The figures show a remarkable tectonic shift in the capital-outlay geo-plates from zero private involvement of the private sector in the nation's utilities in the early nineties to a whopping 37 per cent by 2012. The momentum had built up to an extent that planners could confidently project a 48 per cent share of PPP in the period 2012-17 (the erstwhile 12th Plan) and hope to swing in almost $500 billion of domestic and foreign capital.
A huge amount of capacity-building at the Centre and states had enabled this to happen. This traversed a vast space comprising fresh legislation, new institutions, innovative financing mechanisms and varied concessioning formats.
But just as impressively as PPP version 1.0 soared, Icarus-like, it plummeted to earth. By 2013, the fall of Indian PPP was the subject matter for editorial obituaries.
The World Bank's PPP Group had this to say about PPPs in 2013: "The decline in (global) PPI (private participation in infrastructure) volume was mainly due a fall in PPI in the two largest countries, India and Brazil. In the case of Brazil, the drop in volume was cyclical, but in the case of India, the decline was 68 per cent below its five year average. India, which has experienced record levels of PPI in the last five years, had the lowest investment level since 2005, falling by 60 per cent to $13.5 billion. This was 68 per cent below $42.3 billion, the five year average (2008-2012). There does not appear to be a single factor to account for India's slowdown in PPI after its peak in 2010. There are many indications that this slowdown could continue in the longer term."
A huge amount of capacity-building at the Centre and states had enabled this to happen. This traversed a vast space comprising fresh legislation, new institutions, innovative financing mechanisms and varied concessioning formats.
But just as impressively as PPP version 1.0 soared, Icarus-like, it plummeted to earth. By 2013, the fall of Indian PPP was the subject matter for editorial obituaries.
The World Bank's PPP Group had this to say about PPPs in 2013: "The decline in (global) PPI (private participation in infrastructure) volume was mainly due a fall in PPI in the two largest countries, India and Brazil. In the case of Brazil, the drop in volume was cyclical, but in the case of India, the decline was 68 per cent below its five year average. India, which has experienced record levels of PPI in the last five years, had the lowest investment level since 2005, falling by 60 per cent to $13.5 billion. This was 68 per cent below $42.3 billion, the five year average (2008-2012). There does not appear to be a single factor to account for India's slowdown in PPI after its peak in 2010. There are many indications that this slowdown could continue in the longer term."
But all this has to do with the past.
Here are six key efforts that should go towards shaping PPP version 2.0.
(i) Get "3P India" up and moving: The "3P India" initiative was announced by Finance Minister Arun Jaitley in his first Budget speech. Even after the second Budget, nothing appears to have moved in getting this institution off the ground. Eagerly anticipated and welcomed, the Rs 500 crore allocated for it can be impactful if used creatively to shape a world-class institution to play the pivotal role in resetting the PPP playing-field.
(ii) Reset risk allocation: There is, thankfully, unambiguous recognition for this reset requirement. Already, the Ministry of Road Transport and Highways has announced the hybrid annuity model, which removes traffic and tolling risks from the private concessionnaire's purview. PPPs in the railways are being given shape to provide 'minimum traffic guarantee', and after much prevarication, the new UMPP (ultra mega power project) bidding formats are expected to be more sensitive to the private sector's points of view.
(iii) Create truly independent regulators: The 'independent regulation' horse has to come before the PPP cart. Otherwise, the government might as well write off any confidence-inspiring measures. Much homework has been done and tomes of draft legislation available on how to empower a new breed of truly "independent" regulators. The latest Budget speech announced a 'regulatory reform law'.
(iv) Create a renegotiation commission: Credible and transparent renegotiation is part and parcel of the long PPP journey. The chief economic advisor, in this year's Economic Survey, has suggested that the government should examine the idea of setting up an "independent renegotiation commission for PPPs."
(v) Move funding away from commercial banks: A welcoming and attractive regime will have to be carefully crafted for the full spectrum of long-term debt and equity instruments including pension and insurance funds, as well as REITs, and InvesTrust structures.
(vi) Do not bid out projects without all pre-clearances in place: "Plug and play" has now become a fashion statement. It must step down from the media ramp into the harsh reality of not allowing any statal entity to bid out any project to private investors unless all major central and state clearances are first obtained.
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