Can PPP help cash-starved governments in boosting infrastructure?

Global Procurement Summit 2021 organized by All India Management Association with support of Ministry of Finance, Government of India, the World Bank and the Asian Development Bank gave platform for discussion and exchange of ideas between senior officials engaged in public procurement at central and state public entities and the key bidding communities represented by manufacturers, suppliers, contractors and consultants. The key objective of the summit was to discuss Procurement as Enabler for COVID 19 Emergency response and come out with recommendations for the way forward.

One of the plenary sessions of the summit on “Can  PPP  help  cash- starved governments in boosting  infrastructure?” chaired by Mr. Baldeo Purushartha, Joint Secretary (Infrastructure  Policy and  Finance), Department of Economic Affairs, Ministry of Finance, Government of India. The speakers for this session included Mr. Maurice Diamond, PPP Expert, IPATS London, Mr. Vikash Sharda, Partner, Infranomics Consulting LLP and Mr. Amandeep Singh Virk, PPP Expert.

Mr. Purushartha started the session by establishing the   importance   of   infrastructure    development for growth of the country in a sustained manner. He emphasized on the need of an investment of around USD 1.4 trillion over the next five years on infrastructure to accomplish a GDP of USD 5 trillion and elaborated on the importance of PPPs in fulfilling the investment requirements. He was pleased  to report  India’s ranking among  other  country  in the world  in terms  of readiness,  operational  maturity and having an ideal environment for executing high- valued PPP programs.

Mr. Purushartha further elaborated on the measures taken by the Government of India for encouraging investments in the Infrastructure Sector through announcement of National Infrastructure Pipeline (NIP). He mentioned that Government of India is making attempts for increasing the share of NIP projects to be executed in PPP mode from around 20% to nearly 40%. He also indicated  that the Government   of  India  has  revamped   its  Viability Gap Funding (VGF) scheme for providing enhanced support  of upto  60-80% of the Capex and in some case upto  50% of the Opex for first five years after Commercial Operations  Date  (COD) to  encourage private sector participation in development of social infrastructure (Health, Education, Waste Water, Solid Waste Management, Water Supply, etc.).

Mr  Baldeo Purushartha,  Joint   Secretary   (Infrastructure   Policy  &  Finance),   DEA,  Ministry of  Finance,  Government   of  India; Mr Maurice Diamond, PPP Expert,  IPATS, London; Mr Vikash Kumar Sharda, Partner, Infranomics Consulting LLP and Mr mandeep Singh Virk, PPP Expert,  India

Followed by the chairperson, the next speaker, Mr. Maurice Diamond, presented his views on the key factors that should be considered   for executing a   successful   PPP endeavor.   He elaborated on the notion of cash strapped governments and explained that a cash strapped government does not necessarily mean lack of budgetary availability rather it can also be due to absence of enabling legislation,     streamlined     procurement    process and decision making. He emphasized on the challenge  that  various Government  face in striking a balance between speed  of getting  money into economy   and   meeting    sustainability   objectives and  balancing   the  long-term   economic   benefits of infrastructure  investment with immediate  need to spend on healthcare, employee  and business support.  In closing remarks, Mr.  Maurice stressed on the importance of having a clear understanding about PPP at the planning stage itself and defining sustainable long-term goals for driving a successful PPP programme.

The next speaker of the session, Mr. Vikash Sharda talked about evolution of PPP in Transport and Water Sector in India. The presentation encapsulated the evolution of PPP in these sectors, its performance, major impediments in its success and suggestions for improving the PPP landscape in the country. While reflecting on the advancements of PPP in Transport sector, Mr.  Vikash  highlighted   that   adoption  of PPPs in State Highways continue  to remain low due to creditworthiness issue of counterparty, fiscal health  of some  states  and  lack of PPP capacity at authority level. He also mentioned that speculations made in traffic projections, delays in appointment of Independent Engineers and challenges in post award contract management of PPP projects are some of the key issues that limit greater participation of private sector.

Mr. Vikash stressed on the need to enable long term funding  for private  sector  (including  tax  benefits for secondary  market  transactions)  and  better project preparedness for boosting  private sector investment in development of transport  related infrastructure  in the country. He further mentioned that developing an effective communication & risk management strategy   and creating   an enabling policy environment by establishing a clearly defined tariff and metering policy prior in the bidding process would be beneficial in effective implementation of PPP in Water Projects.

The  first session  of the  second  day ended  with a presentation from the  last speaker  for the  session, Mr. Amandeep Singh Virk, sharing his enriched experience   of  executing   PPP  projects   in  Africa. He also shared  his views on how PPP can help low income  countries  and  some  misconceptions and interventions that  should be handled  with care for successful  implementation  of  a  PPP programme. In his presentation, Mr. Amandeep mentioned various advantages of PPP which included providing financial flexibility, no need for short term budgetary resource allocation, transparency and accountability, transfer of risk, etc. He also raised a very crucial point that failure of implementing PPPs in a certain region (which  may  be  due  to  in-adequate  preparation during  the  planning  stage), pertains  a high risk of losing market’s trust for investing in any such future model.

Mr. Amandeep also shared some recommendations on what a cash strapped country do for successful implementation of PPPs. These included interventions like roping in Multilateral Development Banks and commencing implementation of small/ medium size pilot projects for achieving initial success rather than executing an ill-prepared high valued programme that would result in failure. In conclusion, Mr. Amandeep stated that good governance is critical factor for success of PPPs.

Finally, some queries raised by attendees were answered by Mr. Baldeo Purushartha, Joint Secretary (Infrastructure Policy and Finance), Department of Economic Affairs, Ministry of Finance, Government of India along with other panelist.