Revamping the PPP framework

In both the railway budget and the general budget, the BJP-led NDA government has made it clear that Public Private Partnership (PPP) is the preferred mode for driving major infrastructure development projects. Finance Minister Arun Jaitley even announced the decision to set up an institution named 3P India with a corpus of Rs.500 crore, to provide support to mainstreaming PPPs. This ‘Triple-P’ mode was a common thread in Mr. Jaitley’s speech as he went through several proposed initiatives of the Modi government in sectors such as urban renewal, urban transportation, real estate, and even gas pipelines. Railway Minister D.V. Sadananda Gowda too held out the hope that major passenger and consumer initiatives such as development of railway stations, terminals, or even connectivity to ports could be taken up through the PPP route. To achieve the projected 8 per cent growth in GDP, infrastructure development is of critical importance, and this calls for huge doses of investment across sectors. Successive governments have tried to parcel major projects through this route. The greenfield airports, private ports and real estate projects have been some of the noteworthy instances on this front. But there has also been a chain of problems and allegations in the implementation of such projects, or in terms of the concessions offered to promoters in the private sector or to foreign investors.

No doubt, PPPs represent a valuable device to leverage scarce public funds with private funding to finance critical infrastructure projects. Prime Minister Narendra Modi has been a votary of the PPP model, and prides himself on including a fourth ‘P’ — ‘people’. This puts the focus on a major problem. If only the people of the area are taken on board in its planning, much of the opposition and hurdles will disappear. More often than not, land acquisition and compensation payable for it emerge as the biggest problems, invariably leading to public agitations or protest. Mr. Jaitley spoke of “the weaknesses of [the] PPP framework, the rigidities in contractual arrangements, the need to develop [a] more nuanced and sophisticated model of contracting and develop quick dispute redressal mechanisms.” The other side of the issue relates to user charges. These projects, notably those related to national highway development, are based on certain user projections. When the numbers do not add up on the ground, the investor becomes frustrated because the projected return on investment may not materialise. The government and its agencies must work on a new framework for PPPs to make them attractive to investors, and at the same time affordable to the users or consumers.

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Printable version | Apr 7, 2020 6:27:31 AM | https://www.thehindu.com/opinion/editorial/revamping-the-ppp-framework/article6221913.ece

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