PPP must drive India's infrastructure funding: Experts at BS Infra Summit

Experts at the Business Standard Infra Summit said India must rely more on public-private partnerships (PPP) to fund new projects, as government resources alone cannot meet growing needs

Public-Private Partnership (PPP) should be the default approach in India’s infrastructure development, as government resources alone cannot meet the scale of competing demands, experts said at the Business Standard Infrastructure Summit on Thursday on the theme “Infra for Viksit Bharat: Planning, funding and building".

 

In a panel discussion moderated by Dhruvaksh Saha, Kuljit Singh, EY India Investment Banking Partner, said that private investment must increasingly fund projects that would otherwise rely on government capital expenditure. “There is a lot of scope for PPP in India, for the simple reason that India is source-constrained. We don't have enough resources. Somebody has to get clean water for free, somebody has to get housing for free or subsidised. So by default, I think in India, what needs to happen is that if there is a possibility to undertake private investment to fund what would have been otherwise funded by the government on a CapEx basis, you should always go down that path without fail,” he said.

 

 

Funding challenges and PPP opportunities

 

Singh pointed out that while debt funding is no longer a bottleneck in India, the terms of financing remain a challenge. “It’s rarely difficult to find a project in India now from the debt perspective. 99 per cent of projects now get funded in India; the question is, who funds you? Banks are very happy to fund highway projects. Ports and airports also get funding easily. Where we may struggle to get funding is on what terms we get the debt," he said.

 

He further added that foreign investors are increasingly open to greenfield renewable projects and willing to take construction risk. He also called for replicating successful models from the central government across states. “You have to see why the central government is successful and state governments falter? Because the central government picks up one sector, does a lot of research, and freezes documents after detailed consultations. NHAI, why is it successful? It replicates the same process for every project,” Singh added.

 

For sectors like waste management and railways, Singh suggested that PPPs should focus on new asset creation rather than legacy projects, as “it is very difficult to do something with what already exists, but not so difficult to do something new".

 

Cities unprepared for growth

 

Jagan Shah, CEO of Infravision Foundation, underlined the stress on India’s cities due to unplanned growth since liberalisation. “Our cities are reeling under growth. What we are facing is the consequences of not having planned our cities well enough. Most cities have fairly well-planned neighbourhoods which are legacies of the past, but the kind of spurt of growth since 1991, we have been unprepared for that,” Shah said.

 

Calling cities “systems of systems", Shah said that urban planning must be future-driven and technology-enabled. “We need an enormous shift in technologies, and we need to do it on the best of home-made innovations. That is why you need a complete ecosystem to support the kind of evolution that we need in our services,” he said.

 

Shah highlighted the importance of procurement and collaborations across industry, academia, and government to provide benchmarks for decision-making. He cited sanitation projects as an example where research outputs could guide officers.

 

On PPP in cities, Shah said local projects remain small and financially dependent on state governments and urban local bodies. “Across the entire territory, the urban infrastructure projects are small, subservient to how the state and ULB functions financially, and therefore you're not able to attract the kind of PPP that you want,” he added.

 

He, however, praised the Urban Challenge Fund for pushing cities to bring forward their own projects, with PPP expected to contribute up to half of the financing. “That is a transformative idea,” Shah said.

 

Planning is the core of infrastructure

 

Rahul Mithal, Chairman and Managing Director of RITES, emphasised that planning remains the most critical aspect of infrastructure development. “Out of the three elements of infrastructure, which is planning, funding, and execution, planning is the core,” he said.

 

Mithal stressed the need for adopting the QCBS (Quality and Cost Based Selection) system in project preparation. “Detailed Project Report (DPR) needs a concentrated focus, and you should choose DPR entities only by using QCBS. In QCBS, you need to make a decision, which is the most difficult part,” he said, adding that relying only on technical credentials was the easiest but least effective approach.

 

He also underlined the importance of strong field entities to ensure that designs are executed properly and of leveraging technology to assess vulnerabilities in infrastructure systems.