Equal infra JVs between govt, private cos may now be history

NEW DELHI: No equal joint venture (JV) between a private firm and a government company will be allowed in the infrastructure sector under the new public private partnership (PPP) guidelines. The move aims to fix responsibility of the project with the majority owner and prevent a deadlock on matters of public interest. The equity stake will also define public or private character of the JV.

The new rules also prohibit regulators and government entities such as Port Trust, Airports Authority of India, Railways, National Highways Authority of India (NHAI) from undertaking construction and management of PPP projects through JVs. They have to detach their regulatory functions with commercial interest to implement any future PPP projects by creating a separate project implementing entity.

���The guidelines have been considered by a committee of secretaries (CoS) and approved by the finance minister and deputy chairman of Planning Commission. It would now apply to all central ministries and departments, statutory entities and central public sector undertakings,��� an official in the finance ministry said.

���The aim of new guidelines to lay down criteria which need to be examined carefully while forming a JV in the infrastructure sector. It addresses the important issues relating to conflict of interest, accountability of public sector entities, valuation of assets, contingent liability, exit and termination clauses,��� the official said requesting anonymity.

The new guidelines bar a 50:50 JV between private and public entities as well as public and public entities, as such shareholding pattern creates confusion over accountability and escapes scrutiny from government agencies. In fact, such venture between public and private companies will be regarded as private entity irrespective of the shareholding.

The guidelines will immediately impact several SPVs formed in the power and transport sectors. The Delhi Metro Rail Corporation (DMRC) would also come under the scrutiny of the new guidelines as it is also a 50:50 JV between the central government and the Delhi government.

The new guidelines have also barred government officials from becoming chairpersons in a JV where the shareholding of private sector entities is 50% or more. It has also barred consultants and advisors of public sector entities to be engaged in a similar role in the private sector entity created through JV.

The guideline has also said that regulators should not participate in JVs for PPP projects. This will create a situation where the regulator also acts as a regulated entity in the JV in their area of operation. Already the government has separated the regulatory operations of airports from AAI to Airport Economic Regulatory Authority (AERA).

The guidelines have also said that public sector equity support into JVs should be avoided for unviable projects and the government should restrict itself to providing grants for such projects. It has also said that selection of private sector partners should be done in an open and competitive process.