Do you think that PPP is the only way ahead for reviving Indian investments? While discussing the unique opportunities it offers, mention the challenges faced by PPP in India.

Mentors Comments:
1. Describe PPP briefly – either definition/ use case/ example based
2. Mention its benefits
3. Mention the challenges faced by PPP
4. Suggest way out – other alternatives for investment/ other models of PPP etc.

Answer:
India is witnessing a declining trend in the rate of gross fixed investment in recent years. It is crucial now that the government make policies to revive investments to boost the declining economic growth rate. Public-private partnerships are one of the crucial step in that direction. Public-private partnerships (PPP) involve collaboration between a government agency and a private- sector company that can be used to finance, build, and operate projects, such as public transportation networks, parks, and convention centers. Financing a project through a public-private partnership can allow a project to be completed sooner or make it a possibility in the first place.

Opportunities with PPP for better investment:
India has systematically rolled out a PPP program for the delivery of high-priority public utilities and infrastructure and, over the last decade, developed one of the largest PPP programs in the world.
With close to 1500 PPP projects in various stages of implementation, according to the World Bank, India is one of the leading countries in terms of readiness for PPPs. As per the 2015 Infrascope Report of the Economist Intelligence Unit, “Evaluating the environment for PPPs in Asia-Pacific 2014”, India ranks first in the world in “Operational Maturity” for PPP projects, third for sub-national PPP activity and fifth overall in terms of having an ideal environment for PPP projects.
Public-Private Partnerships (PPPs) in infrastructure provides for the creation of public asset and service by a private partner who has been conceded the right (the “Concession”) for the purpose, for a specified period of time, on the basis of market-determined revenue streams, that allows for a commercial return on investment.
PPPs in infrastructure represent a valuable instrument to speed up infrastructure development in India. This speeding up is urgently required for India to grow rapidly and generate a demographic dividend for itself and also to tap into the large pool of pension and institutional funds from aging populations in the developed countries.
India offers today, the world’s largest market for PPPs. It has as such accumulated a wealth of experience in getting to this premier position.

Challenges for PPP in reviving investment:
Better identification and allocation of risks between stakeholders (i.e the Govt., the Public, and the investors) is one of the major challenges in PPP projects.
The PPP route has been criticized for not meeting the supply-demand gap exactly in the infrastructure facilities.
Six key hurdles faced by PPPs projects are as follows: policy and regulatory gaps; inadequate availability of long-term finance; inadequate capacity in public institutions and public officials to manage PPP processes; inadequate capacity in the private sector-both developer/investor and technical manpower; inadequate shelf of bankable infrastructure projects that can be bid out to the private sector; and inadequate advocacy to create greater acceptance of PPPs by stakeholders.
The most important challenge for PPP projects, however, has emerged as delays in achieving commercial operation dates (COD) which lead to time and cost overruns. It has occurred partly due to land acquisition issues, willful default by promoters, irrational biddings, huge difference between project costs as approved by the Govt. and ones that are given to lenders.
On the land acquisition front, issues related to the huge difference between the registered value offered and the actual market value have been very disputing. Moreover, valuations are conducted on the basis of the current status of land, and the system does not capture the appreciation after the construction of the project.

PPP is one of the way but not the only way ahead for reviving Indian investments, i.e. it need to supplement the govt. efforts which faces fiscal constraints more often than not.
 The NITI Aayog in its document “Strategy for New India @ 75”;, targeted investment rates to 36 per cent by 2022-23 from 28 percent of 2017-2018.
 To raise the rate of investment (gross fixed capital formation as a share of GDP) slew of measures will be required to boost both private and public investment.
 Given the urgency of India’s demographic transition, and the experience India has already gathered in managing PPPs, the government must move the PPP model to the next level of maturity and sophistication.
 Genuine and transparent stakeholder consultation at the project and contract design stage with an open pragmatic approach would naturally help. Inadequate risk mitigation and faulty design may well be the major cause of the default by IL&FS which has been the leading investor in PPP projects.
 In addition to changing mindsets, there is an urgent need to rebuild India’s PPP capacities. Structured capacity building programmes for different stakeholders including implementing agencies and customized programmes for banks and financial institutions and the private sector need to be evolved.
 The maturing the PPP model in India is an urgent priority also to take advantage of this historical conjunction of India’s infrastructure needs and the availability of long-term funding.
 Besides the basic problems for provision of adequate infrastructure, the middle-income trap is also to be averted. Without adequate infrastructure, this will simply not be possible. 
 PPPs in infrastructure represent a valuable instrument to speed up infrastructure development in India. This speeding up is urgently required for India to grow rapidly and generate a demographic dividend for itself and also to tap into the large pool of pension and institutional funds from aging populations in the developed countries.

PPPs are an important policy instrument that will enable India to compress time in it’s journey towards economic growth and development. A successful and growing stream of PPPs in infrastructure will go a long way in accelerating the country’s development process. The potential for additional investment in PPP is therefore enormous. The challenge only lies in having the ambition and pragmatism to actually get large projects going with private investment.

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Kunal Aggarwal
3 years ago

Q3

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sourav singh
sourav singh
3 years ago

Q4 Not checked

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Wasim
Wasim
3 years ago

Pls check

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Murari Jha
Murari Jha
3 years ago

q3
MOJO9731E00D34250209

project _osiris
project _osiris
3 years ago

3

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sahithya kasiraju
sahithya kasiraju
3 years ago

Payment ID: MOJO9802W00A98715356
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