Institutional frameworks for PPPs in India

3.9  A wide range of institutional structures and capacity approaches have been adopted for conceptualizing and procuring PPPs across states and central agencies, different variants of which have had some degree of success. At the state level, the three main approaches have been: combining dedicated institutions with cross-cutting legislation; establishing and using cross-sectoral PPP advisory units to help line departments in the absence of over-arching legislation; and relying on line departments and sectoral agencies to build capacities. Table 2 provides a summary of state-level approaches.

3.10  Gujarat, AP and Punjab have developed specialized institutions and legislation. Each of these states has constituted an agency (respectively the Gujarat Infrastructure Development Board, the AP Infrastructure Authority and the Punjab Infrastructure Development Board) and passed acts to promote private sector participation in infrastructure projects across sectors. As an illustration, the Gujarat Infrastructure Development Act, 1999, gives force of law to the provision of entering into a concession agreement with a private sector developer, provides transparent procedures for selection of the developer, and provides for levying user charges for the facilities provided by the developer.

3.11 A second category of states, including Karnataka, Rajasthan, Uttaranchal and West Bengal, have developed cross-sectoral facilitation entities, but have not passed comprehensive legislation. In Karnataka, the Infrastructure Development Corporation of Karnataka (iDeCK) is a joint venture between the state government and IDFC modeled on Partnerships UK, providing advisory services such as enabling frameworks, project development and structuring, and management of a Project Investment Fund. The Rajasthan Project Development Corporation (PDCOR) is similar in structure, a joint venture between the state government and IL&FS to facilitate private investment in infrastructure, including policy advisory services to the state government, and institutional support to structure and implement PPPs. The ICICI - West Bengal Infrastructure Development Corporation Limited (IWIN) is a joint venture between ICICI Bank Group and Government of West Bengal formed with the objective of accelerating the development of infrastructure.

Source: World Bank analysis

3.12  Finally, a third category of states, including MP, Maharashtra and Tamil Nadu, have relied on sectoral and line agencies to develop and implement PPPs. In Madhya Pradesh (MP), for example, initially the MP Public Works Department (PMMWD) and then the specially-created MP Road Development Corporation (MPRDC) act as the agency for development of road projects on a BOT basis. In the process of developing projects, MPRDC has developed policy, guidance materials and skills. In Maharashtra, the State Road Development Corporation (MSRDC) and Mumbai Metropolitan Region Development Authority (MMRDA) have developed policies for infrastructure development through private sector participation, including a "Policy on implementation of Road & Bridge Projects through private sector participation".

3.13  At the central level, the NHAI has developed and modified standard concession agreements, and has developed different approaches for extending government financial support for PPPs. The capacity building measures under way at NHAI focus on improving human resources, financial systems, bid process management and include internal training, study tours and the development of a robust MIS system. However, it is understood that a number of personnel are on deputation and they leave once their tenure is over. Though this is not an unusual situation for public agencies, it does of course lead to a loss of expertise and knowledge. For the rail sector, a special purpose vehicle called Rail Vikas Nigam Limited (RVNL) has been floated to develop, mobilize resources and implement PPPs. There are no obvious structures in place at the central level to transfer expertise and knowledge built up in one agency - for example NHAI - to a second that is just embarking on PPPs.

3.14  There is no clear link between institutional structures and success in developing PPPs in India. It would seem clear from the experience of MP and Maharashtra in the development of PPPs for roads that it is possible to develop a PPP program in a single sector by building up capacities in line departments. However, these states are conspicuous by their absence of PPPs in other sectors, no doubt at least in part driven by the absence of platforms to transfer acquired skills to other departments. Gujarat, AP and Punjab have all developed cross-sectoral enabling legislation and dedicated agencies but have had very different track records in terms of taking PPPs successfully to the market. Some other states - such as Tamil Nadu - have also developed a few PPPs across a wide range of sectors, without explicit cross-sectoral PPP units or legislation.

3.15  Fundamentals such as political commitment towards the use of PPPs, sufficient trained staff, and strong links between built-up capacity and implementation responsibility in the respective line departments are probably the most important ingredients of success.