Views of C.J. Venugopal: “The private sector has a significant role to play in infrastructure development”

“The private sector has a significant role to play in infrastructure development”

Odisha has been actively encouraging private sector participation in infrastructure projects. The state government has created an enabling framework for private investments. The state has a number of success stories of private participation across sectors.

C.J. Venugopal, Additional Chief Secretary and Chief Resident Commissioner, Government of Odisha, shares the success of public-private partnerships (PPPs) in the development of the state’s infrastructure, policy initiatives and key focus areas…

Odisha’s initiatives

With regard to Odisha’s infrastructure development, various pioneering and innovative projects have been taken from the start. Odisha has been a leading state in the unbundling of the power sector. Also, it was one of the first states to privatise state-owned energy companies. The government has been pushing for it constantly, recognising that the private sector has a significant role to play in infrastructure development. The state has had very progressive policies, both industrial and infrastructural. The state’s PPP strategy focuses primarily on private sector participation in infrastructure development, and the private sector plays a pivotal role in the state’s development and progress. The PPP policy clearly defines progressive fiscal and non-fiscal incentives that are beneficial to both developers and financial institutions.

There is a well-defined institutional framework that enables the state to make transparent and timely decisions. The framework provides a single-window clearance mechanism for PPP projects and facilitates coordination among several departments. A committee has been formed at the chief secretary level, which app­ro­ves project proposals with a budget of less than Rs 5 billion. While this institutional framework permits private sector engagement in infrastr­uc­ture creation, it also enables financing from various sources. With this, Odisha has att­e­mp­ted to institutionalise the whole process. In ad­dition, there is a PPP directorate that tracks all infrastructure development initiatives. It supports the identification of projects by maintaining a well-defined and well-thought-out pipeline of infrastructure projects that may be underta­ken on an engineering, procurement and cons­t­ruction (EPC) or PPP basis. Furthermore, the­­­­­re are two funds – the project development fund and viability gap funding (VGF). The project de­ve­lopment fund is for identifying projects, preparing the detailed project report, looking at the necessary collateral to make projects bankable and viable, as well as appointing consultants to facilitate the bidding process. The VGF is for specific projects, with a primary emphasis on project bankability and sustainability. The VGF has been designed in such a way that it is not fixed for each project; rather, it is flexible to ensure the bankability of projects. The VGF has been provided for capex and in some cases, up to 50 per cent of the opex.

“There is a well-defined institutional framework that enables the state to make transparent and timely decisions.”

The Odisha government is actively looking at infrastructure opportunities in the road connectivity grid, water supply grid, electricity grid and fibre grid. The government is identifying a pipeline of projects and looking at attracting greater investments for these.  The enablers for private participation are already in place. The­re is an efficient contract management system with dedicated project management units for the timely execution of projects and a stro­ng payment security mechanism to make projects viable. The contracts also have a well-defined risk-sharing framework.

Another noteworthy initiative by the government is the land registration portal. The state’s complete land registration procedure is managed via a portal called “Dharani”, which facilitates both online and offline registration. The platform contains all land-related information as well as information on purchasing and selling land. Further, information on land value, re­gistration fees, stamp duty and offline appointment is readily accessible. Land reports dating back to 30 years have been digitised. The portal has eased land-related transactions and land has become more accessible for the industry and infrastructure. The convenience of registering land has allowed the government to not only deliver excellent services to citizens, but also significantly raise revenue owing to the ease of doing business.

Sector success 

Ports have been a successful sector, with private ports doing well. Further, there has been private sector participation in railway corridors. A few corridors for the movement of steel and alu­minium were developed with VGF support and are now operational. A strategy to address supply chain constraints is also being develop­ed, which requires the addition of new corrid­o­rs. The Haridaspur-Paradip railway line and the Angul-Sukinda railway line are examples of successful railway corridors commissioned in the past year. More such corridors are planned to be developed for easing the supply chain constraints. As part of its success story, the Odi­sha government began emergency medical ambulance service about a decade ago, starting with a few locations that have now expanded to co­ver the entire state. Another initiative inclu­des the development of an efficient public street lighting system with private sector involvement, which has aided in the transition to LEDs and led to increased energy efficiency. The effort has garnered widespread support and is being expanded into the state’s interiors.

“Odisha’s PPP strategy focuses primarily on private sector participation in infrastructure development, and the private sector plays a pivotal role in the state’s development and progress.”

The Odisha government is considering a bulk water supply scheme, the details of which have not been charted out yet. Apart from this, the government is laying a lot of emphasis on affordable healthcare. In the past 5-10 years, flexible VGF has enabled bankable and sustainable affordable healthcare. Thus, the state has no fixed VGF and raises it to whatever level is necessary for the project to be bankable. The government is setting up additional hospitals across the state for which VGF is being provi­ded for capex as well as opex. Besides, renewable energy, including the development of solar parks, has been among the favoured sectors of the government.

Affordable housing is another area that has received a lot of attention. The private sector has been incentivised by allowing the construction of low-income group (LIG) houses on some portion of the land provided by the state, and using the remaining portion of the land for commercial purposes to recover costs. The model has been successful in Bhubaneswar and Cu­tt­ack and is being rolled out in other cities as well.  Besides, the government is working to­war­­ds making bus terminals efficient, affordable and service-friendly through PPPs.

Odisha is blessed with a 480 km long coas­tline and a plethora of hill stations and marine parks. This has sparked interest in the tourism industry, which has again benefited from private sector engagement. The private sector has played a significant role in the growth of to­u­­rism, whether it is via water sports, ecotou­ri­sm, resorts, or beach tourism. Investors willing to enter the tourism industry have received su­p­port from the government’s industrial policy or PPP policy. The state’s industrial policy is quite supportive for setting up various industries. The industrial portfolio is diversifying, mo­ving away from metal-based industries towards value-added industries, food processing, tou­rism and other sectors.