India must be institutionally ready for private infra investment to return

Public-private partnership (PPP) is now the accepted shorthand for denoting private investments in India’s infrastructure development. 

India’s British-era infrastructure construction saw quite a few projects as private enterprises. Sterling bonds with guaranteed returns financed and operated railways, tramways, and electricity distribution. Tata Power was established in 1911. Other private power plants existed too. After independence, the story unfolded across eight stages of private capital waning and waxing through India’s infrastructure journey. 

The state as sole builder (1947-1992): Established in 1950, the Planning Commission controlled most national investment decisions. Large infrastructure investments did happen, but with public funding. Such projects included giant hydroelectric projects and the expansion of the railway network – but private capital was not involved. With an uptick in gross domestic product (GDP) growth after the 1991 liberalisation moves, policymakers started seriously considering the engagement of private capital as the “infrastructure deficit” rang alarm bells. 

Green shoots of PPP (1992-1997): Involving the private sector started getting traction in policy circles. PPP experiments mattered more for symbolism than scale. Of the eight private “fast-track” power projects, only two were built. GVK’s 216-megawatt (Mw) Jegurupadu plant became an early proof-of-concept under a power purchase agreement. IL&FS built a 12-km toll road between Rau and Pithampur in Madhya Pradesh, marking India’s first private toll concession. In 1996, Rakesh Mohan’s expert group concluded that public budgets alone could not fund India’s infrastructure. 

Unleashing PPPs (1997-2007): PPP took a decisive turn in 1997 when IDFC was established as the country’s first dedicated infrastructure financier to “lead private capital to infrastructure”. The same year, the Telecom Regulatory Authority of India was established as the first independent infrastructure regulator. The Tariff Authority for Major Ports was constituted to oversee major port tariffs and the private sector’s involvement, and Nhava Sheva’s Jawaharlal Nehru Port Trust signed India’s first major private port concession. The Electricity Act 2003 delicensed generation and distribution, opening the power sector to competition. The National Highways Authority of India (NHAI) became the nodal agency for attracting private capital into road projects. 

Peaking of PPPs (2007-2012): Manmohan Singh, as Prime Minister, urged infra developers to “unleash animal spirits”. The 11th Five-Year Plan targeted a rise in infrastructure investment from 5 per cent to 9 per cent of GDP. Private capital’s share climbed from 22 per cent to 37 per cent of overall infra investments. NHAI’s PPP programme marked a golden period of private-sector involvement in the roads sector. GMR transformed Delhi Airport, while GVK redeveloped Mumbai’s — both under long-term PPP concessions. Ports like Mundra demonstrated private sector’s ability to bring in transformational changes. Infrastructure investments crossed 7 per cent of GDP as banks lent aggressively. Briefly, India became one of the world’s largest PPP markets before the “boom-to-bust” happened. 

The dark side of PPPs (2012-2014): It is now recognised in hindsight that the PPP rush lacked institutional moorings. Over 40,000 Mw of private thermal capacity was stranded, and many highway PPPs collapsed. A clutch of infra firms turned belly-up. Non-performing assets (NPAs) of public-sector banks surged from 2.5 per cent in 2010 to 14.6 per cent by 2016, against 4.7 per cent for private banks. Infrastructure accounted for 50 per cent of corporate insolvency defaults, with NPAs touching ₹18 trillion. The PPP implementation cart had clearly been placed before the institutional readiness horse. 

Back to EPC (2014-2023): The National Democratic Alliance government hurriedly returned to an engineering, procurement, construction (EPC) strategy. Under Union Transport Minister Nitin Gadkari, highway development once again turned substantially to public funding. Highway construction rose from 8-9 km per day to 28-29 km per day by 2019-20. The hybrid annuity model, where the government pays 40 per cent in upfront grants and developers recover 60 per cent through annuities, attracted private capital. Yet public financing was nearing its limit. The Kelkar Committee submitted its report in November 2015, recommending measures to revive PPPs. 

Maturity of core sectors and new frontiers (2023-2025): Union Budgets 2025 and 2026, for the first time in memory, did not feature the words “infrastructure”, “highways” or “railways” as headline themes. It signalled the transition to new horizons such as renewables, nuclear power, semiconductors, battery storage and high-speed rail. Private capital’s share had by now retreated to less than 20 per cent from the high of 37 per cent of the 11th Plan period. 

Monetisation is the new PPP (2026 Onwards): In February 2026, the National Monetisation Pipeline (NMP) 2.0 was launched with a ₹16.72 trillion target (2.6 times the size of NMP 1.0) by FY30. Key monetisation sectors were identified as highways, power, railways and ports. NHAI’s InvIT had already raised ₹14,300 crore in 2022, demonstrating retail and private institutional investors’ appetite for brownfield projects. Seven high-speed rail corridors were announced in Union Budget 2026-27, with an estimated ₹16 trillion outlay for a 4,000-km network, with a clear recognition that public-only financing was unrealistic. 

As things stand, private capital stubbornly hovers around 20 per cent of infra investments when the imperative demands 40 per cent. The pipeline is real, with lessons learnt the hard way. The only question that remains: Will India finally let the institutional readiness horse be put ahead of the private investment cart?

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The author is an infrastructure expert. He is also the founder & managing trustee of The Infravision Foundation. Research inputs from Mutum Chaobisana