I
n all debates over India's burgeoning economy, PPP is of late the trisyllabic mantra often invoked to address the mess that is infrastructure. But it would be unfair to suggest that PPP, or public-private partnership, in infrastructure is just a catch phrase. On the contrary, there has been a consistent effort at fine-tuning policy and a demonstrable urgency shown at the ground level, especially in the last five years. While the government has provided the momentum and expectations are high, the onground reality shows that the learning curve is very steep. As they say, a lot remains to be done.The statistics speak for themselves. The department of economic affair's first nationwide survey of 221 PPP infrastructure projects being carried out with an estimated investment of $25 billion reveals that road projects account for nearly 36 per cent of the value (and 78 per cent in terms of number). Among all the traditional domains of partnership—roads, power, railways, ports, airports and telecom—it is only in roads that PPPs have been making good headway. Next is power—it has shown reasonable progress of late. Airports is a fledgling area, making small yet significant strides.
The government's logic for banking on collaboration is a no-brainer: infrastructure projects have long gestation periods and, in most cases, requirements fall short of the budgetary allocations. "The investment outlay for the 11th Plan period envisages that 44 per cent would be placed under the partnership model. It means huge opportunities for the private sector," says S.S. Kohli, CMD, India Infrastructure Finance Co Ltd, a government vehicle to facilitate financing of viable infrastructure projects. Looked at another way, it's also a huge challenge if one goes by overall investment need of $492 billion for infrastructure in the plan period. After all, there are only $25 billion of PPP projects in the pipeline.
Consider roads, the 'classic public good'. Road projects undertaken on a BOT (build-operate-transfer) basis—where companies build the highways, collect toll and transfer them back to the government after the concession period—are being completed well ahead of time. "We have completed three road projects—the Jaipur-Kishengarh highway, Belgaum-Maharashtra road and the Nellore bypass—on a PPP mode six months ahead of time. And, this, adhering to all quality parameters," says Brahm Datt, secretary, ministry of road, shipping and highways. "We expect several other current projects to also finish three to six months before the scheduled completion date," he adds.
As things stand, 7,962 km of national highways under the National Highways Development Project have been completed out of a total 14,500 km of highways that have been contracted thus far. The NHAI has expanded the scope to include an additional 40,000-km of state highways—and shifted from a model of the highest negative grant (from the government) to a revenue-share arrangement. This year, the NHAI plans to award another 10,000 km of highway projects under the new model concession agreement. "The quantum of NHAI share in the toll revenue quoted by the bidders is extremely encouraging," says Datt. With a toll policy in the works, it's not surprising then that a slew of private companies are making the best of the liberalised road sector.
Of course, the bottlenecks call for attention. In 2002, the Delhi-Gurgaon Expressway was hailed as a successful PPP model. But six years later, the government ended up paying the operator thrice as much on account of delays even as lack of planning at the project stage, unanticipated design changes and land acquisition from multiple owners took their toll. In the case of GVK's Jaipur-Kishengarh road, the project had numerous encroachments and environmental clearance issues. The company had to relocate over 600 religious structures across the 90-km stretch.
