Public plundering partnerships in infrastructure projects

 Public private partnerships (PPP) are a fad these days with India being one of the leading markets in the world for PPP in infrastructure and social sectors.

Private companies occupy government space to provide public services in areas where government is unable to fulfill its obligations to citizens. Either due to lack of expertise or paucity of funds, central and state governments and even municipalities have adopted the PPP model to address deficiencies in sectors like aviation, highways, education, health and social services. 

Theoretically, nobody should have any objection to such a model. Citizens need outstanding schools and hospitals for their well being. Country needs world class airports and high ways to conduct business. But the experience of many of these partnerships suggests that private sector companies are raking in cash for providing shoddy services and are no different than governments when it comes to accountability. Major PPP projects in and around Bangalore involving well known global giants have resulted in poor quality construction and maintenance that are a threat to user safety. And if these projects are any indication, people across the country have a reason to worry and fret about PPP’s in their own states and municipalities.

Frequent users of Bangalore International Airport (BIA) will be surprised to know that the new airport will undergo a phased closure starting this March. The newly built BIA has been operational for the last two years, is the busiest in south India and third busiest in the country after Delhi and Mumbai.

The consortium that built the Airport was led by the internationally renowned construction company – Siemens. The reason for the 55 day closure – cracks have developed in the runway and by Operator’s own admission, it needs to be fixed quickly to avoid safety issues including possibility of a crash.

The other glaring example is the Bangalore Chennai toll road. Major portions of the road are maintained by India’s biggest construction giants – Larsen & Toubro and Reliance Industrial Infrastructure. But the highway is full of potholes, some so big that it could inflict damage on speeding four wheelers and cause accidents. Moreover, traffic frequently comes towards cars in the wrong direction, numerous overloaded trucks cause traffic congestion and the four lane highway which was touted as one of the best in the country is without a doubt poorly maintained.

Whopping user fee

Unfortunately for users, in the prevailing system there is no recourse but to shell out a whopping user fee for such shoddy construction and poor maintenance. International passengers pay a user development fee of Rs 1,000 for using BIA while domestic passengers are charged Rs 300. Toll for the 300 km distance travel from Bangalore to Chennai costs more than Rs 200. The irony of the situation is that these private operators are not accountable to users but to government officials. The public face of the BIA is the Directorate General of Civil Aviation and those of the highways is the National Highway Authority of India. This enables them to hide behind government agencies when questioned and cornered on a required standard of service.

The PPP model in its current form is a broken one. But there is no denying the fact that private capital and PPP’s are essential for a country like ours to spur economic growth, build world class infrastructure and provide capable social services. Present contract structure of PPP’s are too lopsided and needs to be comprehensively amended for future projects. It heavily favors private operators with no recourse for users. And this is where the recently released draft national policy on public private partnership by the finance ministry falls woefully short. 

With an ever growing list of services to be provided by PPP’s across the country, a pan-India standard that serves as a guide to governments at all levels is a welcome initiative by the central government. The draft policy lays out principles and guidelines for awarding PPP’s in a transparent way and addresses governance issues over the project life cycle.

But in its eagerness to attract private capital, government has over extended itself to satisfy companies and conglomerates while failing to address concerns of users of these projects. The policy fails to delineate a recourse mechanism in case private operators fail to deliver a minimum standard of service.

The government needs to amend the draft PPP policy and introduce a punitive damage clause for any shortcomings in providing quality service to users. Tolls should not be collected on highways for a certain period if potholes develop due to poor quality of construction or maintenance. User Development Fee at airports should be suspended until the time runway is repaired. In case of social sector services, adequate compensation must be prescribed for victims. A fine should also be imposed on companies to avoid repetition of such of acts.

The draft PPP policy must be tweaked to balance the needs of users with those of private operators before it becomes law. Failure to do so will not only invite charges of corruption but will also lead to disputes that can damage the interests of both users and private operators.