Audit report submitted by CAG on appellate account. That is difference between sanctioned amount and expenditure by gov authorities which is much high. In General, PPP model used to overcome burden on Gov authotity and hike the productivity. CAG reported differences is 200 times that of agreement cost in some project is one of them. It directly indicates the lack of governance of NHAI in PPP projects.
Issues in PPP projects--
- Issues are not confined up to highways projects, Delhi airport(Terminal 3) is an example of lacunae in governance where partner company imposed development charge that was not part of agreement.
-Profit from these charges not being shared with gov authorities. Loss in profit revenue.
- It is a part of strategy to show less amount and get the work first , later issued extra fund for completion of project. Gov authorities always grant raised funds.
Effects-
- Loss of profit and time duration increased to get back expense done by gov.
- Extra burden on gov accounts, it has to cut short extra amount from other development projects.
-Shows lack of foresight of gov authorities which signed the agreement.
Need to do-
- Due to limitation of CAG, it is not able to play role as Comptroller like Britain where requirement of any extra expense first come before the CAG approval. Need to push the role of Comptroller.
- If expense increased then 50% should bear by partner company.
- Money Related issues in PPP directly come before the Supreme Court. Fix some 4 to 5 months time limit for judgment. Because money involve in construction is huge and if trial would go long way that will loss of interest of gov that would counted to be in millions.
In addition, before granting extra money first check where and why it is causing extra money.Cross verify previous work in parallel and show strict nature after violation of agreement
Ans2:
There is a growing trend that the Public Private Partnership model holds key to development of infrastructure of the country. However, there is the flip side of the coin which shows that there are certain policy/regulation gaps which are exploited by the private partners:
- Major part of revenue diverted to investment projects like Mutual funds rather in construction activities. They are being defended under special purpose vehicles
- Substantial delay in the requisite clearances on time by government authorities result in added burden of toll on the consumers due to increased time frame under private firms in operate clause
- Inflated total project cost is noticed due to which higher loan can be availed and in case of termination due to default, the authorities have to pay 90% debt
- There are issue related to transparency in bidding because of no set guidelines, parameters and process
- Overestimation of potential demand for services, leads to overpricing of services by private sector
There is a need to lay detailed bidding guidelines for more transparency, arrest the financial incapacities of firms which are not able to participate and more accountability on the private firm needs to be established in order to arrest these policy inadequacies.
Ans3:
Due to the lack of funds for infrastructure development public private partnership was introduced but recently CAG has find faults with PPP agreements causing burden on end user.
REASONS:
a) Risk sharing: During market failure or any crisis there is no renegotiation of
contracts or compensation from the part of government where private players exit
like airport express line of Delhi metro
b) Operational delay: PPP projects struck in various clearances related to land acquisition
and environmental clearances escalating the costs of operation at later stages.
c) Assessment: Over or under assessment in toll revenues or inefficient planning
ended up in giving extra concession that are not in contracts like road
projects.
d) Quality monitoring: Performance monitoring is needed to ensure the good service
delivery and compensating the user if it is not at a satisfactory level.
REFORMS:
a) Recent introduction of 3P institutions to deal with grievances has to include
renegotiating terms on uncertain situations.
b) Reducing the delays in clearance process by transparent procedures fixing clear
time period.
c) Fixing accountability on lack of quality delivery with better integration of policies
to support the projects undertaken.
These issues have to be sorted out for better cooperation in PPP projects in infrastructure development for improving economic growth
Issues in PPP projects--
- Issues are not confined up to highways projects, Delhi airport(Terminal 3) is an example of lacunae in governance where partner company imposed development charge that was not part of agreement.
-Profit from these charges not being shared with gov authorities. Loss in profit revenue.
- It is a part of strategy to show less amount and get the work first , later issued extra fund for completion of project. Gov authorities always grant raised funds.
Effects-
- Loss of profit and time duration increased to get back expense done by gov.
- Extra burden on gov accounts, it has to cut short extra amount from other development projects.
-Shows lack of foresight of gov authorities which signed the agreement.
Need to do-
- Due to limitation of CAG, it is not able to play role as Comptroller like Britain where requirement of any extra expense first come before the CAG approval. Need to push the role of Comptroller.
- If expense increased then 50% should bear by partner company.
- Money Related issues in PPP directly come before the Supreme Court. Fix some 4 to 5 months time limit for judgment. Because money involve in construction is huge and if trial would go long way that will loss of interest of gov that would counted to be in millions.
In addition, before granting extra money first check where and why it is causing extra money.Cross verify previous work in parallel and show strict nature after violation of agreement
Ans2:
There is a growing trend that the Public Private Partnership model holds key to development of infrastructure of the country. However, there is the flip side of the coin which shows that there are certain policy/regulation gaps which are exploited by the private partners:
- Major part of revenue diverted to investment projects like Mutual funds rather in construction activities. They are being defended under special purpose vehicles
- Substantial delay in the requisite clearances on time by government authorities result in added burden of toll on the consumers due to increased time frame under private firms in operate clause
- Inflated total project cost is noticed due to which higher loan can be availed and in case of termination due to default, the authorities have to pay 90% debt
- There are issue related to transparency in bidding because of no set guidelines, parameters and process
- Overestimation of potential demand for services, leads to overpricing of services by private sector
There is a need to lay detailed bidding guidelines for more transparency, arrest the financial incapacities of firms which are not able to participate and more accountability on the private firm needs to be established in order to arrest these policy inadequacies.
Ans3:
Due to the lack of funds for infrastructure development public private partnership was introduced but recently CAG has find faults with PPP agreements causing burden on end user.
REASONS:
a) Risk sharing: During market failure or any crisis there is no renegotiation of
contracts or compensation from the part of government where private players exit
like airport express line of Delhi metro
b) Operational delay: PPP projects struck in various clearances related to land acquisition
and environmental clearances escalating the costs of operation at later stages.
c) Assessment: Over or under assessment in toll revenues or inefficient planning
ended up in giving extra concession that are not in contracts like road
projects.
d) Quality monitoring: Performance monitoring is needed to ensure the good service
delivery and compensating the user if it is not at a satisfactory level.
REFORMS:
a) Recent introduction of 3P institutions to deal with grievances has to include
renegotiating terms on uncertain situations.
b) Reducing the delays in clearance process by transparent procedures fixing clear
time period.
c) Fixing accountability on lack of quality delivery with better integration of policies
to support the projects undertaken.
These issues have to be sorted out for better cooperation in PPP projects in infrastructure development for improving economic growth
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