4.25 As noted in Section 2, most countries engaged in a broad-based PPP program have felt the need to develop a cross-sectoral PPP unit although the role that this unit plays is sometimes restricted to information dissemination and the preparation of guidance material. The design response to two key issues - the role of a cross-sectoral unit vis-à-vis line ministries and the role of a national unit in sub-national PPPs - will be driven by the business practices within governments and the fiscal, and other, relations between the center and the states. This means that some models which are more centralized, such as those in the UK and South Africa where national level units have a prominent role in sub-national PPPs, will not be workable approaches in India.
4.26 At the state level, a dedicated PPP unit can both broaden the PPP program by transferring lessons and experiences across sectors, as well as improve the quality of PPPs by bringing to bear better transactions skills. Particularly where there is not a track record of PPPs, skills are probably best brought in from the private sector to supplement available capacities in the state government. A number of states have done this through a public-private company, for example Rajasthan and Karnataka. While this may be a straightforward route for bringing in expertise, the possible conflicts of interest (see Section 2) have to be addressed and dealt with.
4.27 A national PPP unit could undertake the information dissemination and guidance roles described above. It could also usefully play an active role in identifying areas where PPPs could be undertaken by central agencies and ministries, and working with these agencies to conceptualize and bring to the market individual PPPs. To do this, it would need the right transactions skills, most likely brought in from the private sector. There might also be concerns that the line agency would, for turf reasons, not work or cooperate with this unit in the development of its PPPs. These concerns would be reduced both if the unit was seen to be highly skilled and its contribution valued, as well as if there were requirement for the vetting of central agency PPP proposals by this unit, prior to their clearance.
4.28 It is not so clear that this unit should have an active transactions advisory role with respect to state and municipal PPPs, in the manner, for example, that Partnerships UK does. This would directly substitute for the development of state-level capacity. It may also be challenging to do this for a large number of deals, and there might need to be some form of prioritization most likely for sectors that have seen fewer PPP deals in India to date - given the number of PPP road projects done to date, this might not be a major focus of the advice being provided by this unit. This unit would however build up state level capacities through information dissemination and guidance, and also by furthering the national level PPP program.
4.29 However, if the center were to provide additional funding for PPPs (see below) then this unit could review these PPPs to assess whether the contractual structure proposed is robust, that risks are efficiently allocated and that projects to be supported by the center are sound. This oversight role may eventually develop into a prescriptive role, with states interested in accessing the central fund having an incentive to use the national unit's approaches and recommendations to increase the likelihood of acceptance of their project. It would be important therefore that if this clearance and oversight is done that the national unit make clear its guidance and approaches on contract design, risk allocation, affordability and value-for-money assessment, and provider selection.
4.30 The two main options for constituting the national unit are either as a cell or group within an existing ministry or agency, or as a company, either owned solely by the government or a joint public-private company. The right choice depends in part upon what role the unit is to fill. The first option is likely to be the best approach if it is to play primarily an information dissemination and guidance role. Within this set-up, whatever transactions skills may be needed could be secured through hiring consultants on long-term contracts. The second option would be preferable were the unit mainly to focus on transactions and undertake a bigger volume of deals, as setting it up as a company will facilitate paying salaries to attract staff with financial and legal skills, and make it easier to provide monetary incentives for closing deals. However, it is likely to take more time to implement and establish compared to creating a unit within an existing agency. There is a third possibility, a separate agency or authority but this would perhaps not offer the benefits of speed of establishment and integration with existing budgeting and approval processes that a unit within an existing ministry would have, nor the flexibility that a company would have in terms of pay scales and incentives.
4.31 The need for such a unit, and the roles it will play over the life cycle of PPPs, should be agreed and accepted by both line ministries and Finance and Planning. Up-front agreement would help ensure that it serves a well-defined purpose and at its inception neither is perceived as a threat nor suffers from unrealistic expectations.