Is the criticism that the ‘Public- private –Partnership’ (PPP) model for development is more of a bane than a boon in the Indian context, justified?

    Many projects are currently being implemented under Public-private–Partnership (PPP) model(especially expressways, ports, power plants). Each of these sectors are vital to growth of the countries economy. PPP projects are undertaken by government and private sector together. It brings their strength of both together.  Private sector is more efficient and faster. Also, the deep pockets of private companies can be used to compensate the fund deficiencies. Government with its vast resources is more effective with approvals and resource mobilization.  

    India is in want of funds especially for developing infrastructure.  PPP model caters to the need of India aptly.  The structure of PPP model, alternatives available, advantage and issues in PPP model are of much consideration in policy making. The needs of our economy are so many that our government can't provide everything. Under PPP model government takes the role of facilitator and regulator. PPP models are constantly being improved by drawing lessons from problems faced.

    In the PPP model the government and the private sector sign a model Concessionaire Agreement ( MCA).  Unlike a contract which holds only the private contractor liable here both government and the private partners are liable. The government looks after the clearances side and the expertise of the private sector is used to implement the project.

    In infracstructure, the Build Operate Transfer (BOT) model is the most often adopted scheme. The private sector and government sign the MCA which fixes the toll which can be levied after completion of the project. The returns are obtained over long time period(generally 33 years). After that, the project is transferred to the government, which can freshly grant Maintain Operator Transfer (MOT) contracts or the government itself can maintain it.

    The expertise of the private sector is also it's ability to design and execute complex advanced projects. This is also being tapped by Design Build Finance Operate models which are increasingly being used for airport establishment.

    Under PPP model, the technical competence private sector for  is tapped. The efficiency of the private sector in completing projects is utilized. Government is not able to fund the courts for so many projects. But, here in PPP as the private partner finances the project, the risk liability lies on the private sector. If he needs more funds or suffers loses it is to be borne by private sector.

    The PPP projects have suffered setbacks because of time and cost overruns. Often the inter ministerial delay in clearances by the government and problems, issues arising out of land acquisition ( to be done by private sector) has decreased the enthusiasm of the private sector. Distance covered under PPP model fall far short of the target set in the XII five year plan. The recently enacted land Acquisition Act is viewed with suspicion for its implementation might throw up newer challenges and increase acquisition cost manifold.

    The government has promptly come forward to address the grievances of the private sector. A revised MCA has been put out for comments. Major issues have been revised easily. The contract levies heavy penalties for delays. Often the MCA is braised in favour of government, which seldom bears responsibility when an issue arises.  

    The government is contemplating on Engineering Procurement Construction (EPC) model. The government will fund the project (loans from domestic bank, IMF, etc by budgetary provisions). And the private sector after construction will collect the loans through money given at toll and hand it over to the government.

    If the private sector wouldn’t be still coming forth to contribute, the government would have to involve itself. A waterfall mechanism with first trying BOT, then EPC and if not finally government involvement is planned.

    As the government is very miniscule when compared with our society it cannot provide for every services. Lots of them which are in the nature of public goods cannot be outscored. The private sector has been tapped in whereever it is possible. They have shown enthusiasm in projects where the costs are recoverable.

    In power plants the private sector have been ablated captive mines ( which can be used to source coal for generating electricity and not for market sale). As coal India limited ( CIL) could not engage itself to the extent necessary, we had to rope in the private platers. India energy policy relies heavily upon thermal power plants in the near future. We have set ambitions, production targets in every twelfth five year plan.

    The calorific value of Indian coal is law, often creating disruption in the power production. Recent issues caused by irregularities in coal block allocation and lack of clearance which has made domestic coal insufficient. Despite having enormous coal reserves we are now importing coal, injuring our current account. Imported coal often being expensive, increases cost of production which makes the cost of per unit fixed unsustainable. The plants start making loses. Government has shown concern and taken steps to revise the rates inspite of the new circumstances.

    Airports have been increasingly handed over to private partners. Their efficient and quality service has been widely appreciated. Attempts are being made to further private government controlled airports also. Issues have risen because of the extra charges from customers which haven’t been covered by the contract.

    Parts are also being developed by private partners. India has fared poorly in developing her parts. Lack of storage facilities, high turnaround time ( time taken to unload and load the ship )   inability to dock mega – container ships and so on. Having accepted trade facilitation under the influence of WTO, India would be subject to penalties if there is no enough provision made for the same. It includes strict classes for standardization of document clearance, part operations, etc.

    The technical competence of the private sector is much necessary for going forward to develop our parts and improve them to international standards. Currently many parts lack 24x7 services, roping in the private sector to manage affairs can turn a new leaf and reduce turnaround time highly.

    India has shown way to the world with her successful PPP model innovation. USA, China are also implementing schemes under similar projects. The PPP model is a rightful acknowledgment of the expertise and efficiency of the private sector.

    Not all has been well under the scheme; we need to bring in changes and fort track the implementation of projects. The EPC model which allows for price discovery by bidding is a move in the right direction. Further clear rules and regulations have to be provided for to weed out ambiguity. Single window clearances have to become effective. Not to add to the existing system as one more. Inter ministerial and inter governmental ( state and central ) co- operation can make a sea change in the existing state of affairs. Government should be sensitive to the existing state grievance and facilitate the completion of projects by effectively regulating them.

    Due to stalled projects, many projects have turned into non-performing assets ( NPA’s ) affecting the banking sector badly. The toxic NPA’s, if not restructured on time could cause financial instability. The government should take of holistic view on the concern and their impacts.

    The blame game will take us nowhere. The private sector is also a partner in the development process of India. Their role is indispensable if we are to achieve all round (inclusive) sustainable growth. Instead of choking the life out of them, government should pro actively deliver the necessary to create a win- win situation.

    Infrastructure is an essential prerequisite for growth. India has yet not connected every part of the nation to a transport network. Close links play a vital integrationists role. We have to find the political and administrative will to take forward ambitions, targets and implement them successfully.

    Any scheme or model if given in the hands of players unwilling to work with it, shall not succeed. Inorder to  achieve the goal inclusively, more faster and sustainable growth ( as set by our XII five year plan) we need to push forward the projects in PPP model and deal with any issues arising in an effectively manner.