The limited success of the public private partnership (PPP) model in financing infrastructure projects is due to poorly designed frameworks which need restructuring, the Survey for 2014-15 has noted.
The survey has proposed that instead of prescribing model concession agreements, States should be allowed to experiment.
“For example, in ports, terminals can be bid on the basis of an annual fee, with full tariff flexibility, subject to competition oversight.
“For electricity generation, bids can be two-part, with a variable charge based on normative efficiency, or alternatively, determined by regulators and a capacity charge,” it suggested.
Revival of private interest and bank lending needs existing contracts to be restructured, with burden sharing among different stakeholders.
The guiding principle should be to restructure contracts based on the project's revenues, differentiating between temporary illiquidity and insolvency, the survey suggested.
The survey further said that it was better to continue combining construction and maintenance responsibilities to incentivise building quality.
“In many projects, especially highways, maintenance costs depend significantly on construction quality. If a single entity is responsible for both construction and maintenance, it takes lifecycle costs into account,” it said.