Kelkar panel suggests easier funding for PPP projects

Committee suggests ending one-size-fits-all approach in dealing with risks, proposes independent regulators

Ahigh-powered committee set up by the finance ministry to redraw the contours of the country’s public private partnership (PPP) model has recommended ending the one-size-fits-all approach in dealing with project-specific risks, and advocated independent regulators.

If the government signs off on the recommendations it would result in a major overhaul of the existing framework, designed primarily to incentivise private investment in infrastructure.

At present, a significant number of PPP projects have been stalled by legal disputes relating to financial issues. According to the Economic Survey 2014-15, at the end of December last year, the stock of stalled projects added up to Rs.8.8 trillion, or 7% of India’s gross domestic product.

Not only is this posing a drag by accentuating infrastructure bottlenecks, the stalled projects have also saddled the banking sector, especially public sector banks, with a large burden of bad loans.

The panel, headed by former finance secretary Vijay Kelkar, was mandated to prepare a blueprint for unravelling the logjam and kick-start investments in infrastructure.

The report of the committee on revisiting and revitalizing the PPP model was released on Monday. It was submitted to finance minister Arun Jaitley last month.

PPPs relate to public services delivery by private entities, and are awarded through a competitive bidding process. They are typically very high-value contracts, often with huge capital and operating costs, making it difficult for their developers to cope with any financial losses.

Given the long-term nature of PPPs, a “perfect” contract is rare as the situation is apt to change during a project’s lifetime. The emergence of risks not foreseen at the time of signing the agreement exposes such projects to potential distress, making them unviable for the developers and prompting demands for a renegotiation of the original terms.

The Kelkar committee said the final decision for a renegotiated concession agreement must be based on full disclosure of long-term costs, risks and potential benefits, a comparison with the financial position for the government at the time of signing the concession agreement and at the time of renegotiation.

For the highways sector, which is the most dispute-ridden, the committee recommended that all pending disputes including change of scope, delayed land handover, delayed commercial operation dates, termination, cost overruns, delayed payments, penalties and claims may be disposed of in a time-bound manner through an independent body with representatives from the National Highways Authority of India, developers, lenders and an independent chairman.

The committee observed that given the urgency of India’s demographic transition and the experience the country has already gathered in managing PPPs, the government must now tweak the model by incorporating lessons learnt so far and making it more sophisticated.

However, the committee advised against adopting PPP structures for very small projects, since the benefits may not be commensurate with the costs.

“Unsolicited Proposals (“Swiss Challenge”) may be actively discouraged as they bring information asymmetries into the procurement process and result in lack of transparency and fair and equal treatment of potential bidders in the procurement process,” it said.

This comes at a time when the cabinet has approved developing 400 railway stations next fiscal through the Swiss challenge formula under which a private entity identifies a project and approaches the government with a proposal to develop it. A rival investor can offer a counter-bid which the original bidder can match and win the project.

The committee also expressed its displeasure over government authorities treating PPPs as an off-balance sheet funding method for the government’s responsibility of providing reliable infrastructure services to its citizens.

“PPPs should not be used as the first delivery mechanism without checking its suitability for a particular project. States and other agencies should also not treat Central PPP VGF (viability gap funding) as a source of additional grants that can be accessed by adopting a PPP delivery mode for projects that are not suitable for such a long-term financing structure,” it said.

The committee also strongly rallied behind the proposal for 3P India, an infrastructure think-tank that Jaitley proposed in the budget last year and is yet to see light of day.

“A centre of excellence in PPPs, enabling research, activities to build capacity, more nuanced and sophisticated contracting models and developing a quick dispute redressal mechanism is overdue. Every stakeholder without exception had underlined the urgent need for setting up the 3P-I institute for PPPs. The Committee strongly endorses this,” it added.

The committee agreed with concerns expressed both by the government and private parties against demands for audits of PPP projects and revealing information through the Right To Information act.

“Conventional audit by authority of private partner’s books per standard procurement process risks delivery of poor quality of service and public assets,” the report contended, while advising that the boundaries of operation of various statutory bodies be clearly defined through an overarching mechanism.

The committee also recommended building a host of other institutions such as Infrastructure PPP Project Review Committee (IPRC), Infrastructure PPP Adjudication Tribunal (IPAT) and a national PPP policy. An IPRC is expected to evaluate and send its recommendations in a time-bound manner when stress is reported in any PPP project while an IPAT chaired by a judicial member (former judge of the Supreme Court or a high court chief justice) is expected to mediate on disputes among stakeholders in a PPP.

The committee also recommended that the government encourage banks and financial institutions to issue zero coupon bonds or deep discount bonds for sourcing long-term capital at a low cost for PPP projects.

“These will not only lower debt servicing costs in an initial phase of project but also enable the authorities to charge lower user charges in initial years,” it said.

Abhaya Agarwal, partner, infrastructure advisory, at the Indian arm of audit and consulting firm EY, said while the report makes valid suggestions, implementation will be key. “Renegotiation of PPP projects is not going to be easy because it will involve substantial financial outflow (from the government). The countries which have done so have backed it with funds with huge cash,” he said.

On the proposed 3P India, Agarwal said such an institution should not be set up under the government.

“It should be an autonomous body so that it can think like and act like the private sector,” he added.

Review role and need of port tariff regulator: Kelkar panel

The panel endorsed private cargo terminal operators’ demand to migrate to a new tariff-setting regime, but asked the govt to frame the terms for such a shift

The government must review the role and need of the Tariff Authority for Major Ports (TAMP), the rate regulator for 11 of the 12 ports owned by the Union government, according to an expert panel set up by the government to revisit and revitalize the public-private-partnership model in infrastructure.

The nine-member panel led by Vijay Kelkar, chairman of the New Delhi-based National Institute of Public Finance and Policy, endorsed private cargo terminal operators’ demand to migrate to a new tariff-setting regime, but asked the government to frame the terms for such a shift.

“The methodology and guidelines adopted for determining the ceiling tariff has been revised periodically by the Tariff Authority for Major Ports (TAMP) in 1998, 2005, 2008 and 2013. Frequent revisions have resulted in multiple business frameworks for similar nature of projects, depending on the period of their concession, which has led to concerns of developers who are evaluating and bidding for projects all the time. It is suggested that a path for moving from pre-TAMP to current TAMP method be provided,” the committee wrote in its report submitted to the government in November.

The report was put up on the finance ministry’s website on Monday.

The Kelkar panel’s suggestion comes when the shipping ministry and the port industry are discussing a potential migration of some 16 existing port contracts (10 of them private)—some operating from as far back as 1997—from a regulated set-up to a market-driven pricing regime announced in 2013 for projects put to bid since then.

On an average, the existing contracts have about 12 years or more left till the end of their term of 30 years.

A shipping ministry-mandated study by Deloitte Touche Tohmatsu India Pvt. Ltd has recommended modalities for migration, including setting a reserve price for re-bidding, the terms for granting the right of first refusal to the existing cargo handler and closure payment if a new entity wins the right to run the facility.

The most suitable option for the government would be to go for re-bidding of the projects for the market to determine suitable revenue share that can be expected from the respective projects in a deregulated scenario, according to the study by the consultancy firm.

This is in line with the shipping ministry’s view that the existing cargo handlers should share the higher revenue earned from migration to a deregulated regime as it will get the freedom to set rates. This right can be construed as a change in the initial bidding terms leading to a financial benefit for the existing operator, according to the ministry.

The private terminal operators, though, are not in favour of putting their facilities up for a re-bid.

To be sure, this is not the first time that an expert panel has suggested a review of the role of and need for TAMP to put the ports owned by the union government on par with those owned by state governments, which already have the freedom to set rates based on market forces.

A decision on this issue has been delayed due to conflicting stands taken by stakeholders.

The shipping ministry also lacked clarity on the process for winding down TAMP.

The Kelkar panel has favoured reorienting the model concession agreement (MCA) by adopting best practices including models followed in some minor ports (as in Gujarat) in terms of stipulating specified cargo handling capacity and qualitative parameters of facilities. A concession agreement sets out the terms of a port contract.

The concession agreement may also make the public authority responsible for providing support infrastructure facilities (including land, reliable access to utilities, dredging, rail and road evacuation infrastructure) through enforceable obligations.

It has also underlined the need for clarity regarding assessment of stamp duty on concession agreements in the ports sector. Currently, there is considerable ambiguity and uncertainty on whether the concession agreement is to be treated as an agreement, lease or licence.

In 2012, one of India’s biggest port tenders at Jawaharlal Nehru Port collapsed after the successful bidder declined to sign the concession agreement, saying it will not bear the stamp duty for registering the agreement.

Reserve Bank of India releases report on financial inclusion

RBI committee has noted that there has been a significant jump in financial inclusion-related activities

A committee set up by the Reserve Bank of India (RBI) to prepare a five-year financial inclusion strategy has suggested that all credit accounts be linked to a unique biometric identifier such as the Aadhaar unique identity number to help identify multiple loan accounts and prevent borrowers from becoming over-indebted.

The committee, in a report released on Monday, also recommended that short-term interest rate subvention, or subsidies, on crop loans be phased out and replaced with a crop insurance scheme for small and marginal farmers.

The panel, headed by RBI executive director Deepak Mohanty, was set up in July to come up with a measurable plan for financial inclusion. The committee found that while some indicators of inclusion have improved, a large number of people remain reliant on informal channels such as money lenders.

One key recommendation of the committee is to link all credit accounts with a biometric identifier such as Aadhaar and the information shared with credit information companies.

“This will not only be useful in identifying multiple accounts, but will also help in mitigating the overall indebtedness of individuals who are often lured into multiple borrowings without being aware of its consequences,” the committee has recommended.

An allegation levelled at the government’s flagship Jan Dhan Yojana has been that the sharp rise in savings accounts could be because of multiple accounts opened by individuals rather than a larger proportion of the population entering the banking system. Linking each account to a unique identity number will help stem such a phenomenon.

In assessing the progress of financial inclusion initiatives, the committee noted that there had been improvement in some indicators.

The average number of branches per 100,000 individuals in India had jumped to 9.7 by June 2015, compared with 7.2 in 2010. The growth in branch penetration has also resulted in an improvement in the number of savings bank accounts in rural and semi-urban locations in India, the report said.

It added that the compounded annual growth rate (CAGR) in the number of savings bank accounts opened between 2006 and 2015 in rural and semi-urban areas has been 15.6% and 15.9%, respectively. This compares with a CAGR of 11.8% and 10.9% in urban and metropolitan areas, respectively, the report noted.

“The recently announced Jan Dhan Yojana by the government marks a landmark in the quest for universal financial access. The government is also focusing on paying benefits directly into these accounts. This will ensure that a big chunk of the accounts opened under various schemes, which are presently dormant, witness ‘movement’, thereby integrating access with use. These are very heartening developments,” said the preface to the report.

Worryingly, despite the leap in the number of accounts, the share of unorganized lenders such as money lenders has not reduced over time. Out of every 1,000 households of marginal farmers, more than 600 are in debt to money lenders. The share of banks is just 129 households.

Alok Prasad, an independent expert on financial inclusion said that the report does not propose the nuts and bolts of how financial inclusion can be furthered over the intended five-year period.

Instead of measurable and concrete actions, the committee has made a “mishmash” of recommendations without clear milestones, said Prasad.

Among the committee’s more contentious recommendations is a suggestion to do away with the interest rate subvention offered on short term crop loans. They suggest that this be replaced with a universal crop insurance scheme for small and marginal farmers.

At present, the government mandates banks to offer 2% interest subsidy on short-term farm loans to small and marginal farmers.

The centre compensates banks for the subsidy that they extend while giving farm loans at 7%.

The report notes that interest subsidy only increases misuse and does not go to the intended beneficiary. Since the subsidy is only for short-term loans, it does not encourage capital formation in agriculture as long-term loans continue to be expensive.

“Phasing out of interest subvention will make the credit culture more healthy and the process more transparent. The goal of the RBI has been to do away with all sorts of subsidies in order to strengthen the credit culture as the subsidy in many cases doesn’t reach the intended beneficiary,” said Kalpesh Mehta, a partner at Deloitte Haskins and Sells.

Focussing on the role of technology in financial inclusion, the RBI committee suggested low-cost mobile solutions for last-mile delivery of banking products and proposed that the government marry mobile technology with Jan Dhan Yojana.

The committee has recommended the use of application-based mobile phones as points of sale for creating necessary infrastructure to support the large number of new accounts and cards issued under the Jan Dhan Yojana.

“One would have liked to see much more emphasis on how technology can be the game-changer; how financial inclusion can also make business sense for banks,” said Prasad.

The report recommended that complete digitization of land records be taken up by the states on a priority basis to improve credit flow to agriculture.

“This would enhance the use of mechanisation and reduce input costs and prices,” the report says.

The Mohanty committee has warned against taking the competence of business correspondents (BCs), who provide last-mile delivery of banking services, for granted. It recommended a graded system of certification of BCs, from basic to advanced training.

“BCs with a good track record and advanced training can be trusted with more complex financial tasks such as credit products that go beyond deposit and remittance,” the recommendations said.

It should be left to the banks to decide how much they should depend on BCs, said Bindu Ananth, chairperson of IFMR Trust, a private trust involved in financial inclusion. .

“Banks are smart enough to figure out which BCs they are tying up with, since they act as agents of banks and do not take up any of the liabilities,” Ananth said.

Other recommendations include one to allow banks to open specialized interest-free windows with simple products such as demand deposits.

The committee consisted of officials from public and private banks, officials from payment networks, a representative from the World Bank, a representative from the Bill and Melinda Gates Foundation and central bankers

The true picture of financial inclusion

Many new bank accounts have been opened, but the report points out that 40% of accounts did not see any deposits or withdrawals in 2014

The two accompanying charts, culled from the Reserve Bank of India’s (RBI’s) report on financial inclusion, show the true picture of financial inclusion in the country. Chart 1 shows the increasing importance of moneylenders in the rural economy. The data is till 2012 but the report says, “the Committee is of the view that this scenario may not have changed materially in the last couple of years.” Chart 2 shows how the poorest borrowers, those with smaller landholdings, have to rely more on moneylenders. Sure, many new bank accounts have been opened, but the report points out that 40% of accounts did not see any deposits or withdrawals in 2014

Details of test series programme (IAS-2016 PRELIMS TEST SERIES)

Details of test series programme (IAS-2016 PRELIMS TEST SERIES)

COP21: The Toothless Paris Agreement

 

After two weeks of intense negotiations in Paris, 196 nations signed what is being hailed as a ‘landmark’ deal to limit carbon emissions, restrict the rise in global temperatures to below 20C of pre-industrial levels, and make the world economy carbon neutral by the second half of the century. But how effective can an accord, which aims to assuage the concerns of diverse countries with diverse agendas, be especially when the commitments that have been made are voluntary?
Unsurprisingly, there is more scepticism than optimism that governments will do the needful to transform their fossil fuel-dependent economies to ones that use more sustainable and cleaner energy resources.
For instance, a recent New York Times article reported that Chinese state owned companies have undertaken, and have commenced, the construction of coal-fired power plants in 27 countries across the developing world with loans from the Chinese Exim Bank. The report also stated that Beijing is in fact encouraging its state-owned firms to go out and seek projects in neighbouring countries in order to offset declining profits at home due to a glut in domestic coal-fired plants, increase demand for Chinese steel and bind the Chinese economy more closely with its neighbours. In fact, coal-based plants account for 68 per cent of the generation capacity built by China in the rest of Asia, and that figure is set to increase.1
The developed countries too cannot be exempted from blame. Although West European countries are cutting down on coal consumption, their eastern counterparts, in what is being alluded to as a new “coal curtain”, are increasing both output and consumption. For example, while Poland and the Czech Republic have announced an expansion in production of their domestic coal reserves, other European nations are also investing in new coal production and generation capacity. Even Germany, which is at the forefront of steering Europe’s shift to renewable energy, seems to be caught in the horns of a dilemma between protecting some 21,000 coal sector-based jobs and cutting emissions from coal-based plants. But after pledging to close down its nuclear reactors by 2022, it may have to depend on coal, which provides more than a fourth of its electricity, for filling the gap vacated by nuclear energy.
Therefore, the biggest, and possibly the only, success of the COP21 summit is that a deal was signed at all. To elaborate, first, because of US pressure, the Intended Nationally Determined Contributions (INDCs) and emission reduction targets will now be voluntary, with each country allowed to set its own target. Accordingly, large emitters like the US have pledged to reduce emissions by 26 to 28 per cent by 2025 from 2005 levels; the European Union has committed to a 40 per cent cut in emissions from 1990 levels by 2030; and China has pledged to peak its greenhouse gas (GHG) emissions by 2030 and cut CO2 emissions by 60 to 65 per cent from 2005 levels. Given that the world will use 900 of the remaining 1000 Gigatonnes of carbon by 2030, of which half will be used by China, the US and the EU, what space does that leave for other developing countries including India?
Second, the Agreement facilitates developed countries profiting from carbon trading. Article 6, paragraphs 3 and 4, without even mentioning markets, introduced a provision called Internationally Transferred Mitigation Outcome (ITMO), which is an enhanced version of the Clean Development Mechanism (CDM) and Joint Implementation. This benefits the developed West to make profits by not only using carbon trading for profits but also endorses the inclusion of ITMOs in Nationally Determined Contributions.
The third, and perhaps the most contentious issue, is the provision regarding the financing mechanism. Article 9, paragraph 3 states that “the developed countries intend to continue their existing collective mobilisation goal through 2025” and that prior to that, the COP “shall set a new collective quantified goal from a floor of USD 100 billion per year, taking into account the needs and priorities of developing countries.” The fact that a similar commitment of providing USD 100 billion towards the Green Climate Fund was made as far back as November 2010 at COP16, a commitment which the developed countries have yet to deliver on, induces cynicism about the latter’s intention to deliver on any financial obligation.
Lastly, the fact that the developed countries succeeded in making all commitments non-binding, makes the Paris Agreement almost toothless. As charted out in Article 21, the agreement will take effect if it is ratified by more than 55 per cent of nations or nations that are responsible for 55 per cent of global emissions. However, Article 28 goes further in diluting any responsibility accruing to the developed world by stating that “At any time after three years from the date on which this Agreement has entered into force for a Party, that Party may withdraw from this Agreement by giving written notification to the Depositary.”
If India can take any comfort from the summit it is only the fact that it was successful in ensuring that it deflected pressure on setting a date for capping its emissions, thereby giving it the space to develop. India has promised to reduce its emissions by 33 to 35 per cent by 2030 from 2005 levels. It has in fact made it clear that while it was committed to hike its renewable energy portfolio seven-fold by 2022, which includes besides solar and wind portfolios, hydro and nuclear energy as well, it would not only double its coal output by 2020 but would also continue to rely on coal for decades thereafter due to its abundant reserves of the resource and because it is the cheapest source of energy. Moreover, as Piyush Goyal (in charge of the ministries of coal, power, and renewable energy) noted, India with 17 per cent of the world’s population contributed only 2.5 per cent to global GHG emissions as against the developed countries’ contribution of over a fifth of GHG emissions with just five per cent of the world’s population. More importantly, India has also successfully prevented the inclusion of developing countries from making mandatory financial contributions to the global finance pool. As a result, any financial and technical assistance that India provides to other developing countries will be voluntary.
Given all this, to put it in the words of James Hansen, the father of climate change, “It’s a fraud really, a fake. It’s just worthless words. There is no action, just promises. As long as fossil fuels appear to be the cheapest fuels out there, they will be continued to be burned.”2

PSLV-C29: Demonstrating India’s Growing Space Capabilities

 

 

India’s Polar Satellite Launch Vehicle (PSLV-C29) successfully launched six satellites for Singapore on December 16, 2015. This was a fully commercial launch undertaken by the Indian Space Research Organisation (ISRO). The year 2015, particularly its second half, has been the most successful year for ISRO from the commercial point of view. During the last six months, it has successfully undertaken three commercial launches and has launched a total of 17 satellites of foreign countries.
Till date, the Antrix Corporation Limited, the commercial arm of ISRO, has provided launch services for 57 satellites from 20 countries. For the last one-and-a-half decade, ISRO has been launching satellites for foreign vendors beginning with a German satellite in May 1999. Interestingly, more than one-third of the launches have taken place in the last six months. This clearly indicates the maturing of ISRO’s commercial launch programme.
Over the years, PSLV has emerged as one of the most reliable work-horse for ISRO, and the launch of satellites on December 16 was its 31st consecutive successful flight. Few months back, Indian Government had stated in the Lok Sabha that by lunching 45 foreign satellites India has earned about US$ 100 million. Now, with all 57 launches, it is likely that this figure could have reached to approximately US$ 120/125 million. Today, many more international clients are waiting for ISRO to offer them launching facility on payment. Presently, ISRO’s hands are full for minimum next two years with around 15 to 20 satellites lined up for launch for various foreign agencies.
One very important but less discussed aspect of PSLV-C29 launch is the experiment performed by ISRO after it had successfully placed all six satellites into their respective locations. The mission carried out a major experiment to restart the fourth stage engine and this experiment has been declared successful. Development of such capability offers ISRO the flexibility to plan launces in different orbits in a single launch vehicle mission. Till date, ISRO has been launching multiple satellites in a single rocket, but all these satellites were designed for similar orbit positioning.
The PSLV is essentially used for Low Earth orbit (LEO) satellite launches (approximately they could carry 1700 kg payload to 625 km distance up in the space from the earth’s surface). Since its first launch in 1993, PSLV has undergone several modifications based on the need of the mission. Such modifications essentially involved boosting its load carrying capacity by adding six strap-on booster motors. Also, some changes have been made for reconfiguring thrust and efficiency aspects. In November 2013, PSLV was even used to launch India's first interplanetary mission, the Mars Orbiter Mission (MOM). However, with PSLV-C29 mission ISRO for the first time has experimented with the multiple burn fuel stage/rocket engine.
The PSLV mission configuration constitutes four stages using solid and liquid propulsion systems alternately. The first stage carries solid propellant, and the second stage uses the indigenously developed Vikas Engine which carries liquid propellant. The third stage is a solid stage and the fourth stage is a liquid stage with a twin-engine configuration.
With the successful restart and shut off of the fourth stage engine on December 16, ISRO has demonstrated its capabilities with multiple burn fuel stage/rocket engine. This is an arena of critical technology development. The main challenge here is to restart the engine after a short gap. In a routine PSLV launch, after the fourth stage gets activated a very high amount of heat is generated. Hence, the real test is to cool the engine down in the space by shutting it off and restarting it after a short gap.
During the PSLV-C29 mission, the fourth stage got cut-off in around 17 and a half minute, and during about next four minutes six satellites were placed in the orbit at 550 km altitude. Subsequently, the fourth stage got restarted after 67 and a half minute at a lower altitude of 523.09 km, as planned. The engine remained active for a period of four second and altitude went up 524 km and engine was cut-off again. Now, with the success with a multiple burn fuel engine ISRO needs to integrate this technology and undertake an actual multiple orbits-single rocket mission. The first such proposed mission, PSLV-C35, could be launched in December 2016. During this launch, one satellite will be launched at a higher orbit and the other at a slightly lower orbit.
Launching of satellites is a Rocket Science! Every new mission is a technological challenge and it is important to ensure that satellites go into the correct orbit and in the most energy-efficient manner. Cost and time aspects demand that rocket launching agency should be able to exploit innovation potential to the maximum to get maximum dividends from a single mission. India’s Moon and Mars mission have demonstrated that frugal engineering is ISRO’s forte. Now, in the coming few years, it is expected that ISRO would be in a position to put big primary payloads into different orbits by using a single rocket launcher.

Committee on Skill Development

Committee on Skill Development

The Minister of State (Independent Charge) for Skill Development and Entrepreneurship Shri Rajiv Pratap Rudy has said that a Sub-Group of Chief Ministers on Skill Development was constituted to address issues pertaining to human resources, especially  creating a pool of skilled manpower with speed, scale, standard and sustainability. The Sub group has submitted its report. The recommendations of the Sub Group include use of funds from Education Cess and part of CSR funds for skilling in India. The Sub group has also recommended that instead of replicating ICT Academy of Tamil Nadu in each State, the existing and established organization (ICTACT) can open chapters / branches in willing states, where local administration can be represented, for carrying on its activities. The major highlights of the recommendations made by the Sub-Group are at:

Highlights of the recommendations of Sub Group of Chief Ministers on Skill Development

The major highlights of the recommendations made by the Sub-Group are as follows:

Integrated Delivery Framework for Achieving Convergence

·         The State Skill Development Missions (SSDMs) should evolve into a coordinating body to harmonize the skilling efforts across line departments/   private   agencies/voluntary   organizations   etc.   The common norms announced at the central level may be adopted by the SSDMs so as to have State-specific guidelines for skill development programmes.

·         For decentralized implementation and to ensure effective coordination and monitoring of skill development initiatives a three-tier structure at State, district and block level for SSDMs proposed. Pattern of DRDA to coordinate skill efforts at district level can be adopted for effective coordination and interaction with local self-government, civil society, training provider, industry and other stakeholders.

·         Determination  of  sectoral  priorities  at  State  level  based  on  an independent  assessment  of  the  needs  of  each  sector  and  the formulation  of  appropriate  policies  to  enhance  the  qualitative  and quantitative skill availability for the sector based on conduct of regular skill surveys.

·         SSDMs should have the overarching power to pool across the resources and to utilize according to priority.  The inter-linkage of the SSDMs with the industry, training providers, Sector Skill Councils, NSDA should be maintained at the policy formulation and implementation level.

·         Sector Skill Councils to assist the State Skill Development Missions to align training program with NSQF.

Achieving Scale & Relevance through PPP

·         Industry to be incentivized to set up training institutions in PPP mode in industry clusters to facilitate availability of trained manpower for big and  MSME  units  and  to  adopt  existing  government  ITIs  and Polytechnics.

·         Local Industry to be involved for curriculum development, training modules, provision of equipments, training of trainers, opening skill development centres and taking apprentices.

·         Industry  can  also  enter  into  flexi  MOU  based  on  sector,  trade  or institutions and offer work benches for practical training

·         Industry  can  help  in  Developing  a  database  of  instructors  as  also resilient system for selection of Training providers

·         The States Government can incentivize the public sector or the private industries operating either within the State or in neighbouring regions to involve in the skill development efforts of these States through their SSDMs in less industrialized as well as difficult terrain.

·         Skill Development programmes and skill training providers should get an extension of service tax exemption for the next 5 years.

·         Income tax exemption to category-A training providers (as per the definition of Ministry of Rural Development) for a period of 5 years need to be considered.

·         Skill training in manufacturing sector should be incentivised in all skill development programmes to achieve the broader objective of Make in India programme”.

Reaching the Unreached and the Disadvantaged

·         The possibility  of introducing  legislation  on  Right of Youth to  Skill Development to make it mandatory on the part of the State to impart skill training to every eligible youth may be explored.

·         Vocational education may be introduced from the middle level onwards with SSDM having the responsibility to explore the marketability potential of traditional skill sets of the State. This would motivate the children to take up training in traditional skills especially in States that excel in handicrafts, wood art and handlooms. Further the international models viz German, Chinese and Singapore may be studied for replication in India.

·         Flexibility to states to introduce local and traditional skills meeting local needs to be provided under various central government administered skill programs and attract local youth for training.

·         Opening of Incubation Centres, counselling Centres and  Tracking Centres at the village level.

·         The  provision  of  safe  transportation,  female  instructors,  child  care facilities,  market  and  finance  to  encourage  women  participation.  Also making available dormitory/ hostel facilities in district and block headquarters for students from remote corners.

·         Using ICT, Mobile vans, to make available training facilities in villages and hilly areas.

·         Monetary and non-monetary incentives should be part of the policy for training providers and potential employers to engage with differently- abled persons.

Improving the Quality

·         SSDMs  could  play  a  facilitating  role  to  address  the  shortage  of instructors/  trainers  especially  in  imparting  practical  training  by identifying    Government/    private/    self-employed    entrepreneurs operating establishments/units in the skills in demand in the State and bring them on the panel where students after attaining the basic skills can be sent for practical training.

Making Skills Aspirational by involving Local Bodies/NGOs

·         The Railways and other para-military forces   can play a more proactive role in advocacy and skill development, instead of just focusing on recruitment rallies. The personnel of these agencies could be used for skill training or these agencies could lend institutional support in imparting training in hilly, inaccessible and difficult terrains.

·         The awareness among the targeted population on the benefits of skill training can be generated through audio/visual media as well as through street plays and by involving the PRIs/ULBs and Civil Society.

·         Local Bodies to be used for skill mapping and creating a data base of youth at local level.

Focus on Outcome

·         Union Government initiatives in strengthening the National Career Guidance Centre at the district and block level, integrating with the Labour Market Information System should be facilitated by the SSDMs. This would facilitate to track the youth receiving skill training and moving to placement either as self-employed or wage-employed. LMIS/National Career Service Centres could be the medium where the

success stories that are documented can be shared so that it provides a medium for the youth to explore the possibilities of its up- scaling/replication.

Making Available Adequate Resources

·         To  enhance  the  scale  of  skill  development  resources  is  of  utmost priority.   Half of the 2 percent CSR could be used exclusively for skill development initiatives. Further it was also agreed to by the Sub-Group that out of the cess collected under the Building and other Construction Workers Cess Act, 1996 the Cess Fund which is presently in surplus should be available for imparting skill training to all underprivileged youth irrespective of whether or not they are wards of construction workers.

·         Public Training Institutions to be made revenue generating.

·         Use   of   MPLAD/MLA   funds   for   creating   infrastructure   for   skill development could be   explored.

·         Funds generated  under  education  cess  could  also  be  used  for introducing vocational education from secondary school onwards.

·         M/o SDE should make a budget provision for all States to set up Skill Universities  or  convert  one  of  the  existing  Universities  as  a  Skill University  under  PPP  mode.  This funding could be made available through NSDF/NSDC.