Study and indexing of PPP environment for infrastructure development among 30 Indian states

Abstract

India s rapid economic growth over the last decade has put tremendous stress on its limited infrastructure. Though it has one of the highest GDP growth rates in the world(average rate of 8% since 2002-03), it ranks 86th globally in terms of quality of overall infrastructure1. A close look at the available data on infrastructure clearly shows that India s infrastructure deficit is dragging down its growth potential. It requires an investment of $1 trillion over next 5 years to match with current infrastructure of China. Since government does not have resources and bandwidth to meet the requirement, there is a growing opinion that private investment through public private partnership (PPP) is the approach to scale up India s infrastructure. However, infrastructure development operates in a very complex environment as multiple factors - political, legislative, economic, regulatory, social, and technical -play a critical role in ensuring the success or failure of projects. Interestingly, as infrastructure projects have long gestation period, these factors keep changing and cannot be foreseen during conceptual and contract formation stage. It has led to failure of many PPP projects across emerging countries including Latin America and India and also raised questions on their governance mechanism. This is where the frameworks play a key role in managing the overall environment for PPP projects, similar to what a constitution does for a country. This paper has done extensive study on available literature and data (primary and secondary) on PPP and concludes that there is a strong need to think beyond project level model documents and funding methods. It establishes the need for strong institutional, legislative and policy frameworks which can take care of changing environment with changing times. Also, the paper studies existing institutional, legislative, policy frameworks, operational maturity and political-economic environment of all 30* Indian states(*including Delhi and Puducherry). In first of its kind of study, we have developed an India PPP Infra Index which compares the overall PPP environment across all Indian states and ranks them on 21indicators. Most of the studies in India have compared states only in terms of number or value of PPP projects. This paper has attempted to capture both qualitative and quantitative aspects of PPP across the states. Most critically, this paper puts the big picture of PPP environment with all elements on one canvas. The analysis has presented some very interesting results for example - few small states have better PPP environment compared to some large states. However, the research has not validated the environment in terms of implementation or effectiveness of these frameworks on ground. This study is based on the information available in the public domain through various primary and secondary data sources. From policy perspective, the paper proposes that governments need to think beyond piece meal approach for infrastructure development through PPP. It is very important to put in place systems and mechanisms which oversee planning, execution and delivery of the PPP projects. The complexity of infrastructure projects can be dealt only by putting appropriate frameworks and mechanisms in place.