Global Economy

View: Getting 'Public Private Partnership' model right is not easy

The PPP (public private partnership) movement in Indian infrastructure started in 1996 when an expert group on the commercialisation of infra projects, chaired by Dr Rakesh Mohan, submitted a groundbreaking report advocating the involvement of private capital. Even at that time, the report stressed the need for different risks in a project to be “clearly demarcated and allocated to different stakeholders”. This was a prescient warning by the committee but, sadly, successive governments paid little heed to it.

Following this report, 1997-98 onwards saw a whole set of PPP activities coming together. These included the setting up of the Infrastructure Development Finance Corporation, Telecom Regulatory Authority of India, Tariff Authority for Major Ports, electricity regulators, the National Highways Authority of India and the involved tutelage of the Planning Commission.

In fact, the share of private capital in infra investments moved up from 22% in the 10th Plan period (2002-07) to 37% in the 11th Plan (2007-12), with aspirations to raise it to 48%, had there been a 12th Plan. In recent times, it has been stagnating at around Rs 3 trillion per annum, less than 20% of total investments. Why PPP started dipping from 2012 has been thoroughly analysed. By the time the NDA government came to power in 2014, they saw a devastated PPP playing field. The then FM Arun Jaitley’s maiden budget in July 2014 proposed the setting up of an institution called “3P India” with a Rs 500 crore allocation to resolve complex PPP issues. A committee headed by former finance secretary Vijay Kelkar submitted its report, “Revisiting and Revitalising PPP Model of Infrastructure Development”, on November 19, 2015, and endorsed the setting up of 3P India.

Now, PPP is back in the reckoning. 100% of the National Monetisation Pipeline target of Rs 6 trillion and 40% of the National Infrastructure Pipeline target of Rs 111 trillion is expected to be funded under PPP formats. That targets about Rs 50 trillion of private capital over the next five years.

It is certainly a challenge. Getting PPP models right is never easy. In 2021, Britain announced the “renationalisation” of the British Rail after a 25-year run on what was believed to be an iconic PPP initiative.

Indian Railways, too, has been struggling with getting PPP initiatives off the ground.

It has to be recognised, though, that in sectors like telecom, ports, airports, electricity transmission and renewable energy, PPPs have continued to deliver, overcoming many adversities on the way.

In her budget speech on February 1, 2022, Finance Minister Nirmala Sitharaman emphasised capacity-building measures. Following this up, in July, the finance ministry announced the setting-up of the Infrastructure Finance Secretariat, which is expected to play a definitive role in the revival of the PPP ecosystem.

Under the current mantra of public funds to build greenfield projects, and private capital to ‘monetise’ brownfield operating assets, PPP may well see a revival in a modified avatar.


This website uses cookies. By continuing to use this site, you accept our use of cookies.