Why the public-private partnership model has failed in India

Feb 08, 2013, 08:00 IST | Arindam Chaudhari

Indian policymakers had been daydreaming all along that the public-private partnership (PPP) model could solve all the infrastructural deficiencies of India

Arindam ChaudhariIndian policymakers had been daydreaming all along that the public-private partnership (PPP) model could solve all the infrastructural deficiencies of India. In reality, the resounding thrust on PPP has backfired and has even choked the prospects of this model.

Against India’s poor infrastructural backdrop, PPP had been exponentially scaled up in the last 10 years under a blind faith that it would produce nothing short of a miracle. Private participation has been consequently rising in PPPs in sync with government’s mission and policy. In the 11th Five Year Plan for example, the government’s estimation of investment on the country’s infrastructure between 2007 and 2012 was pegged at $320 billion.

In this context, World Bank had earlier assessed that as much as 20 per cent of this could be sourced through PPPs. Astonishingly, the figure rose to 37 per cent with the major contribution coming in the telecom sector. All this seems good; but then, a deeper scrutiny reveals how PPP projects are getting stalled and delayed. The inherent curse of red-tapism and power struggle between different agencies as well as between the private sector and government are looming threats for the PPP model. Add to this, the inevitable scenario of corruption and resultant artificial price hike of the resources that are gradually making PPP an unviable business model.

The Delhi-Gurgaon Expressway was a victim of mammoth red-tapism where the lack of coordination of more than 15 civic bodies. The stalled/delayed/off-track PPP projects list is a long one and ever expanding. Most of the operators jumped on to the PPP bandwagon due to cheaper inputs like energy and fuel. But then, they have later found the entire project financially unviable due to delays in land acquisition and other bureaucratic clearances issues that have skyrocketed costs in various PPP projects to levels that have negated the advantage of all subsidised inputs!

However, the problems perhaps don’t lie with the dynamics of the model but more to do with the dynamics of India’s political and economic settings. For instance, in China, the consequent results of the PPP model are quite efficient and profitable. China’s efficient bureaucracy, fewer corruption cases, zero or minimal red tape and cheap resources make them a benchmark case study for understanding PPP projects.

The bottom-line is that China provides clean, hassle-free, uncomplicated, and prompt governance. These clearly cannot be expected in India, the epitome of corruption. In such a scenario, the Build-Operate-Transfer (BOT) model that the Delhi Metro has followed is perhaps the only way to ensure sustainable standards and quality over the long run in India.

The State must singularly start building most of the projects as they do in China; and later, they should auction the same to private players for efficient management and service delivery, the way they do in the US. In summary, if we really need the model to work, then India has to internalise lessons from both America and China in implementing the same this is the only magic that can make the Indian version of PPP work!

The author is a Management Guru and honorary Director of IIPM Think tank 

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