experts to appraise PPP projects, and develop model PPP documents and guidelines, among others.
The first stage of PPP process will begin with the formulation of a project implementing agency — a body responsible for initiating and overseeing the implementation of a PPP project. This body will create necessary project development and budget plans and submit them to the National Planning Commission. Upon getting NPC approval, the project implementing agency may commence project preparation process, including, preparation of detailed feasibility report and bid documents, following which evaluations will be conducted and projects will be awarded.
Although all PPP projects will be handed over after competitive bidding process, the project implementing agency may consider proposals from a single party if competitive bid process has failed to identify a successful bidder. Also, projects involving proprietary technology or franchise and those considered strategically important by the Cabinet may not have to undergo competitive bidding process.
Once projects are awarded—whether through competitive bidding process or via unsolicited proposals—the private entity will be extended a concession period, notes the draft policy. During this concession period, the private entity may collect charges or tariff and receive performance-linked payments from the state.
The private entity may also use land acquired or leased by the state during the concession period. “A PPP project will not be awarded to a private entity unless 80 per cent of the land required by the project is acquired by the state,” says the draft policy, adding, such public assets will have to be returned at the end of the concessional period.
In general, PPP projects will not receive any revenue grants from the government to meet operational costs.
“However, where the government wishes not to levy any user charges or where the user charges are fixed at low levels, the government may provide specifically targeted subsidies,” says the draft policy. Also, projects may be granted direct capital grant in the form of viability gap funding in case proposed revenue sources are feeble, add the draft.
In terms of risk sharing, risks relating to design, construction, project management, compliance with environmental regulations, quality, technical standards and efficiency shall be assigned to the private entity. But risks relating to general permits and approvals, land acquisition, political force-majeure, non-political force majeure events such as earthquake, landslide and strikes, inter-governmental coordination, and government funding contributions shall be assigned to the state, adds the draft policy.
Source: THT
