Tuesday, October 11, 2011

Public Private Partnerships (PPP) in India

The most significant criteria for a continued growth rate of an economy is rests on the provision of a quality infrastructure. According to the Planning Commission, an approximation of 8 percent of the Gross Domestic Product or GDP needs to be invested. This would help in acquiring a prospective economy as stated in the 11th Five Year Plan. Fund investment of over US $ 494 billion has been conceived of according to the 11th Five Year Plan with effective from 2007 to 2012. The investment sectors under consideration are inclusive of telecommunications, electric power, water transport, road, rail, air, water supply as well as irrigation amounts to about Rs. 20,27,169 crore according to 2006-07 prices.

In order to meet such demands, various Public Private Partnerships or PPPs are being promoted for implementation of infrastructure projects. PPP is often described as a private business investment where 2 parties comprising government as well as a private sector undertaking form a partnership. The deficit can be overcome by ensuring much more private capital investment. Expert guidance is the only way out for enabling efficiency through subsequent reduction in cost.

Promotion of PPP is therefore necessary since its the most preferred mode. Despite of its benefits, there are some constraints too which can be summarized as:
  • Sufficient instruments as well as the ability to undertake long-term equity cannot be provided by the market in the present financial scenario. Also financial liability required by infrastructure projects would not be sufficed.
  • Most sectors face a lot of hindrance in enabling a regulatory framework as well as a consolidated policy. So its important to convert such policies into PPP friendly. To achieve the desires results, active participation of various state projects are essential.
  • Lack of ability of private sectors to fit into the risk of investing in diversified projects also needs to be overcome. Modernization of new airports, transmission systems and building power generating plants are some of the avenues which required skilled manpower.
  • Ability of public institutions to manage the PPP process should also be subdued. Maximizing the return of the stakeholders needs to be managed due to the involvement of long term deals including the life cycle of the asset infrastructure.
  • Lack of credibility of bankable infrastructure projects used for financing the private sector should also be overcome. Inconsistency is still visible in the limitations of PPP projects, despite of continued initiatives by States and Central ministries.
  • Inadequate support to enable greater acceptance of PPPs by the stakeholders forms another source of constraint.
Several initiatives have been undertaken by Government of India to enable a greater PPP framework in order to eradicate the above mentioned constraints. Various foreign as well as private investments by waving off charges are encouraged. Framing of standardized contractual documents for laying down the terminologies related to risks, liabilities and performance standards have been devised. Approval schemes for PPPs in the central sector has been streamlined through Public Private Partnership Appraisal Committee or PPPAC. A website has been launched for the purpose of virtual PPP market serves as an online database for PPP projects.


PPPs can only be mainstreamed by continuous response to the varying goal of people and economy in general. The boundary domains of PPPs should be increased in order to prosper the infrastructure development of India.

No comments:

Post a Comment