Advance ruling mechanism for core projects likely soon
Private investors, who are queuing up for infrastructure projects, will no longer face the prospect of sudden rejection of their projects by the government, after they have begun work on them.
By TNN |
NEW DELHI: Private investors, who are queuing up for infrastructure projects, will no longer face the prospect of sudden rejection of their projects by the government, after they have begun work on them.
This means, promoters of airports, roads, ports or even some railway projects can carry that assurance to the table, when they negotiate with banks and other financial institutions for lending to them.
On the lines of the appellate authority for tax, which tells companies if they need to pay a tax on a transaction, there will be an advance ruling mechanism for public-private partnership (PPP) projects. Simply put, this means that before committing any funds for a project, a company can get a formal word from the government, if a project fulfils the conditions for being a PPP.
The formal word from the government is important because a PPP project can raise funds at far more competitive terms than other private sector projects. This is because the PPP projects will usually include a viability gap funding from the Centre that would ensure they are made bankable.
The government has accordingly added one more layer to the PPP appraisal procedure. The initial scrutiny will be done before the PPP project appraisal committee takes up the same for the final approval.
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This had been demanded by private sector players, who claimed the assurance was necessary. In the revenue department, companies routinely get their business proposals vetted by the authority for advance rulings, to incorporate their tax liability in their plans.Projects, which receive the green signal from this committee, could get a viability gap support from the government as a grant. This makes these infrastructure projects bankable, which is often the bane with these plans.
Such a support has already been given to seven projects for about Rs 700-crore projects from state sectors, in the current fiscal. The advance ruling mechanism could be located either in the Planning Commission or the department of economic affairs in the finance ministry.
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