Government’s new found love for private enterprises seems to be finally taking shape in the form of PPPs. No doubt, they are the only way forward for the Indian economy towards growth at present, but then, there are areas which need immediate attention, if the government doesn’t want to hit a road block, feels Niharika Patra
What can be more surprising to a person, who is visiting India after a long time, than a host of long and shimmering roads, swanky buildings and above all, a sudden increase in the quality of basic amenities provided by the government. After all, it’s a never-seen-before India for him!
All thanks to the government’s new found love for private business houses, an impressive combination of public projects and private money is finally making India a place to be. Though, one cannot disagree that the results have been few and far, but the good thing is that the whole concept of mixed economy is finally coming up with the combination, which is certainly making the idea click.
In fact, public-private partnership (PPP) is that one thing which can make India rub its shoulders with the dragon nation, when it comes to world-class infrastructure coupled with the much needed push for the Indian economy. Agrees M. Y. Reddy, Committee Head, Infrastructure, FICCI, “Applying PPP model to the infrastructure is what can give the sector the necessary boost that it wants as of now.”
Though the idea is not new for the Indian policy makers, PPPs have been utilised to a greater extent only during the last decade or so (and that have been mostly limited to roads, airports, ports, bridges, et al). However, the recent announcements made by Finance Minister, Pranab Mukherjee, to provide infrastructure sector the much needed push, through clearing of pending PPP projects, would surely open new doors, not only for the private sector, but will also make projects like that under National Highways Authority of India (NHAI, which requires 60 highways to be built across India with an upward investment of Rs.70,000 crore) get going once again.
Even steel, ports and the Railways have been waiting for long for some big programme implementations under PPP. In fact, a latest report by BNP Paribas shows that the Railways alone provides for an investment opportunity close to a whopping Rs.2.7 lakh crore in the next eight years. Of the whole corpus, an investment of Rs.68,000 crore is alone needed by the Dedicated Freight Corridor, which covers 2,800 kms of rail corridor across seven states of India.
But then, that’s not all. Poverty eradication and social reforms too are reaching ground levels and this is where the PPP model is eying for a big opportunity. In fact, Food Security Bill, which talks about providing grains to the poor at Rs.3, can do wonders coupled with a proper distribution system. For instance, the use of Smart Cards (for the distribution of food grains), the latest innovative step that allows the holder to check the status of their application and stock while facilitating easier and more transparent distribution of stocks, provides huge business opportunity to Smart Card producers, who have been eagerly waiting to tap the huge potential in the public sector. The initiative (which has already tasted success in National Health Insurance Scheme) can be seen as a win-win solution for both the government as well as private players. Avers S. Kumarswamy, Chairman, Agrochemicals Promotion Group, “Public distribution has been a problem not only for the BPL families, but also for the ingredient suppliers of fertilisers and seeds because of the rampant corruption.” Certainly, Smart Cards would to a great extent also help in removing that devastating loophole.
Education too, has seen PPPs mushrooming up. The latest plans of Education Minister Kapil Sibal to make vocational training more accessible indicate a bright future for PPP based ventures in up-gradation of ITIs. Till now 171 ITIs have already been identified by the government for upgradation under PPP basis. If implemented in a proper manner it has the potential to transform the education system in the country.
But then, PPPs don’t come without hiccups. While PPPs are proving to be a good means of turning out quality projects, there are long-term troubles attached to the model. The first and foremost is the time. While the tenders are given with a time-frame attached to them, the projects, most of the times, don’t end up on time. Raison d’être: the regulatory loopholes. Price too contributes heavily at times to such conflicts.
For instance, even with PPPs in line, power is one sector that has seen conflicts between the parties, both at the cost and price front. In fact, coming to a fair price agreement is the biggest hurdle in effective use of PPP model. “For augmenting investment, it is critically important to move from fixed rates to market determined rates,” agrees T. N. Thakur, Chairman, Power Trading Corporation.
Moreover, the number of PPPs on the social infrastructure front is also too small at present. In fact, it’s the current policy environment in the country that is discouraging private players from lending in their hands to the government for such projects. Further, wherever a PPP model exists, it’s mostly an Indian company doing the Tango with the government. The contribution from foreign players’ is almost missing.
“Decentralisation of power and quick decision making is what will make the PPP model click in India. Further, it’s important that empowered monitoring mechanisms are put in place so that all such projects are implemented in a time bound and phased manner,” Satish Bagrodia, President, PHDCCI tries to suggest a solution to the problem.
No doubt, in order to make the elephant dance, both private and public players have to dance together too. After all, it takes two to tango, they say! But then, the harmony somehow seems missing as of now and that is certainly not a good sign. If you don’t believe us, ask a dance instructor!
Niharika Patra
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2009
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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IIPM fights meltdown, places 2300 students By Education Mail Bureau
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What can be more surprising to a person, who is visiting India after a long time, than a host of long and shimmering roads, swanky buildings and above all, a sudden increase in the quality of basic amenities provided by the government. After all, it’s a never-seen-before India for him!
All thanks to the government’s new found love for private business houses, an impressive combination of public projects and private money is finally making India a place to be. Though, one cannot disagree that the results have been few and far, but the good thing is that the whole concept of mixed economy is finally coming up with the combination, which is certainly making the idea click.
In fact, public-private partnership (PPP) is that one thing which can make India rub its shoulders with the dragon nation, when it comes to world-class infrastructure coupled with the much needed push for the Indian economy. Agrees M. Y. Reddy, Committee Head, Infrastructure, FICCI, “Applying PPP model to the infrastructure is what can give the sector the necessary boost that it wants as of now.”
Though the idea is not new for the Indian policy makers, PPPs have been utilised to a greater extent only during the last decade or so (and that have been mostly limited to roads, airports, ports, bridges, et al). However, the recent announcements made by Finance Minister, Pranab Mukherjee, to provide infrastructure sector the much needed push, through clearing of pending PPP projects, would surely open new doors, not only for the private sector, but will also make projects like that under National Highways Authority of India (NHAI, which requires 60 highways to be built across India with an upward investment of Rs.70,000 crore) get going once again.
Even steel, ports and the Railways have been waiting for long for some big programme implementations under PPP. In fact, a latest report by BNP Paribas shows that the Railways alone provides for an investment opportunity close to a whopping Rs.2.7 lakh crore in the next eight years. Of the whole corpus, an investment of Rs.68,000 crore is alone needed by the Dedicated Freight Corridor, which covers 2,800 kms of rail corridor across seven states of India.
But then, that’s not all. Poverty eradication and social reforms too are reaching ground levels and this is where the PPP model is eying for a big opportunity. In fact, Food Security Bill, which talks about providing grains to the poor at Rs.3, can do wonders coupled with a proper distribution system. For instance, the use of Smart Cards (for the distribution of food grains), the latest innovative step that allows the holder to check the status of their application and stock while facilitating easier and more transparent distribution of stocks, provides huge business opportunity to Smart Card producers, who have been eagerly waiting to tap the huge potential in the public sector. The initiative (which has already tasted success in National Health Insurance Scheme) can be seen as a win-win solution for both the government as well as private players. Avers S. Kumarswamy, Chairman, Agrochemicals Promotion Group, “Public distribution has been a problem not only for the BPL families, but also for the ingredient suppliers of fertilisers and seeds because of the rampant corruption.” Certainly, Smart Cards would to a great extent also help in removing that devastating loophole.
Education too, has seen PPPs mushrooming up. The latest plans of Education Minister Kapil Sibal to make vocational training more accessible indicate a bright future for PPP based ventures in up-gradation of ITIs. Till now 171 ITIs have already been identified by the government for upgradation under PPP basis. If implemented in a proper manner it has the potential to transform the education system in the country.
But then, PPPs don’t come without hiccups. While PPPs are proving to be a good means of turning out quality projects, there are long-term troubles attached to the model. The first and foremost is the time. While the tenders are given with a time-frame attached to them, the projects, most of the times, don’t end up on time. Raison d’être: the regulatory loopholes. Price too contributes heavily at times to such conflicts.
For instance, even with PPPs in line, power is one sector that has seen conflicts between the parties, both at the cost and price front. In fact, coming to a fair price agreement is the biggest hurdle in effective use of PPP model. “For augmenting investment, it is critically important to move from fixed rates to market determined rates,” agrees T. N. Thakur, Chairman, Power Trading Corporation.
Moreover, the number of PPPs on the social infrastructure front is also too small at present. In fact, it’s the current policy environment in the country that is discouraging private players from lending in their hands to the government for such projects. Further, wherever a PPP model exists, it’s mostly an Indian company doing the Tango with the government. The contribution from foreign players’ is almost missing.
“Decentralisation of power and quick decision making is what will make the PPP model click in India. Further, it’s important that empowered monitoring mechanisms are put in place so that all such projects are implemented in a time bound and phased manner,” Satish Bagrodia, President, PHDCCI tries to suggest a solution to the problem.
No doubt, in order to make the elephant dance, both private and public players have to dance together too. After all, it takes two to tango, they say! But then, the harmony somehow seems missing as of now and that is certainly not a good sign. If you don’t believe us, ask a dance instructor!
Niharika Patra
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2009
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
1 lakh copies sold in less than 10 days of Arindam Chaudhuri’s “Discover The Diamond In you”
IIPM fights meltdown, places 2300 students By Education Mail Bureau
Delhi/ NCR B- Schools get better By Swati Sharma
Event at IIPM
Detail of all IIPM branches
IIPM set to beat economic slowdown
IIPM - Admission Procedure
IIPM, GURGAON
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