Signalling of PPPs as 'asset selling' driving investors away: Eco Survey

PPP models need to reduce structural uncertainty, need more private investment in greenfield projects

The signalling and a rising perception that public private partnerships (PPPs) are tantamount to “selling of assets”, particularly at the state level, is driving away investors willing to take the risk in long-term infrastructure development projects, the Economic Survey 2025-26 noted.

 

“The perception principle has improved by a long margin among central projects as compared with states. The lesson is often lost that wrong signalling in this regard creates two problems – adversely affecting the public mood and driving away investors willing to stomach the entirety of risks across a long concession period (30-60 years),” the Survey said.

 

Improving communication and transparency is, therefore, important for sustaining public acceptance and investor confidence, especially for projects with long concession periods, it said. The Survey also called out the shortcomings in the PPP framework, currently focusing on transaction-level financial closure.

 

 

“India’s PPP framework needs to move from transaction-centric execution toward system-level market building, with a sharper focus on reducing structural uncertainty,” the survey said, adding that it will require measures such as adequate pre-construction risk closure by the public authority.

 

PPPs must increasingly reflect the third “P” — Partnership — where public and private actors co-design projects, share early-stage risks, and align incentives around long-term service outcomes rather than narrow financial closure, said the survey.

 

“PPP outcomes have been weakest where land acquisition, statutory clearances, demand assessment, or utility shifting have remained unresolved. In the coming decade, a credible PPP regime will be defined less by risk transfer on paper and more by the State’s capacity to absorb early-stage risks that private capital cannot efficiently price,” it said.

 

Even as it acknowledged the steady progress in sectors where PPPs have matured and a lot of private investment has poured in, the Survey called for a new generation of PPPs which can work for socially critical sectors, citing the need to extend these models to health, education, warehousing, sanitation, urban infrastructure, green hydrogen, and the broader energy transition. “In these areas, conventional concession-style risk transfer is often insufficient,” it said.

 

The Survey also flagged the trend of sectors which have matured in PPPs seeing only brownfield investment. “Private sector participants that have benefitted from de-risked brownfield assets should be encouraged to increase their risk appetite for greenfield projects, particularly through pure-play PPP models such as BOT, especially in mature sectors like roads,” the Survey said.

 

The survey also made a case for the rationalising of freight rates of Indian Railways, which ferries around a fourth of the country's cargo.

 

"High freight rates, due to cross-subsidisation, distort competition with roads, inflating commodity and consumer prices, as well as logistics costs. Rationalising freight rates could improve revenue buoyancy, incentivise a modal shift of freight from roads to rail, and increase market share. This, in turn, would stimulate economic activity, green the transport sector, and decongest road space," the survey said.

 

The Survey also said the capital expenditure on roads and highways has jumped 5.8 times from ₹53,000 crore in 2014-15 to ₹3.06 lakh crore in the current financial year, and the sector is now moving from rapid network expansion towards greater logistics efficiency and multimodal integration.

 

It said High Speed Corridors of 9,366 km are currently under implementation, and in line with the Budget announcement last year, a dedicated PPP pipeline of 13,400 km, with estimated cost of ₹8.3 trillion, has been identified for development over the next three years.

 

In the railways sector, 18 projects worth ₹16,636 crore have been completed and seven projects worth ₹16,334 crore were under implementation at the end of September 2025.

 

The Survey said the number of PPP projects awarded in the ports sector rose from 37 in FY15 to 87 in FY25, with the total value of PPP projects increasing from ₹16,180 crore to ₹61,029 crore. Currently, 57 operational PPP projects valued at ₹42,235 crore have increased port capacity by 660 mtpa.

 

“A pipeline of 48 PPP projects worth ₹23,000 crore, excluding the development of Vadhvan Port Project worth ₹76,220 crore, has been identified for the next five years from 2025-26 to 2030-31. These projects will further enhance the capacity and efficiency of India's major ports," the Survey said.