PPP model not working, govt mulls alternative

  • HT Correspondent, Hindustan Times, Lucknow
  • |
  • Updated: Jan 14, 2013 11:34 IST

For the cash-starved state government, the triple P (public private partnership) no longer seems to be the panacea for raising funds for big-ticket infrastructure projects.

That is why the state government is mulling over measures to generate revenue for facilitating development projects through self-sustained special initiatives.

A concept note on how the authorities can bankroll these ventures at the local level, instead of relying on loan from financial institutions, would come up for discussion at a meeting to be chaired by chief secretary Jawed Usmani here on Monday.

"For long, PPP has been touted as the only mantra for tackling the financial crunch by the bureaucrats. The fact, however, is that except for one or two major expressways, this fiscal model to raise funds has never taken off," said a senior government official.

Most of the PPP deals are looked at with suspicion because of the kind of huge investment that is involved.

Political rivalry, lack of a firm resolve, not to mention shifting approach on policy matters, were some of the reasons because of which deep-pocket investors had become wary of taking up such ventures, he said.

"Under this proposal, certain innovative fiscal and enabling incentives have been planned for infrastructure development, initiatives in road transport, civil aviation, education, healthcare and tourism," he said.

The most recent example of this approach is the decision to provide a Metro Rail link between Noida and Greater Noida.

"The project had been lying defunct as we could not find a suitable investor under the PPP pattern. Subsequently, the government decided to raise funds and devised its own method to generate revenue for the project," the official pointed out.

The Rs 5,000 crore needed for the new Metro Rail link would be raised from realty sector.

By increasing the floor area ratio (FAR) from 2.75 to 3.5 along this special corridor, the authorities plan to generate funds needed for the project from the builders who will purchase the increased FAR.

Likewise, a need is being felt to set up a Dedicated Urban Transport Fund (DUTF) and special purpose vehicles (SPVs) to implement road and transport projects in Lucknow, Kanpur, Varanasi, Allahabad and Agra.

Other potential fiscal measures, which can be mooted, include levying a green surcharge on petrol and diesel. For instance, Rs 2 per litre cess on petrol and diesel each can be collected through an additional surcharge of VAT/sales tax by the state government.

Similarly, a special cess on vehicle registration can be introduced. This can be done by increasing the registration charges (Rs 1,500/year).

This would also help in restricting personalised motorised transport, a necessary prerequisite to encourage people to use metro.

"But all this is still at a conceptual stage. We are still vetting these suggestions and a final shape would be given to the proposal after weighing the pros and cons of these steps," the official said.


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