Annual Report 2010 - Ministry of Finance and Planning

3 | REFORM INITIATIVES• Category IIDevelopment Project Proposalsto be undertaken by PrivateInvestors in the form of PrivatePublic Partnership (PPP), BuildOwn Operate (BOO), BuildOwn Transfer (BOT) and otherpartnership arrangementswith line ministries or otherGovernment agencies.• Category IIIPrivate investment initiativeswhich involve having to disposeeither by sale, grant or otherwise -any state land or land owned by astate entity.The process relating to Category Iand II requires the Secretary tothe line Ministry or the Head ofthe relevant Government Agencywho receives an unsolicited or astandalone proposal to consider andbe satisfied that such a proposalis likely to bring about exceptionalbenefits to the country, both interms of funding and otherwise andconsequently proceeding with sucha unsolicited proposal without goingthrough the normal procurementprocess, if advantageous. He must besatisfied that the proposal and thefunding offer appears important andrelevant in the overall context of thepublic investment plan and the policystrategies of the Government or thatthe proposed investor commandsa reputation and knowhow, that isotherwise scarcely available. In thecase of a proposal that containsmerit to proceed, it should besubmitted to the Standing CabinetAppointed Review Committee(SCARC) for an assessment. TheSCARC upon receiving such aproposal for consideration, with theassistance of supporting committeeswhere necessary should evaluate andrecommend whether such a proposalshould be proceeded with or not. Asstipulated in the relevant Guidelines,in deciding whether a deviation fromthe standard tender procedure isjustifiable, consideration should begiven to the strategic nature of theproject and the ultimate benefitsit is likely to bring to the economicdevelopment of the country,whether the proposal is within theplanned development agenda of thegovernment, the likely transformationof the knowledge, knowhow that islikely to flow from such project, theproposed conditions being attractiveand acceptable and advantageousin the national interest. If deemedsuitable accordingly, such a proposalshould be recommended for theapproval of the Cabinet of Ministersto be proceeded with. However,in order to ensure transparencyand accountability, the guidelinesrequire that related project financingshould necessarily be extendedthrough a reputed banking orfinancial institution acceptable tothe government and that the projectfinancing terms should extend to atleast up to 15 years including a graceperiod of at least 3 years. Further,the line agency is also required tomake an assessment and informwhether related repayments arepossible out of funds generated fromthe project or other funds withinthe control of such agency. It is arequirement that a ‘no objection’should be obtained from theCentral Bank regarding the externalfinancing terms.The process relating to CategoryIII deals with situations where theproposal involves inter alia thedisposition of land either owned bya state or a state owned institution.In relation to such a proposal, if theSecretary to the line Ministry or theHead of the relevant governmentagency having made an assessmentis satisfied that such a proposal islikely to bring substantial, social oreconomic benefits to the countryor will facilitate to change thelandscape of the country, he couldsubmit such a proposal to theSCARC for consideration. If theSCARC is of the view that such aproposal deserves to be proceededwith, it can be proceeded inter aliawith Cabinet approval subject toregulatory clearances required. Toensure accountability, the relevantSecretary to the line Ministry or theHead of the relevant GovernmentAgency is required to obtain avaluation from the GovernmentChief Valuer based on which thetransaction should be concluded. Itis also a requirement that Secretaryto the line Ministry or the Head ofthe relevant Government Agencycredits any proceeds received fromsuch transactions to the Accountof the Deputy Secretary to theTreasury, where in-turn such fundscan be utilized only for specificcapital investments within therelated agency as approved by theNational Budget Department.What is important to note is thatalthough with the approval of theCabinet of Ministers, steps can betaken to proceed with a stand-aloneor unsolicited proposal withouthaving to go through the GeneralTender Guidelines to select a party,the post award and complianceprocess has to be followed in termsof the procedure applicable tothe Government and governmentrelated institutions. In this regard,Public Finance Circular No. 444 wasissued on 04th August 2010, havingobtained necessary approvals fromthe Cabinet of Ministers.190