Search the Internet          Tips  Sites: Finance, Investment

Maharashtra to adopt annuity method to attract private players

Renni Abraham

The draft legislation for infrastructure development in Maharashtra seeks to adopt the annuity payment mechanism to protect developers' interests while seeking private sector participation.

Policy imperatives for the Infrastructure Act that is sought to be legislated by the state government are being worked out by the Maharashtra Economic Development Council, while Crisil Advisory Services has been entrusted with the task of preparing the draft for the Act.

MEDC director Chandrakant S Deshpande said: "We have been holding a series of meetings with the industry. As against the build, operate and transfer concept, the annuity method of payments seems to be the route preferred by the private sector."

This mechanism has been successfully tried and tested in infrastructure projects undertaken within the golden quadrilateral (road projects) and is found to cause lesser anxiety to the developer who is not bogged down by delayed payments and is assured of an annual payment.

He thus does not have to worry about escalation in costs due to public interest litigations that delay the project, he added. MEDC's brief includes arranging meetings with the industry to iron out differences and elicit sectorwise views at the conception stage itself, instead of preparing the final draft document and then inviting industry reactions.

The MEDC draft also focuses on developing inland water transport services - for both coastal and passenger traffic - besides focusing on the power, roads & bridges, ports, solid waste management, tourism, urban-infrastructure and transportation sectors.

CAS, that drafted the Infrastructure Act for the Andhra Pradesh government (AP and Gujarat have legislated an Infrastructure Act), has been asked to incorporate the required changes and flesh out an act that is Maharashtra-specific.

For instance, after the AP government enacted its Infrastructure Act, it was found the infrastructure authority set up wasn't able to speed up the project implementation process or even address private sector grievances adequately.

This was because the infra-authority established under the Act primarily comprised government officials. This is cited as one of the reasons for the red tapism and delays in AP as far as infra-projects are concerned. Deshpande said: "Our draft focuses on preparing an overarching institutional mechanism to ensure the expeditious clearance and financial closure of infrastructure projects, besides fleshing out the sectoral policy after eliciting sectoral views from the private sector."

CAS director for transport and infrastructure Sanjay Sinha said: "What we are trying to do here is facilitate the setting up of a nodal body structure that would be involved with the master planning, policy issues, dispute-resolving mechanism for speedy redressals, spell out the state-provided support services for infrastructure projects and an indicative risk-sharing mechanism on a standardised platform to start with. This would make the rules of the game clear to potential developers who come in. Basically we are making all these available through explicit provisions in the proposed Act."

CAS has also made case studies in the infrastructure projects conceptualised in Maharashtra, Gujarat, Andhra Pradesh, besides in other nations like China, Philippines, Australia, Malaysia and the UK.

The draft of the proposed legislation also seeks to set up a conciliation board for resolving disputes arising between the government and the private developer.

Powered by

ALSO READ:
The Rediff Budget Special
The Rediff-Business Standard Special
Money

Tell us what you think of this report