Despite the Union government’s emphasis on public-private partnerships to build infrastructure in India, half the states are yet to submit proposals for this.
“There is a shortage of propject proposals, fullstop,” said a finance ministry official who did not wish to be identified .
Recent statistics show that only 14 out of 28 states and four out of seven Union territories have 476 ongoing public- private partnership projects in roads, ports, airports, railways, power and urban infrastructure. These states account for projects worth an estimated Rs69,893 crore.
A further 76 projects with an estimated cost of Rs34,724 are in the pipeline. The Central government has identified private sector participation as the best way to generate the roughly $320 billion (Rs12.8 trillion) in investments needed over the next five years in the infrastructure sector. The problem, analysts say, is the shortage of funds to finance detailed project reports (a must before work begins on the actual project and also something funders look at when they finance projects), uncertainty and red tape that result in proposals languishing at the ideation stage for years at a stretch.
“When we talk about infrastructure development, a few years back, availability of infrastructure was thought to be the key bottleneck. Now, there is near unanimity that there is no shortage of finance but there is a lack of projects,” said Suresh Kumar, chief operating officer of the India Infrastructure Initiative, an infrastructure and project development programme of consulting firm Feedback Ventures Pvt. Ltd.
“Typically, states contract project development companies to prepare reports on the viability of infrastructure projects. The states will not do it themselves because they do not have the expertise, and cannot invest time, effort or money into developing proposals. And the private sector doesn’t want to do it, because after they invest so much on preparing a report, there is no guarantee that they will win the project,” added Kumar.
All projects are awarded after competitive bidding regardless of who prepared the original project report. Another problem is an acute shortage of funds for developing project reports. A Rs100 crore fund that the department of economic affairs at the finance ministry administers is entirely inadequate, Kumar said. “Rs100 crore for 28 states means roughly Rs3.5 crore per state. In some cases, preparing a single project may take that much,” he added.
Some states have requested the Centre to divide the Rs100 crore equally among the states and let them administer it, rather than wait for projects to materialize. Finance ministry officials however, said that having states administer the project development fund is unlikely to make a difference as there aren’t enough takers even for the fund.