Roads, ports benefit most from PPPs

With public-private partnerships (PPP) becoming the buzzword for infrastructure development in India, roads and ports have been the greatest beneficiaries of the collaborative-funding mechanism. Among states, the leading users of the PPP model by the number of projects have been Karnataka, Andhra Pradesh and Rajasthan.

Road projects account for 60 per cent of the current Indian PPP projects by number and 45 per cent by value, due to small average size of the projects. Ports, which account for a meagre 10 per cent of the total number of projects, have a larger average size of project and contribute 30 per cent in terms of value.

The dominance of these two sectors as beneficiaries of the PPP model is evident from the fact that if ports and central road projects are excluded from the total value of 645 PPP projects (Rs 2,24,175 crore), the deal value is significantly lowered, to only Rs 55,757 crore, or around 25 per cent.

Among states, of the current 645 PPP projects, Karnataka leads with 122, followed by Andhra Pradesh and Rajasthan with 108 and 56 projects, respectively.

PPP has been a burgeoning mechanism, touted by the government to provide for the massive infrastructure gap in the country. The Planning Commission had estimated an investment requirement of $500 billion during the 11th Five-Year Plan (2007-12) for infrastructure development. About a fourth of this investment has been envisaged to be met through private investments and PPPs.

The infrastructure investment for the 12th Plan period is envisaged at $1 trillion, around 10 per cent of India’s GDP. This estimate is about twice the investment envisaged in the 11th Plan and preliminary estimates indicate that there would be potential funding gap of 25-30 per cent for the 12th Plan target.

The mid-term review has projected the overall infrastructure investment to fall marginally below the target. However, by the end of the 11th Plan period, backed by investment in the telecom sector, private investment is expected to reach 36 per cent of the overall investment, compared to a target of 30 per cent set at the beginning of the Plan period.

The concept of PPP has, however, received lukewarm response in the ongoing 11th Plan period due a number of governance and financial hurdles, the availability of long-term financing being one of the major concerns for the private players.