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LATEST NEWS UPDATES | IIMs to be roped in to study lukewarm private response to PURA by Devika Banerji

IIMs to be roped in to study lukewarm private response to PURA by Devika Banerji

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published Published on May 30, 2011   modified Modified on May 30, 2011

The government is scurrying for an alternative to its plan on engaging private sector in providing urban amenities in rural areas. After a good initial response that saw more than 90 companies showing interest in the scheme - Provision of Urban Amenities in Rural Areas, or PURA, - the Rural Development Ministry has received only eight pilot proposals from six companies.

Of the 45 shortlisted, most, including big players like Reliance Power , Tata Realty and Infrastructure Limited, Tata Power , Jindal Steel and Power and IDFC, have opted out of the scheme primarily because of the small size of the projects.

Other smaller yet significant players did not qualify after the initial stages due to lack of experience in infrastructure projects implemented through a public-private partnership mode.

"We did not receive project proposals from many of the companies that qualified and we think we will have to rework the current approach," said an official at the ministry of rural development.

The ministry now plans to rope in one of the Indian Institute of Management (IIMs) to study the reasons for lukewarm private response and suggest ways to improvise on the PPP model for the scheme.

The Rural development ministry had in 2010 revived the PURA scheme, which was envisioned by former President APJ Abdul Kalam. The ministry had expected to undertake 15 pilots by January this year and scale up the number of projects in the 12th five-year plan based on the learning from the pilots.

PURA projects will fall under three categories - projects that are being funded by the government, projects not funded by the government and add-on projects. The government is to contribute 78% of the capital expansion for core projects, which include building water and sewage facilities, construction of roads, skill development and development of economic activities.

Non-government schemes include provision of street lighting, telecom, electricity generation while add-on projects, to be funded entirely by private sector, include village-linked tourism, agri-marketing, warehousing and other services.

The private partner is supposed to provide expertise for implementation of government projects and is expected to earn 12% return on capital. The government will also provide a capital grant to every PURA project subject to a cap of 35% of the project cost with an upper limit of Rs 42 crore.

"For most companies, the sizes of projects were a dampener. We believe the scheme would be better if its scope is increased and we are allowed to invest in bigger projects," said an official in a company that had opted out of the scheme.

Shrinath Savoor, Vice President - strategy of Shree Cement also says that there is need to make the scheme more lucrative for the private sector by increasing the size of the projects. "The scheme will be more attractive if projects were larger," said Savoor.

The companies that have submitted detailed project reports under the scheme are IL &FS, Infrastructure Kerala Limited, Marg Limited, Megha Engineering Infrastructure and SVEC Construction. The eight projects are proposed in Andhra Pradesh, Kerala, Puducherry, Rajasthan & Uttarakhand.

The Economic Times, 30 May, 2011, http://economictimes.indiatimes.com/news/economy/infrastructure/iims-to-be-roped-in-to-study-lukewarm-private-response-to-pura/articleshow/8642583.cms


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