Know your PPP

Public-private partnerships, or PPPs, received unprecedented attention in this year’s Union budget. Finance Minister Arun Jaitley pointed to the 900 PPP projects under development in India, making it the world’s largest PPP market. But he wants many more PPPs to solve all sorts of problems: from urban renewal to “rurban development”, from airports and metro rails to gas  grids, from research centres to convention centres, and even to set up the Hast Kala Akademi. But while India might be a leader in contrivance, it remains a laggard in consequence.

India still lacks infrastructure —  roads and rail, ports and airports, power, water and sanitation, communications technology, schools and hospitals —  and as it grows, the large infrastructure deficit is becoming painfully evident. Simple tinkering in the quest for a more nuanced and sophisticated approach for PPPs will not bridge this gap. Fundamental changes in the understanding of PPPs —  what they are and aren’t —  must come first. To get results, the government must ensure that PPPs are deployed only where the three Ps —  suitable and economically viable projects able to attract proficient private partners in engineering and finance through transparent, competitive processes —  are present

A PPP is not a decree of the government. Nor is it just any juxtaposition of public and private efforts. A PPP is a partnership between the government and a private entity based on a long-term contract that requires the private entity to deliver services in exchange for compensation from the government or users, tied to their quantity and quality. All the activities necessary to provide these services —  typically design, construction, finance, operation and maintenance of the underlying infrastructure asset —  are the responsibility of the private concessionaire. A PPP represents a radically different and demanding approach for procuring infrastructure services compared to traditional public procurement.

Why are policymakers in India and many other places so enamoured with PPPs for building infrastructure? Because they see PPPs as an ingenious method to obtain large infrastructure investment without making a dent in the public budget. Our railway minister announced a Rs 60,000 crore bullet train while allocating only Rs 100 crore from the railway budget. Where does he expect the balance to come from? In right earnestness, from PPPs. That, after he has got PPPs to also pay for foot overbridges, escalators and lifts; boundary walls around stations; dual display fare repeaters at ticket counters; port connectivity; passenger amenities; and private freight terminals.

But the ingenuity of PPPs lies not in private money but in private efficiency. The job of government is not to hanker after private cash but to draw out private competence to achieve public goals.PPPs must be used only when there is reason to expect that they will deliver superior —  cheaper, higher quality and more reliable —  infrastructure services. If private entities are able to deliver, a PPP mechanism ensures that the resultant benefits translate into public gain and private profit. It is this profit motive that makes the private sector partner with the government in the quest for better outcomes. It requires attracting skilled private players who can manage projects from inception to outcome.

It is tempting to look for infrastructure finance within the banking system, especially state-owned banks. However risky, long-term, illiquid infrastructure assets sit awkwardly beside bank liabilities that are safe, short term and required on demand. If infrastructure investments perform poorly, the government might find itself having to fend off a banking crisis. The budget proposal to attract capital market financing in the form of infrastructure investment trusts and pooled municipal debt obligation facilities are welcome alternatives. What is critical is that PPPs be financed with not just any private capital but “risk capital”: long-term funding that is tied to project performance and reaps profit if the project succeeds and incurs losses if it fails.

Perhaps the most important role for the government is to provide an adequate regulatory framework that is independent, fair and technically competent. Private entities cannot be allowed to exploit their monopoly power to reap inordinate profit, even as governments cannot be permitted to hold a private investor who has already invested millions to ransom. The long-term contracts that underlie PPPs usually span decades, sometimes generations, and almost always multiple governments. Regulation must provide assurance to investors about the rules of the game, even as it allows reasonable flexibility to respond to changing needs and circumstances.

The finance minister’s proposal to establish the “3P India” centre would be a step in the right direction if it can define the scope of PPPs, prepare suitable projects, attract appropriate investors using long-term financial instruments and establish a credible regulatory framework. The centre should serve as an intellectual gatekeeper of the PPP concept for new projects, as well as a repository of PPP experience with past projects. As the G-20 high level panel on infrastructure put it, “PPPs require their own infrastructure”. The finance minister has taken the first step in building that infrastructure.

Half a century later, Supreme Court cuts its summer break

After nearly half a century, the Supreme Court will finally cut short its summer vacation. Amending rules that have stood since 1966, the apex court has decided to curtail its summer vacation from a maximum ten weeks to seven weeks.

The declaration of a shorter summer vacation for the top court has come by way of a gazette notification on the new regulations, to be called the Supreme Court Rules, 2013. The notification replaces the SC Rules, 1966.

As decided by Chief Justice of India R M Lodha, the fresh rules, which have obtained the assent of the President, will come into effect from August 19 this year.

In an apparent expression of the CJI’s will to cut down on the long holidays and have more working days for the court, Order II, Rule 4, Sub-rule 2 of the notification says: “The period of the summer vacation shall not exceed seven weeks.” This period was fixed as not exceeding 10 weeks under the 1966 Rules.

The Supreme Court goes on summer vacation for not less than 45 days on average every year. This year, the vacation lasted 49 days. With other holidays, the SC functions for less than nine months every year.

Even as the maximum number of court holidays under the new rules remains constant at 103 days in a year, a shorter summer vacation will mean fewer yearly holidays.

Since taking over as CJI, Justice Lodha has been trying to push for more working days in courts across the country. Justice Lodha had written to Chief Justices of all High Courts for their views on a 365-day work calendar, amid growing criticism from various quarters on the staggering pendency of cases. The CJI had pointed out that the SC currently works for 193 days, High Courts for 210 days and trial courts for 245 days a year.

He had suggested that instead of the courts closing for vacations, judges should be allowed to take leave according to their convenience.

“In other words, the courts should function all year round, giving individual judges the choice of holidays and vacations. For working of this idea, I had suggested that by the end of September, each judge should indicate holidays and vacations he or she wants to avail of in the succeeding year. The registry will then finalise the sittings having regard to the options given by the respective judges,” the CJI’s letter had said.

The Law Commission in its report in 2009 had recommended that vacations in the higher judiciary should be curtailed by at least 10 to 15 days.

However, the CJI’s proposal did not find favour with lawyers’ bodies including the Bar Council of India and the SC

GOVT PANS FOR FASTER CONNECTIVITY

Reach anywhere in India in 24 hours by road and rail; long distance calls to cost same as local calls, says Modi

From building coastal expressways as part of a plan to upgrade the road and rail network to ensure that a person can reach any point in the country within 24 hours, to boosting labour reforms so that workers are employed for “fixed terms” instead of on contract; from new legislation on conflict of interest to adding a health knowledge institute to every district hospital — a 17-point people-oriented agenda has been sent by Prime Minister Narendra Modi to his ministries.

While Modi’s wishlist was sent on July 10, all the ministries were told to submit detailed action plans, with sharp focus on delivery and implementation, by July 20 so as to put the agenda in place when the NDA government completes its first 100 days in office in August-end.

Laying stress on connectivity and power with “service goals” set to improve transportation within the country, it proposes a network of coastal expressways on the east and west coasts, connected to each other through latitude expressways (to be called Akshansh Marg Expressways) at 13 degrees, 15 degrees and 17 degrees.

Another plan is to build a Kanha-Krishna corridor, from Madhya Pradesh to Andhra Pradesh, which would combine highways and the rail network as well as oil and gas pipelines.

It also envisages Metro Rail and BRT systems in towns and cities to enable an urban citizen to travel from one point to another in less than an hour at “a reasonable price”.

Besides inland connectivity, Modi’s vision includes construction of a world-class port on either side of the peninsula to take advantage of the country’s long shoreline. “At least two ports, one on the east coast and one on the west coast, should be capable to handle the largest container ships plying on global routes,” says the list sent by the Cabinet Secretariat.

As part of the plan to improve connectivity, it has been proposed that all long distance calls within the country should be priced the “same as local calls for every citizen”.

The agenda also talks of decentralised mini grids in towns and cities that would be operated by private vendors or cooperatives, as well as plans for village-level mini grids. Nagpur has been identified as the logistics distribution hub and electricity distribution hub.

In a boost to labour reforms, there is a proposal to ensure appointment of workers on “fixed term basis as against contract basis” with an additional item proposing that “Factories Act should not be applicable to small industries”.

Modi’s agenda also aims at curbing black money usage by mandating PAN or UID numbers inall financial transactions, including all immovable property transactions” and e-tendering of all government contracts. There are also additional curbs for public servants and representatives.

There is a recommendation to introduce a law on the lines of Sections 297-301 of the Companies Act, mandating disclosure of interest by elected representatives and civil servants.

Health reforms get a fair share of attention with the proposed deployment of male community health workers (Ashok) on the lines of the female Asha, a district health knowledge institute attached to every upgraded district hospital and a three-year B.Sc course in community health.

And to top it all, the wishlist pledges a Public Service Delivery Guarantee to achieve the action plan.

Black money: OECD unveils automatic info exchange framework

In a major development in the fight against black money, multilateral grouping OECD today unveiled a 'single global standard' for automatic exchange of financial account information by various countries including India and Switzerland.

The new framework, to be presented before a meeting of G-20 finance ministers in September, would mark a significant forward movement from the current practice of information exchange mostly on the basis of requests and only in the cases of suspected tax evasion or other financial crimes.

The new global standard, which would be common for all countries, would facilitate a "systematic and periodic transmission of bulk taxpayer information by the source country of income to the country of residence of the taxpayer concerning various categories of income or asset information".

To enable automatic exchange of information on an annual basis, the financial institutions, including banks, brokers and fund houses, would have to mandatorily collect necessary details from their clients and submit the same to their respective regulators.

Paris-based Organisation for Economic Cooperation and Development (OECD) said that such an automatic exchange of information would "help detect cases of non-compliance even where tax administrations have had no previous indications of non-compliance", besides providing timely information on non-compliance where tax has been evaded.

This assumes significance in case of India, as it has been facing difficulties in getting information on cases of suspected tax evasion from other countries, specially Switzerland, which has been maintaining that such details can not be shared without specific proof of financial irregularities by the concerned Indian client of Swiss banks.

An initial framework was released by OECD in this regard earlier this year and India became one of the 'early adopters' of this global convention.

Later, Switzerland also committed to abide by this framework, while a few more countries have now expressed their interest in adopting the same and these include Mauritius -- another country with which India has been working on a revised bilateral treaty due to concerns of money laundering.

Those having already committed to follow this global protocol include the US, the UK, Germany, European Union, Japan, Singapore, China, as also financial centres like Luxembourg, British Virgin Islands, Cayman Islands, Gibraltar, Cyprus, Bermuda, Isle of Man, Greece and Liechtenstein.

However, such an exchange of information would also have a confidentiality clause and safeguards, while countries would need to pass domestic laws as per their respective legal jurisdictions to enable such a cooperation.

The standard, once implemented, would allow governments to obtain detailed account information from their financial institutions and exchange the same automatically with other jurisdictions on an annual basis.

OECD Secretary-General Angel Gurria said the standard "moves us closer to a world in which tax cheats have nowhere left to hide".

All information exchanged is subject to the confidentiality rules and other safeguards, including provisions that limit the use of that particular information.

"Each competent authority will notify the other competent authority immediately regarding any breach of confidentiality or failure of safeguards and any sanctions and remedial actions consequently imposed," the grouping said.

The standard has two components -- Competent Authority Agreement (CAA) and Common Reporting Standard (CRS).

According to OECD, automatic exchange may help educate taxpayers in their reporting obligations, increase tax revenues and thus "lead to fairness -- ensuring that all taxpayers pay their fair share of tax in the right place at the right time".

The Hindu journalist, Smita Gupta, wins Prem Bhatia Award

Smita Gupta, Associate Editor with The Hindu, has been selected for the prestigious Prem Bhatia Award for political reporting.

The Prem Bhatia Awards, instituted in the memory of one of the most eminent journalists of his era, have gone this year to two “exceptional journalists” for their reporting on politics, and environment and development issues, respectively.

While Ms. Gupta has been selected for “her excellent reporting and analysis of the major political parties in India,” the award for excellence in environmental and development reporting has gone to Nitin Sethi, Associate Editor, Business Standard, for his reporting on key environmental and development topics.

The awards will be presented at the 19th Prem Bhatia Memorial Lecture at the India International Centre on August 11.

The annual lecture this year would be delivered by T.N. Ninan, Chairman, Business Standard Ltd., on “Reviving the Indian economy”. It will be presided over by economist Bibek Debroy.

Lokpal: Babus to declare assets under new rules

It has issued new forms for filing these returns which have fields to give details on cash in hand, bank deposits, investment in bonds, debentures, shares and units in companies or mutual funds, insurance policies, provident fund, personal loans and advance given to a person or any entity, among others.

The employees need to declare motor vehicles, aircraft, yachts or ships, gold and silver jewellery and bullion possessed by them, their spouses and dependent children, according to the form.

They need to give detail of their immovable properties and statement of debts and other liabilities on first appointment or as on March 31 of every financial year.

There are about 50 lakh central government employees, including IAS, IFS and IPS, among others.

The rules, Public Servants (Furnishing of Information and Annual Return of Assets and Liabilities and the Limits for Exemption of Assets in Filing Returns) Rules, 2014-- were notified by the Department of Personnel and Training (DoPT) last week.

As per the rules, notified under Lokpal and Lokayuktas Act, every public servant shall file declaration, information and annual returns of his assets and liabilities as on March 31 every year on or before July 31 of that year.

These declarations are in addition to such returns being filed by the government employees under various services rules.

 However, the competent authority may exempt a public servant from filing the information in respect of any asset if its value does not exceed his or her four months basic pay or Rs. two lakh, whichever is higher, the rules said.

The employees, who have already filed their declarations, information and annual returns of property, shall file revised declarations as on August 1, 2014, to the competent authority on or before September 15, this year.

According to the Lokpal and Lokayuktas Act, a public servant shall furnish to the competent authority the information relating to the assets of which he, his spouse and his dependent children, jointly or severally, own.

He is also mandated to declare his liabilities and that of his spouse and his dependent children, as per the Act.

The government is in process of modifying certain rules, including those related to search committee's working, under the Lokpal Act.

The Lokpal and Lokayuktas Act provides for the establishment of a Lokpal for the Union and Lokayuktas for the states to inquire into corruption charges against public functionaries.

President Pranab Mukherjee had given his assent to Lokpal Act on January 1, this year.

The previous government could not go ahead with the much-touted appointment of the Lokpal due to objections raised by BJP about the selection procedure of the anti-corruption body.

As per existing rules, an eight-member search committee will draw up a panel for consideration by the selection committee led by the Prime Minister for appointment of chairperson and members of the Lokpal.

Philippine sect opens ‘world’s largest indoor arena’

Philippine President Benigno Aquino presided over the opening today of what is billed as the world’s largest indoor stadium, erected by a politically-influential religious sect.

The USD 175-million Philippine Arena, which can seat 55,000 people, was hailed as a showcase that will serve as a major venue for concerts and sports events as well as gatherings for its owners, the Iglesia ni Cristo (Church of Christ) sect.

“You have proved that the Filipino can reach great heights, that we can have achievements as lofty as any in the world,” Aquino said in a speech to Iglesia members.

He hailed the 15-storey structure as “the largest domed arena in the whole world”, saying its capacity was “even double that of the Staples Centre in Los Angeles”, a major sporting and entertainment venue.

Ground-breaking was in July 2011 for the stadium, which has a floor area of about 99,000 square metres and a height of 62 metres, and the facility was formally completed this month.

Located in Bocaue town, just outside the capital, the arena’s construction is just one of many events marking the centennial of the Iglesia ni Cristo on July 27.

The Christian sect also said the stadium will have a capacity about double that of other popular indoor arenas like New York’s Madison Square Garden.

However the Singapore National Stadium, completed in June,also seats 55,000 people and has been hailed in the press as the world’s largest domed structure.

The builders have said the arena will be resistant to earthquakes which are a frequent threat to the country which sits on the Pacific Ring of Fire.

The Iglesia ni Cristo sect wields considerable political influence in the Philippines as its members, believed to number about three million people, vote as a bloc for whoever their leaders endorse.

Setting up of Steel Plants

The Minister of State for Mines, Steel and Labour & Employment, Shri Vishnu Deo Sai has said that steel is a de-regulated sector. The role of the Government is that of a facilitator. As such no license/permission is required from the Ministry of Steel for setting up of steel plants in the country. The decisions relating to project investments and implementation are taken by the concerned investors keeping in view the market conditions. As per the available information, there are around 3700 steel factories in the country mostly located in the States of Jharkhand, Bihar, Odisha, Chhattisgarh, Andhra Pradesh, West Bengal, Karnataka, Maharashtra etc. Some of the existing major private sector steel plants in the country are as under:- Plant State Tata Steel Ltd. Jharkhand Essar Steel Ltd. Gujarat JSW Steel Ltd. Karnataka & Maharashtra Jindal Steel and Power Ltd. Chhattisgarh Bhushan Steel Ltd. Odisha Bhushan Power & Steel Ltd. Odisha Monnet Ispat & Energy Ltd. Chhattisgarh Electrosteels Steel Ltd. Jharkhand VISA Steel Ltd. Odisha           In a written reply in the Lok Sabha today, Shri Vishnu Deo Sai has said that there are two steel manufacturing Public Sector Undertakings in the country namely, Steel Authority of India Limited (SAIL) and Rashtriya Ispat Nigam Limited (RINL). SAIL has got eight steel plants and state-wise details of their locations are as under:- Plant State Bhilai Steel Plant Chattisgarh Durgapur Steel Plant West Bengal IISCO Steel Plant West Bengal Alloy Steels Plant West Bengal Rourkela Steel Plant Odisha Bokaro Steel Plant Jharkhand Salem Steel Plant Tamil Nadu Visvesvaraya Iron & Steel Plant Karnataka He said that RINL is operating one steel plant at Visakhapatnam, Andhra Pradesh. In addition, NMDC Ltd., a public sector undertaking,  is constructing a 3 mtpa green field Integrated Steel Plant at Nagarnar, Bastar District, Chhattisgarh.