Revisiting PPPs: Achievements and Challenges

Infrastructure and PPPs in India High economic growth during the last decade Led to a demand for basic infrastructure such as water supply and sanitation, transportation and energy. Rapid growth of the rural purchasing power meant demand for connectivity, logistics etc. The 12th FYP (‘12-’17) strived to improve upon the 11th FYP success. Projected Private sector to go up to 47% from 37%.

First two years of the 12th plan suggests that infrastructure investment will be less by 30%. (20% in Public and 43% in private) The role of PPPs is very significant in this back drop. In the past also PPPs did better than pure public investments. Sectoral PPPs in Roads, Airports and Ports are a mixed bag of success and failure. In the Port sector?

Challenges: Recent slowdown, weak regulatory and institutional mechanism, over leveraged debt, aggressive bidding by developers, contractual issues, long drawn out dispute mechanisms, inadequate due diligence by lenders, lack of flexibility in the contractual arrangements, have all led to difficulties for the PPPs. Stress on the non PPP projects have led to reduction of financing to the private sector.

Re-balancing of risk-sharing One size fits all was a problem, atleast in the Port sector. Obsolescing Bargaining; To be able to deal with sudden changes which are not expected. And to ensure that the Government does not have an upper hand. Absence of a regulator exacerbates the problem. Renegotiation of contracts; Finance Ministry is coming out with guidelines and possible approaches.

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