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Kelkar panel suggests new ways to fund PPP projects

The Vijay Kelkar committee which was reviewing the public-private partnership model of infrastructure development has made recommendations to improve the financing of such projects.

The committee has analysed the risks involved and the existing framework of risk-sharing between the project developer and the government and given its recommendations.
“The mandate was to revive the past public-private partnership review it and redesign it by introducing best international practices and improve capacity building. We have looked into all aspects. The Finance Minister wants to implement the recommendations of the report as early as possible” said Kelkar after submitting his report to Finance Minister Arun Jaitley on Thursday.
Both Kelkar and officials in the Finance Ministry remained tight-lipped on the key recommendations. Shaktikanta Das Secretary Department of Economic Affairs while acknowledging that PPP projects are facing problems due to financing contractual and capacity issues declined to give any timeline for implementation.
Das said the report will be put in the public domain soon. “Obviously it will require some amount of inter-ministerial consultation. We have to see what needs to go to the Cabinet and if there is a legislative issue…we also have to go through it” he added. During the consultation period leading infrastructure players such as Anil Ambani’s Reliance Infrastructure had pitched before the Committee for a neutral regulator to look into all issues arising in public-private-partnership projects across sectors.
The players had also pointed out that it is unfair to hold the developer responsible for delays beyond their control. These could be delays related to land acquisition environmental clearances or other such regulatory approvals.
Top investors
L&T Reliance GMR and GVK are the top investors in PPP projects. The private players wanted contracts and commitments made by the public sector partner to be firm from the outset. The demand was for equal distribution of the risk in a PPP project between the public and private sector partners.
The committee was set up in May this year after the Finance Minister in Union Budget 2015-16 called for a need to revisit the PPP model of infrastructure development. The panel was to submit its report within three months but was given an extension.
Apart from its head Kelkar the 10-member committee included CS Rajan Chief Secretary Rajasthan; SB Nayar Chairman and Managing Director India Infrastructure Finance Company Ltd; Shekhar Shah Director-General NCAER; Pradeep Kumar Managing Director CBG State Bank of India and Vikram Limaye MD IDFC.

NCAER lowers GDP forecast to 7.4% for FY’16

NEW DELHI: Economic think tank NCAER today marginally lowered GDP forecast at 7.4 per cent because of slowdown in agriculture due to deficient monsoon.

“This marginal fall is due to the anticipated slowdown in the agricultural sector. Industrial growth continues to gather strength while the outlook for the services remains mixed” National Council of Applied Economic Research (NCAER) said in a statement.

In August it had projected economic growth at 7.5 per cent for the current fiscal.

The Finance Ministry has pegged the growth rate for the financial year 2015-16 at around 8.1-8.5 per cent which now looks difficult to achieve as the growth in the first quarter worked out to be only 7 per cent.

It further said the overall demand remains sluggish because of weak external demand and dampened rural demand while investment shows weak signs of revival.

The industrial sector performed better with 4 per cent growth in the first half of the FY’16 as against 2.9 per cent in the comparable period of the last fiscal it said.

The improvement is mainly driven by the manufacturing sector with 4.2 per cent growth in the first half of the 2015-16 compared to 2.2 per cent in the corresponding period of the last fiscal.

“While the mining sector showed no growth electricity has recorded slower growth in the first half of FY16 versus FY15. Capital goods and consumer durables also show improved y-o-y growth signalling improved investment and consumption” it said.

However it said annual growth in consumer non-durables continues to be in negative territory.
With regard to agriculture sector it said the actual rainfall received during June-September period of 2015-16 was below normal.

Despite deficit rainfall it estimates overall food grain output during this year’s kharif season likely to be marginally higher compared to last year due to better rainfall conditions in areas where coarse cereals and pulses are grown.
On inflation NCAER said it has declined over the period of the last one and half years.

“Retail inflation declined by an average of 1.4 percentage points between 2014-15:H1 and 2015-16:H1. Wholesale Price Index (WPI) inflation fell sharply averaging 4.1 per cent (y-o-y) in the same period” it said.

NCAER lowers GDP forecast to 7.4 per cent for next fiscal

Economic think tank NCAER on Saturday marginally lowered GDP forecast at 7.4 per cent because of slowdown in agriculture due to deficient monsoon.

“This marginal fall is due to the anticipated slowdown in the agriculture sector. Industrial growth continues to gather strength while the outlook for the services remains mixed” National Council of Applied Economic Research (NCAER) said in a statement.

In August it had projected economic growth at 7.5 per cent for the current fiscal.

The Finance Ministry has pegged the growth rate for the financial year 2015-16 at around 8.1-8.5 per cent which now looks difficult to achieve as the growth in the first quarter worked out to be only 7 per cent.

It further said the overall demand remains sluggish because of weak external demand and dampened rural demand while investment shows weak signs of revival.

The industrial sector performed better with 4 per cent growth in the first half of the FY16 against 2.9 per cent in the comparable period of the last fiscal it said.

The improvement is mainly driven by the manufacturing sector with 4.2 per cent growth in the first half of the 2015-16 compared to 2.2 per cent in the corresponding period of the last fiscal.

“While the mining sector showed no growth electricity has recorded slower growth in the first half of FY16 versus FY15.

Capital goods and consumer durables also show improved y-o-y growth signalling improved investment and consumption” it said.

However it said annual growth in consumer non-durables continues to be in negative territory.

With regard to agriculture sector it said the actual rainfall received during June-September period of 2015-16 was below normal.

Despite deficit rainfall it estimates overall food grain output during this year’s kharif season likely to be marginally higher compared to last year due to better rainfall conditions in areas where coarse cereals and pulses are grown it said.

On inflation NCAER said it has declined over the period of the last one and half years.

“Retail inflation declined by an average of 1.4 percentage points between 2014-15:H1 and 2015-16:H1. Wholesale Price Index (WPI) inflation fell sharply averaging 4.1 per cent (y-o-y) in the same period” it said.

GDP to grow 7.4% in FY16: NCAER

India’s gross domestic product (GDP) would grow 7.4 per cent in 2015-16 much lower than current official estimates of 8.1-8.5 per cent the National Council of Applied Economic Research said in its mid-year review of the economy on Saturday. The think-tank said: “Industrial growth continues to gather strength while the outlook for services remains mixed. Overall demand remains sluggish because of weak external demand and dampened rural demand. Investment shows weak signs of revival.” In August NCAER had forecast GDP growth for the current fiscal at 7.5 per cent.

NCAER’s projections are at par with the Reserve Bank of India (RBI)’s GDP growth estimates of 7.4% in the September monetary policy and within the range of 7.3-7.6 per cent estimated by the International Monetary Fund World Bank Moody’s Analytics and Asian Development Bank.

The official estimates of 8.1-8.5 per cent projected in the last economic survey are expected to be revised when the July-September economic growth data is available. On Saturday NCAER said while the industrial sector performed better year-over-year in the first half of the financial year the services sector was sluggish. “The services sector excluding construction shows signs of waning growth; slowing down in the first quarter of the current fiscal (on a year-on-year basis) to 8.9 per cent compared to 9.2 per cent in the quarter 4 of 2014-15” it said adding the outlook for the rest of the year looked ‘mixed’.

“For the second year in a row the actual rainfall received during June-September period of 2015-16 was below normal… Despite deficit rainfall NCAER estimates the overall food grain output during this year’s kharif season may be marginally higher compared to last year due to better rainfall conditions in areas where coarse cereals and pulses are grown” it said.

The report noted that while inflation had moderated expectations continue to be high and inflation volatility showed signs of increasing. “The RBI front-loaded a rate cut with a 50 basis point reduction in the repo rate. The rate cut is intended to create an environment conducive for boosting investment expenditure. However monetary transmission has remained weak” it added.

“Nominal demand for credit witnessed some sluggishness in growth for the first half of 2015-16. Public sector banks continue to be plagued by non-performing assets” the report stated.

The report credited the government for doing ‘largely commendable’ work on the fiscal front compared to the same period last year. On the external front however the first half of the year was not that good for merchandise exports with dull prospects for the rest of the financial year.

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