topic 53
public-private partnerships
The state of infrastructure in India has been a source of concern for local and foreign investors interested in tapping its potential as a business destination.
Perceptions about Indian infrastructure are reflected in infrastructure rating
comparisons drawn with Brazil and China, which indicate that India has someway to go on infrastructure development before it can match its peers. Mutually beneficial relationships between the public and private sectors - are an effective way to bridge gaps between demand and resources, quality and accessibility, and risk and benefit. The ability to share risk, tap external financial resources, and profit from private-sector investments and intellectual capital, gives public-sector policymakers greater flexibility in allocating both human and financial resources.
The creation of world class infrastructure would require large investments in addressing the deficit in quality and quantity. Therefore, it is necessary to explore
the scope for plugging this deficit through Public Private Partnerships (PPPs) in all areas of infrastructure like roads, ports, energy, etc.
Recently, legal and regulatory changes have been made to enable PPPs in the infrastructure sector, across power, transport, and urban infrastructure.
For example, the Electricity Act allowed for private sector participation in the distribution of electricity in specified area(s) of the distribution licensees under the role of a "franchisee". The recognition of the franchisee role is a significant step towards fostering PPP in the distribution of electricity.
In some cases, the impact of private sector involvement in terms of end-user benefits has been felt almost immediately. A case in point is the initial Build-Operate-Transfer (BOT)experience at Jawaharlal Nehru Port, where the Minimum Guaranteed Traffic requirement at the end of 15 years, identified as part of the concession agreement, was met in just 2 years. The experiment is being replicated across other major ports as well.
Though the PPP model has gained significant importance in the country, there is a need to refine and evolve it further to make it a successful proposition. The key issue that must be addressed is an approach to satisfy the conflicting interests of multiple stakeholders (governments, private players, users, financial institutions, etc.).
Countries with a large number of PPP projects generally enjoy better infrastructure. This means a higher standard of living, better prices, and elevated levels of productivity.
PPPs offer more choice and modern services. Private investors have the capital to invest in specialized training, resources, and technology, enabling them to offer more choice in terms of service provision