PPPs in India – gap between theory and practice

In India, PPPs are expected to mobilize about half of the US$ 1 trillion target for infrastructure investment by the end of the 2012-2017 Five Year Plan. The government has been actively promoting PPPs in many sectors of the economy and the report by Social Watch India presents a mixed picture. Many of the highway/road construction projects like Golden Quadrilateral and seaports like the Jawaharlal Nehru Port Trust (JNPT) have been deemed a success.

The report observes, however, that “many times PPPs are good in theory, but in practice… they have transmogrified into avenues for the realtors to become rich at the cost of the tax payers”. Some promoters who excelled at gold-plating projects 'persuaded' public sector banks to lend on questionable assumptions and collateral. These promoters took out their equity money in the construction phase and exited the project under various conditions. Given India's rank in 'enforcing contracts' of 178 out of 189 countries, this should cause little surprise, since PPPs are essentially contracts. The biggest losers have been Indian citizens. Public sector banks now have a pile of stressed loans, which can now be remedied only by recapitalization from the tax payer.

Source: India National Report 2017.