Indian Infrastructure Role of Private Sector Investment

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Indian Infrastructure: Role

of Private Sector

Investment

Submitted By:Rohit Kumar Meena, B.Tech II year,

Civil EnggC5 Batch, 09113077

Indian Institute of Technology RoorkeeRoorkee

November 2010



ACKNOWLEGEMENT

It took the knowledge and guidance of many people to completethis report satisfactorily, but we would like to express our mostsincere gratitude to Mr. Nalin Negi, Humanities and Social ScienceDepartment, IIT Roorkee for not only providing a constantguidance and encouragement but for giving us his valuable timewhen it really mattered a lot.



1. IntroductionThe role of infrastructure in economic development can hardly be over emphasized..Investment in infrastructure is not only essential for sustained growth but also foremployment generation. The advanced economies of the US, of Europe and of Japan,all developed their infrastructure first. Closer home, the Southeast Asian countries &China have done the same thing. Infrastructure is a sector with colossal potential.According to the Economic Survey 2005-2006, India has the potential to absorb US$150 billion of foreign direct investment in the next five years in the infrastructure sectoralone. Good infrastructure is not something that flows out of economic progress, but

rather something that comes before it. The following components of infrastructure aredealt with in this report:

a) Transportation services —road, railways, ports and civil aviation,b) Telecommunications,c) Power,d) Water supply

In the post-liberalization era, the private sector, either by it self or in partnership withgovernment, has been playing an important role in infrastructure development.Government is now focusing on creating an enabling regulatory and policyenvironment.

2. An Overview of India’s Present State of Infrastructure

The India growth story has now become a best seller the world over. The BRICs Reportby Goldman Sachs, the AT Kearney's FDI Confidence Index 2004, and the specialedition of the New Scientist magazine, all talk of India as the next knowledge



superpower. The Indian economy is among the fastest growing economies in the worldand the average GDP growth in the last ten years has been almost 7%. Today we have acomfortable foreign exchange reserve of over 140 billion dollars. Our exports, which willcross 75 billion dollars this year, have been growing at over 25% compared to last year,despite a strengthening rupee. But if we have to sustain this rosy picture we must pay

more than lip service to infrastructure. Inadequacies in physical infrastructure canseverely constrain economic growth and, in fact, take us backwards.In any economic comparison between the emerging Asian superpowers of India andChina, the most easily identifiable fault with India is its comparatively poor quality of physical infrastructure. The reason is that we just do not spend enough on it. Accordingto a Morgan Stanley research, China spent $260 billion or 20% of its GDP on power,construction, transportation, telecommunication and real estate in 2002 whereas Indiaspent just $31 billion or 6% of its GDP. Figure illustrates this wide gap.

Source-yusuf and winters 2003

Also, the cost of most infrastructure services in India runs about 50-100% higher thanChina. The electricity sector is India's biggest infrastructure bottleneck. The result is anannual growth rate of around 6%, which is quite below its true potential. According toMorgan Stanley, freight as a percentage of total import value is about 11% in India,compared with a 6% global average and 5% for developed countries. There is also ahigher lead-time for trade, six to twelve weeks for India's trade with the US, comparedwith China's two to three weeks. India’s infrastructure -deficient environment has not

been conducive to the growth of manufacturing exports that integrate into global valuechains as is visible in figure.



Source- yusuf and winters 2003

A World Bank report issued almost three years ago said, "The shortage of power isestimated at about 10% of the total electrical energy and roughly 20% of peak capacityrequirement." Fifty years after independence, many rural areas in India still have noelectricity. Even measured against neighboring countries, India's per capita electricityconsumption is very low - 270 kilowatt hours/year as compared to 300 for Pakistan and480 for China.

Source- yusuf and winters 2003

The telecom sector witnessed a sharp decline in telecom tariff particularly in theMobile, National Long Distance and International Long Distance segments. New cellphone connections grew by 20.8 per cent in April – December 2004-05 as comparedto13.1 percent growth in the same period of the previous year. Notwithstanding thespectacular growth in the telecom sector, tele-density continues to be less than 10(Table), and to reach the tele-density level of 25 by 2007, the sector needs investment20 billion dollars.



Economic survey 2004-05

The revenue earning freight traffic of 438.36 million tonnes carried by the railways inApril-December, 2004-05 was 2.4 per cent above the target of 428.19 million tonnesand 7.7 per cent over the traffic achieved in the corresponding period of the previousyear. But railways are the worst offender both in terms of time and cost over-runs.Almost 35% of the total projects affected are in this sector. The Nangal Dam-Talwara113-km new line rail project in Punjab and Himachal Pradesh was approved in March1981 at a cost of Rs 37.68 crore. Only 43 per cent of the project has been completed andis now anticipated to have a ten-fold increase in the final cost.Road projects initiated under the National Highway Development Programme(NHDP)around 2000, face a maximum time over run of only five years (or 60 months) but stillhave the largest number of projects (86 out of 269) that are running behind schedule.The water supply infrastructure of the country also reels under inefficiency. Forinstance, virtually no single city or utility in India has the capacity to manage acomprehensive program to reduce leakages or lost revenues. A number of utilitiescontinue to lose close to 50% of their water to leaky pipes, illegal connections andunbilled or unpaid for water. Not only is the water itself wasted, so is the energyrequired to treat and pump the water. India’s urban poor currently pay up to ten timesmore per liter of water from unregulated private water vendors than their morefortunate neighbours do from the public utility, and often this higher priced water isunclean.

Growth has accelerated in spite of acute infrastructural deficiencies in power, roads,water supply, etc. If this is what industry can achieve with such handicaps, the heights itcan reach with optimum infrastructure need not be a distant dream.



3. Demerits of Public Ownership of InfrastructuralEnterprises

Governments generally play the dual role of ownership as well as regulation of

infrastructural enterprises. Combining production and regulatory roles involves aninherent conflict of interest. Experience shows that this conflict, coupled with politicalinterference, protection from competition, and weak accountability, often leads publicenterprises to have dismal productivity.Public ownership has the potential to weaken the investment climate in four mainways:

1) When public enterprises are responsible for providing inputs relied on by privatefirms (such as power, telecommunications, or finance), weaknesses in theirproductivity and incentives can contribute to higher costs and less reliableservice, to the detriment of firms (and other consumers) dependent on thoseinputs.

2) Public ownership can increase demands for corrupt payments, because publicmanagers usually have weaker incentives to reduce leakage and graft. Forexample, firms in transition economies are more likely to have to pay bribes toget telecommunications and electricity services when they are provided bypublic enterprises. Employees of state-owned power companies in South Asiahave developed a highly organized system to extract bribe payments fromcustomers. The result can be higher costs for firms and reduced revenues for thepublic enterprise, reducing public investment or increasing the burden ontaxpayers.

3) When public enterprises are granted a monopoly, opportunities are denied toother firms. Even when competition is permitted between public enterprisesand private firms, it is notoriously difficult to create a level playing field. Theproblems are especially acute when the public enterprise has a regulatory role,because it will get incentives by using that role to advance its interests overthose of competitors .Even when such obvious conflicts of interest have beenaddressed by moving regulatory responsibility to a more independent body,pressures to favour the interests of public enterprises can continue. Publicenterprises often also enjoy a range of exemptions from taxes and otherregulations that can also distort competition.

4) Public enterprises in developing countries also have a poor record in meeting

regulatory requirements. E.g. state-owned pulp and paper plants in Bangladesh,India, Indonesia, and Thailand have poor pollution control than similar privatefirms.

4. Emerging Role of Private Investment



World-class infrastructure creates an enabling environment for growth. For achievingconsistently high growth rates, a concentrated assault on infrastructure deficiencies isvital. Given the limited resources at the disposal of governments, the emergence of private sector is seen as a sustainable means of bridging the infrastructure gap. Privateenterprise is the engine for sustainable job creation and the dominant source of jobs

worldwide. In 2003 the private sector employed more than 90 percent of people indeveloping countries and 95 percent of people in countries such as El Salvador, India,and Mexico.India introduced reforms to reduce tariffs and loosen licensing requirements in the mid-1980s, followed in the early 1990s with more extensive trade liberalization and a furtherdismantling of the so-called licensing Raj. As a result, private investment as a share of GDP nearly doubled. India’s per capita GDP almost quadrupled from $670 in 1980 to $2,570 in 2002. India has sustained efforts to improve the opportunities and incentivesfor firms to invest productively

Source: National Accounts Statistics, CSO

For example, firms in states in India with better investment climates show muchstronger growth and productivity than their peers in states with less favorableinvestment climates. Firms in states with poor investment climates have 40 percentlower productivity than those in states with good investment climates.

Private sector has also demonstrated its efficiency by increasing the exports of themanufacturing sector by over 30% in the past three years. Indian companies are makingforeign acquisitions galore and becoming MNCs. Tata Steel, Bharat Forge, Tata Motorsand Ranbaxy are a few examples.

5. Public-Private Partnership (PPP)



Given the externalities, high risks and low rates of return, infrastructure financingcannot be left solely to the private sector. At the same time, given the Budgetconstraints and inherent inefficiencies, the public sector, too, cannot be fully reliedupon. The solution, therefore, lies in public-private partnership, where the two cancomplement each other's efforts in providing infrastructure services.

Public Private Partnership (PPP) means a project based on a contract or concessionagreement, between a Government or statutory entity on the one side and a privatesector company on the other side, for delivering an infrastructure service on paymentof user charges. The term private in PPP encompasses all non-government agenciessuch as the corporate sector, voluntary organizations, self-help groups, partnershipfirms, individuals and community based organizations. PPP, moreover, subsumes allthe objectives of the service being provided earlier by the government, and is notintended to compromise on them. Essentially, the shift in emphasis is from deliveringservices directly, to service management and coordination.Three things generally distinguish PPP from direct provision of services by

governments, namely:(i) A partnership based on well-articulated contract.(ii) A long-term relationship between the public and private sector.(iii) Flexibility and responsiveness in decision-making.

PPPs are not opportunistic alliances made to obtain favour from the government butmarket-dictated tie-ups where both partners bring something to the table. The state-owned company brings years of experience and strong networks because of years of association with the government and the private company carries out the constructionand maintenance work efficiently within the time schedule.An analysis of public-private infrastructure investment globally (by the Public PrivateInfrastructure Advisory Facility) shows that India's share of global investment is stillvery low. Only 131 of the 2,712 projects initiated globally between 1990 and 2003 werelocated in India, and the country received only $33 billion of the total $786 billioninvestment in infrastructural PPPs. The overwhelming proportion (74 per cent) of India's PPP projects in infrastructure, apart from Independent Power Producers inpower, were in roads, followed by urban projects (13 per cent) and ports (9 percent). Butdespite the low number of projects, PPPs in ports received the largest share of investment (55 percent), followed by roads (36 percent), and airports (5 percent).



Source : World Bank Perspective for World Bank Perspective for PPP in the Road Sectorin PPP in the Road Sector in India. Workshop on PPP in highways, New Delhi,

November12, 2005

There are numerous variations of the partnership pattern depending on the riskallocation between the two sectors. The most common types of concessions are Build-operate-transfer (BOT), Build-operate-own-transfer (BOOT), Build-own-lease-transfer(BOLT), Design-build-finance-operate (DBFO) and freestanding projects. Typically, aprivate sector consortium forms a special company called a "Special purpose vehicle" (SPV) to build and maintain the asset. The consortium is usually made up of a buildingcontractor, a maintenance company and a bank lender. It is the SPV that signs thecontract with the government and with subcontractors to build the facility and thenmaintain it.

Benefits:

The potential benefits expected from PPP are mentioned below: Cost-effectiveness Higher Productivity Accelerated Delivery. Clear Customer Focus Enhanced Social Service. Recovery of User Charges

Features of a good PPP model:

The Pre-requisites of a successful PPP model are:1. Strong political commitment

http://en.wikipedia.org/wiki/Special_purpose_vehicle

http://en.wikipedia.org/wiki/Special_purpose_vehicle



2. Transparency and Consistency of policy3. Effective regulation4. Careful design of the contract with appropriate risk apportionment and

attention to cost recovery5. Clearly defined stakeholder roles and project financing

6. Extent of competition.7. Creation of a good information base.

Political support is the most important element for both the creation and smoothfunctioning of PPPs, especially in infrastructure areas that fall in the concurrent or statelist. At the state level, third-tier institutions are still functionaries of the stategovernment, and strong political will is needed to create and steer PPPs to successfulcompletion.

6. PPPs in Physical Infrastructure Development

Infrastructure projects have long gestation periods and given their resourcerequirement, it is not possible to fund them fully from the government's budgetaryresources. However, if innovative instruments & mechanisms are found, they can bemade attractive. For funding and managing infrastructure projects, PPPs offer asolution that can prove mutually beneficial to both national interest and our vibrantprivate sector. The PPPs initiated in the various infrastructure sectors are nowdiscussed.

6.1) Roads

A Committee on infrastr ucture headed by the Hon’ble Prime Minister has proposed amassive infrastructure developmental programme for the next 7 years. The programmeenvisages an investment of Rs.1,72,000 crore on following developmental projects :

Completion of Golden Quadrilateral and East-West and North-South corridors. 4-laning of 10,000 km under NHDP Phase-III . 2-laning with paved shoulders of 20,000 km of National Highways under NHDP

Phase-IV. Augmenting highways in North East under Special Accelerate Programme.

6-laning of selected stretches of National Highways under NHDP Phase-V. Development of 1000 km of expressways under NHDP Phase-VI. Construction of ring roads, flyovers and bypasses on select stretches under

NHDP Phase-VII.National highways, which account for just 2% of the road network, carry 40% of traffic.By 2012, it is envisaged that another 40,000 km will be developed through an



investment worth $50 billion. This massive investment requirement can be met throughPPPs .

6.2) Railways

The railways were able to achieve a new record of loading 668 million tonnes of freightwith a historic growth of 11 per cent by optimally availing themselves of the extantrolling stocks and long turn around time of wagons due to booming economy. Therailway sector will need an investment of US$ 22 billion for new coaches, tracks, andcommunications and safety equipment over the next ten years. A ten-year CorporateSafety Plan of the Indian Railways envisages an expenditure of US $ 7.24 billion. Inorder to meet such huge investment requirements, the rail ministry has adopted thePPP approach for financing, constructing and maintaining railway projects andpromoting tourism. Some of the prominent PPPs are now discussed:

a) The Indian Railways has received a proposal from Oberoi group of hotels to run aluxury train in the Rajasthan circuit. The train will be on the lines of Palace-on-Wheels.It has decided to establish a PPP model between private hotels and Indian RailwaysCatering and Tourism Corporation (IRCTC) to provide quality meals on trains andrailway stations. Roping in private players would promote elite ridership and alsoincrease the number of foreign tourists.

b) The finance ministry has pitched for opening up passenger train services to theprivate sector. The ministry has suggested that the concept be expanded to letentrepreneurs run short-distance passenger trains. The smooth sailing of containerservices liberalisation has given the government strength to touch this sensitive area of reforms. In accordance with the approach adopted in the 11th Five-Year Plan, thefinance ministry has proposed to the Railways to enhance its contribution to thegeneral budget through more private sector involvement.

c) The government has asked the Ministry of Railways to submit a proposal on PPPbasis for running goods trains between specific points such as coalmines, powerstations, industrial hubs and ports. There is a requirement of special wagons to moveautomobiles, hot rolled steel coils and petroleum products, where the Railways couldbenefit by partnering with the private sector. PPPs have been created for laying the rail

network for port connectivity that include Pipavav Railway Corporation Ltd, KutchRailway Company Ltd and Hassan-Mangalore Rail Development Company.

d) Sify has tied up with Indian Railway Catering and Tourism Corporation (IRCTC) tomake online railway ticketing service available at over 3,400 i Way cybercafes across 154cities. Now even those persons who don’t possess credit cards or net banking facilitycan get tickets reserved online.



e) The railways has also proposed four dedicated freight corridors in partnership withthe privateplayers. These are Delhi-Chennai, Howrah-Delhi, Kharagpur-Vijaywada andChennai-Goa. As a part of the project, the private players are expected to do theupgradation of locomotives and EMUs, track renewal to support higher axle load,construction of new types of lighter wagons to reduce dead freight, construction of new

railway bridges to withstand higher axle load, improved signalling and communicationand anti-collision devices.

6.3) PortsPort reform began with the framing of a new policy in 1994 and guidelines for privateparticipation in 1996. Private participation started with the concessioning of thecontainer terminal at Jawaharlal Nehru Port, established in 1989 as a satellite port to

Mumbai. The competition improved performance, with preberthing and turnaroundtime falling from around 11 days in 1996 to less than 3 days in 2002. There is a hugepotential for investment in the expansion and modernization of ports, inland navigationand maritime transport. The Government has taken up the US$ 22 billion 'Sagarmala'project to develop the Port and Shipping sector under PPP.100 percent FDI is permittedfor construction and maintenance of ports. While the government will take care of 15%of the investment, the rest will come from the private sector.The government isexpecting an investment of over Rs 10665 crore in 12 major ports to achieve thetargeted 2000 million tonnes ports capacity by 2016.BOT projects are being taken up atmany of these major ports. Mumbai port is expecting more than Rs 1480 crore for sixprojects, including a Rs 150-crore cruise terminal near the gateway of India.At Paradipport, two projects at an estimated cost of Rs 430 crore are under way. The constructionof a clean cargo berth and a deep draft iron ore are to begin after biding takes placelater this year. Vishakhapatnam and Cochin port are also expecting investments of Rs300 crore and Rs 150 crore, respectively. In Kochi, international bunkering and cruiseterminals are going to be set up.

6.4) Civil AviationUpgradation and modernization of airports will require US$ 33 billion investment in thenext ten years. Airports Authority of India(AAI) has set a target of investing 1 billiondollars for modernization of airports. Efforts to restructure and modernize the Mumbai

and Delhi airports through the PPP route are underway. Two new greenfield airportswith private sector participation are proposed at Bangalore and Hyderabad. In thesegreenfield airports, private partners will hold 74 per cent equity in the joint venture andState Governments and AAI will together hold the balance 26 per cent. The newgreenfield airport at Bangalore is to be implemented on a BOOT basis.The strategic joint venture partner consists of Siemens Germany, Unique Zurich Switzerland andLarsen and Turbo India Ltd. The approximate cost of the project is Rs.1,300 crore. The



strategic joint venture partner for the greenfield airport at Shamshabad near Hydrabadis a consortium led by M/s GMR Infrastructure Limited with Malaysian Airport HoldingBerhard (MAHB) and the approximate cost is Rs.1,300 crore. AAI is also consideringdevelopment of non-metro airports. Indian Financial Consultants (IFC) and GlobalTechnical Advisors (GTA) have been appointed for ten airports, namely Ahmedabad,

Amritsar, Goa, Guwahati, Lucknow, Madurai, Jaipur, Mangalore, Trivandrum andUdaipur to assist AAI in identifying commercial activities to enhance non-aeronauticalrevenue including world class design for the terminal buildings. Policy initiatives havehad a marked impact upon airline traffic. Domestic traffic grew by 24.7 per cent incalendar 2004 over calendar 2003. The international traffic saw a growth of 18 per centin the same period. Private airlines now account for 61.1 per cent of domestic traffic.

6.5) Telecom

No sector reflects the dramatic transformational impact of selective private sectorparticipation in infrastructure as telecom. Steady liberalisation under the telecompolicy has turned India into one of the world’s fastest growing telecom markets. Indianow boasts the lowest tele rate in the world. The telecom market, has an investmentpotential of US$ 20-25 billion over the next five years. The telecom market turnover isexpected to increase from US$ 10 billion in 2004 to US$ 13 billion by 2007.

SemIndia, a consortium of overseas Indians, plans to invest $3 billion in an advancedsemiconductor manufacturing facility in the country with technology from America'sAdvanced Micro Devices Inc. The project, a PPP, is expected to take off next year and

will lead to a world-class industry in India to meet domestic and global demands of semiconductor chips for cell phones, PCs, set-top boxes etc. AMD will transfer high-endmicroprocessor and logic manufacturing technology to SemIndia,

Bharti Telecom has set up an excellence centre for telecommunications at IIT-Delhi onPPP basis to promote research and development of industry oriented technologies.

6.6) Power

The government is planning to add 1 lakh MW of generation capacity by 2012 out of

which 77,000 MW would be generated by the public sector and 23,000 MW by theprivate sector. A 1200 km transmission line project by Powerlinks Transmission Limitedthrough the PPP mode is already under under implementation.11 Independent PowerProjects (IPPs) of more than 4000 MW capacity, involving investment of aboutRs.13,700 crore achieved financial closure in January-September,2004 and 8 IPPs of about 10,000 MW capacity with proposed investment of Rs.33,000 crore have achievedfinancial closure by February 2005.It has been estimated by PGCIL that capitalinvestment of US$ 150 billion is required in the next 10-15 years to develop a National



Grid ,Tala , which would be the first transmission system in the private sector. Hydelprojects aggregating 50000 MW are proposed to be developed by 2017 by utilizing thehuge untapped potential of the North-East and Jammu & Kashmir. All these projectsinvolving large investments and risks would be best implemented through the PPPmode.

The Electricity Act 2003 has helped enhance investment and PPPs in the powersector.The salient features of this act are:

Generation (including captive power plants) freed from licensing. Sale of power to third parties (other than bankrupt state utilities) allowed, Distribution reform encouraged.

It has also made considerable progress in terms of giving buyers and sellers of electricity flexibility to transact with each other. Market development has been enabledby many other policy initiatives, including inter-regional link lines of roughly 9 GWcapacity and online realtime information dissemination from the five Regional LoadDispatch Centres. The Ministry of Power has formulated a blueprint to provide reliable,

affordable and quality power to all users by 2012. This calls for investment of US$ 73billion in the next five years. Huge opportunities are there for investment in powergeneration and distribution and development of non-conventional energy sources.

6.7) Water Supply

Investment in water supply has indisputable economic benefits. The World HealthOrganization (WHO) estimates that every U.S. dollar invested in water supplysanitation generates an economic benefit of $3 to $34, depending on the type of watersystem installed and the region where the investment is made.

Water and its management are a critical issue in India and there is an urgent need forinvestment in water supply infrastructure across the country. In India, virtually all waterand waste water systems are currently managed by the public sector, and most fail tomeet the needs of the citizens or businesses they serve. Enlisting the private sector inthe water sector brings finance, reduces waste and lowers costs when supported byeffective governance and transparency.

Several successful PPPs have been established in the water supply sector. Some of theprominent ones are enlisted below:

a) The Tamil Nadu Water Investment Company (TWIC), formed as a joint venturebetween the Tamil Nadu Government and IL&FS, set up the New Tirupur AreaDevelopment Corporation Ltd (NTADCL) as an SPV (special purpose vehicle) toimplement the first private water supply in the country at Tirupur. The corporation isthe first public-private partnership in the water supply sector in South Asia operating ona BOOT basis. It is now providing water and sewerage services to thousands of Tirupurarea residents who now receive water every day for 4-6 hours, as opposed to receivingwater only on alternate days at the best of times prior to the project.



b) Navi Mumbai near Mumbai has also shown how to improve water supply services byusing performance-based contracts to manage its water distribution and transmissionsystem. The results are astonishing. Revenues were increased by almost 45% the yearfollowing the introduction of the new contracts. The city was also able to reduceunnecessary expenditures. Over a two-year period the city reduced its annual energy

consumption by Rs. 45 lakh on sewerage contracts alone. Significantly, customercomplaints to the utility decreased to almost zero. Performance based contractsallowed the utility not only to provide better service to its customers, but also at loweroperational costs.

c) In Vishakapatnam, rehabilitation of the 250-km canal and expansion of feeder canalcapacity has been taken up. The Vishakapatnam project demonstrates the ability of thePPP framework to add value, by improving the efficiency of existing assets andexpanding the range of services.

.

9. Suggestions

The new paradigm of mobilizing the private sector and society, in collaboration withthe state can set in motion the process of rapid infrastructure development. Themacroeconomic environment for such change is also conducive today. The Tirupurproject illustrates convincingly that private sector participation can provide thenecessary complement to government investments. It also demonstrates that theprivate sector can provide important services to the poor and at lower costs withoutcompromising on the quality of service. At the most basic level, as is now evolving inIndia, public-private partnership implies a co-existence of the public and private sectorsin producing goods and services. At the next stage, it is possible to discern the benefitsof the partnership in complex, multipartner infrastructure projects. In India a beginninghas been made by the government to invite greater private participation. Certaincapital-intensive roadways built by government agencies have had substantial privatesector presence as sub contractors. A third way in which the partnership has evolved inIndia is to engage corporations in their non-traditional areas such as primary education,waste management and in providing civic amenities like water. Given that predictabilityand risk is the key to PPPs, the challenge is to create a framework to assure the private

sector of market-driven returns at reasonable risk. Inadequate preparatory work has ledto delays, unacceptable transaction costs, etc. To create policy and regulatoryframeworks for eliminating similar pitfalls, the finance ministry, along with thePlanning Commission, has evolved an appraisal and approval process to assure thehighest standards of due diligence. The government also needs to give PSUs moreoperational freedom and managerial autonomy to enter into partnership with privateplayers. Only then will these new public-private partnerships deliver on their promise.



The learning for the 21st century is that public capital, with the sovereignresponsibilities and public accountability, and private capital, with private sectorefficiencies and incentives, have to learn to work with each other in a mature manner.

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Indian Infrastructure Role of Private Sector Investment

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