Saturday 14 July 2012

Institutional Mechanism for Monitoring of PPP Projects

The Cabinet Committee on Infrastructure (CCI) approved a proposal from the Planning Commission to set up an Institutional Mechanism for monitoring and enforcement of provisions in PPP projects.  With an increasing reliance being placed on PPP projects across many wings of the government, it has become necessary to adopt a well-defined institutional structure for overseeing contract performance effectively.  This is all the more necessary as concessionaires will have an incentive to cut corners whereas the criticism would be faced by government.

            The Institutional Framework requires project authorities to create a two-tier mechanism for monitoring the performance of PPP projects:

(i)             A PPP Projects Monitoring Unit (PMU) at the project authority level

(ii)            A PPP Performance Review Unit (PRU) at the Ministry or State Government level, as the case may be. 

            The PMU is to prepare a report to be submitted to PRU within 15 days of the close of the relevant month.  The report is to cover compliance of conditions, adherence to time lines, assessment of performance, remedial measures, imposition of penalties, etc.  The PRU is to review the reportssubmitted by the different PMUs and oversee or initiate action for rectifying any defaults or lapses. 

            In addition to following the guidelines for the mechanism, the respective Ministries will send a quarterly compliance report to the Planning Commission with a copy to the Ministry of Finance. Planning Commission, in consultation with the Ministry of Finance, will prepare a summary of these reports along with the recommendations relating to further action/improvements which would be placed before CCI once every quarter for the next two years. Based on the experience gained any necessary modifications would be made in the Guidelines.

            This is an important governance mechanism in an area which will see a lot of activity in future. It will ensure good governance, accountability, efficiency and economy in spending. The Planning Commission will have a central role in ensuring high quality monitoring. The Cabinet will have a chance to monitor every quarter.

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