“People first” PPP for Sustainable Development in India: A new beginning

Author – Surabhi Nagi

Given the current low growth high inflation scenario of the Indian economy, there is little hope that the financial situation can be flipped being completely reliant on the government. Poor economic management coupled with inadequate polices from the government have been the central issues leading India to the vicious cycle of low growth. The country that was projected to grow at 7% reported the GDP growth rate slump to 5.7%. There is a dire need for investments both in core as well as social sector infrastructure to foster employment vis a vis boosting the GDP post GST and demonetization blues. The NDA government at the center is gung ho after the credit rating increase by Moody and a status quo with a positive outlook by S&P. Though, it would boost the confidence of the domestic and foreign investors, it is the need of the hour that both the government and the private players come together to foster new investments to augment the productivity. Productivity enhancing structural reforms that auger well with both the private as well as the public sectors need to prioritized.

According to the Sustainable Development Goals of the Agenda-2030, the UN estimates that there is a need to invest $110trillion in infrastructure and if it was to be green infrastructure, the amount goes up to $115 trillion. The amount currently available with the institutions like the world bank is far less than the amount that would be required to finance these infrastructural investments. Thus delivering of services via optimum use of existing resisting resources coupled with new technological advancements becomes a lot more essential.

Inculcating the PPP model of growth can very well come handy in such situations. Termed as the new catalyst for economic growth, the partnerships in true sense, can aid the governments operating at razor thin budgets especially in a country like India. Faced with steep growth rate of urbanization and resource constraints, it seems a viable option to move forward with. The public private partnerships in such situations can help bring in ahead of the curve technologies and augment competition that shall further help elevating the economic growth. PPPs usually being long term contracts, aid employment, bring capital into the economy, generate competition which further bring in more private players, increasing the purchasing power and thus leading the nation on the path of economic growth.

PPPs in the past have been proved successful in terms of bringing in capital, expert manpower, elevating operational efficiencies and substantially reducing costs and management inefficiencies. One of the very first PPP based infrastructure projects Delhi-Noida-Delhi (DND) Flyway way back in 2001 had proved extremely successful in saving the time, distance and fuel cost for delhites travelling to Noida and vice versa. The flyway busted the myth of prohibiting private participation in providing public infrastructural services. Realizing the potential perks of private participation, of late many PPP projects have come up in both social and core infrastructures. Ports, roads and highways, aviation, railways, urban infrastructure, health, water & sanitation – no sector is left untouched by the private sector.

Considering the ports sector in India, the need to improve the container handling and cargo productivity was felt tremendously which led to the government entering into partnerships with the private sector.  As of December 2016, 122 ports were under the public private partnership with the government further raising the curtains for private investments by allowing 100% FDI, income tax incentives and standardization of the bidding documents.

Source – CIRC, pppindia

Till May 2017, 783 projects related to roads & highways were built by the government of India in partnership with the private sector. Indicating the large number of projects undertaken via such partnership, projects worth a total of Rs. 5,194,851.53 crores have been completed or awarded to the private sector according to the data by Ministry of Finance.  Projects with sky rocketing investments have been made possible not just by the interests of the private parties but majorly via the alternative financing support schemes from the government like VGF (Viability Gap Funding).

Notwithstanding the positive gains, PPPs have its share of negativity too. It is often alleged that it’s a channel to socialize cost and privatize gains. This is largely because of the structure of PPP which have “Value for Money” as one of the major objective at its core. It is seen as benefitting the private party at the cost of social and environmental structure. This is largely because of exclusion of a major stakeholder (End user)  in the Project value chain. The lack of proper messaging and awareness drive aggravate the situation further as there is no buy in from the community and affected people from the project.

Thus it is high time to include another “P” which is “People” to all PPP projects and that to giving it the first preference. This is also now being recognized by the UN SDG 2030 agenda. The core objective of Value for Money is now being replaced with Value for People. It should be transformational, inclusive and integrated to sustainable development goals. Thus it is high time, government tweaks its PPP policy to make it more People oriented and at the same time incentivize adequately private partners to bring in more investment. The unlocking of private capital would help government free up more capital for budgetary provision to the social sector projects, thus creating a win-win situation for all stakeholders..