Is PPP the Future of Infrastructure Development in India?

Is PPP the Future of Infrastructure Development in India?

PPP or Public-Private-Partnership is a unique concept which involves coming together of public and private sector with a purpose to develop public assets or for provision of public services. It is an elaborate arrangement between a state body and a privately owned entity which serves to promote private capital investment in public projects, especially those connected with infrastructure development. The agreement also includes sharing of assets and skills between state and privately owned bodies to be able to achieve the best possible outcome. The private entity receives performance linked payments based on a specific set of criteria.

A basic feature of any PPP scheme is that the project under consideration is usually a high priority one and is well-planned by the government. Another essential aspect is that both the sides assume some amount of risk and mutual value for the project. Some of the infrastructure projects usually covered under PPP model include building of highways, ports, airports, developing railways infrastructure, telecom facilities, power generation projects, sanitation, water and waste management projects.

In India, the PPP model was introduced by UPA Government at the Centre for developing some of the major facilities including airports and metros. The model worked well in some cases but in some others, there arose a number of issues which could not be addressed properly. Considering the infrastructural growth needed to drive the economy further, the newly formed NDA Government has also come up with a number of proposals in the current Union Budget in which PPP model would be implemented to help achieve better and faster results.

Finance Minister laid stress that with more than 900 infrastructure projects are underway in the country, PPP model holds great potential for us but we must work to remove the inefficiencies in its implementation and develop a responsive dispute redressal mechanism. To this end, he announced the setting up of an exclusive institution called 3P India with a budget allocation of Rs 500 crore which would be responsible for resolving any disputes and issues arising in the planning and implementation of Public-Private-Partnership model.

There are several areas in which the government is looking forward to implement this model including high-end metro projects, rural and urban development projects. The main issues faced with proper implementation of this model is that infrastructure projects are usually long-term ones and a number of factors including cost of materials, policies and even economic conditions can change while the project is underway. If the initiative to set up a sophisticated mechanism for resolving such issues in implementation of PPP model is successful, it can attract big investments from private sector and lead to fast-paced development of infrastructure.