Public-private-partnership : introspection

Milton Friedman's words, “There is nothing that does so much harm as good intentions,” are still meaningful today. No Prime Minister takes oath without good intentions; no Finance Minister presents a budget without knowing what the economy needs the most. Still, India remains poor and Indians remain deprived of their basic needs and rights. It took 40 years for India to realise that the government is ill-equipped to provide basic services to its people. On the contrary, the exploitative nature of private players emerges as a concern for policy makers. Thus, Public-Private-Partnership (PPP) emerged as a well-accepted solution. It envisioned the achieving of what the government and private sector could not achieve individually. But sadly, with time, only new problems and challenges have surfaced than major success-stories.

The Kerala state government in 2001 had undertaken a project setting up a one-stop, web enabled portal for information and services related to the government-citizen interface with a cost of $100,000. However, it failed finally as it couldn't attract private investors. Dabhol Power Project was a dream project with an investment of $2.9 billion by Government of India and foreign companies including Bechtel, Enron and GE. It thoroughly failed. Apart from delay in the project completion, price of electricity had gone up twice of what government was charging before. Finally, everything was jeopardised as the Enron scandal was exposed in 2001. Even globally, PPP has not been very successful.

Brazil sold the Rio de Janeiro Electricity Company to a private company Rio Light in order to improve efficiency; rather, the electricity price increased by 19 per cent – eventually, 40 per cent of employees lost their jobs. Till 2010, there were as many as 900 PPP projects that had been undertaken in India. As per State PPP cells – out of all projects undertaken, 201 projects with a cost of $18 billion have been completed, 332 with an estimated cost of $44 billion are in the pipeline, 271 projects worth $32 billion are under implementation and the rest 144 with an estimate of $17 billion are still under bidding. Sadly, not many projects meet deadlines, thus generating huge cost and time overruns.

Yet, the failure of PPP is more because of a perforated system and lack of accountability and commitment from the polity as well as the ‘license raj’ driven private sector. The PPP model is based on the structural pillar of the congruence of social objectives (of the government) and profit needs (of the private sector). The government therefore cannot merely pass the bucks to private players and criticise them for failure; instead, it should invigilate and spearhead the progress of the PPP projects strictly. The PPP model needs equal involvement from the government and not just a hands-off behaviour. Only once the government masters the paradigm that the PPP model is not a contract awarding procedure but a JV with private parties will PPP succeed as a case study in India.