Renewing faith in Public-Private Partnerships (Indian Express)

Mains Paper 3: Economy
Prelims level: PPP model
Mains level: Infrastructure

Context:

• The sectoral break-up of PPP projects, we would find that almost all of the projects have come up in economic infrastructure (power, transport, and telecom) compared to social infrastructure.

Measures announced by the finance minister:

• The finance minister recently announced several measures aimed at boosting Public-Private Partnerships (PPPs) in infrastructure sector:
• Twelve more airports are to be bid out on .........................

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Performance of the PPP airports:

• The PPP airports at Delhi and Mumbai, from being the worst airports in the world prior to privatisation, now figure among the best (as per 2019 Airport Service Quality rankings).
• In addition, the revenue share from Delhi and Mumbai airports to Airports Authority of India (AAI), at Rs 3,040 crore in FY19, is more than the profit after tax (PAT) of AAI for that year (Rs 2,271 crore)
• PPPs in airports provide a better user experience and give high returns to the government.
• Therefore, the PPP arrangement needs to be replicated across airports in India for the user and revenue implications that would enable AAI to increase air connectivity to remote areas through the UDAN (Ude Desh ka Aam Nagrik) scheme.

Application of PPP model in the power sector:

• Power distribution is the weakest link in the power sector. There is a loss of about 40 paise per unit of power sold in the country, which makes the power distribution segment bankrupt, while also leading to stranded investments in the power generation segment.
• It has been estimated that the ................................

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PPI database:

• As per the private participation in infrastructure (PPI) database of the World Bank, India is second in the developing world, both in terms of the number of PPP projects as well as the associated investments (1,096 PPP projects, accounting for an investment of $273 billion, since 1990).
• The Indian success in PPPs is built on a robust policy framework, the financial incentive (VGF) scheme, and the standardisation of procurement (Request for Qualification and Request for Proposal) and substantive (Model Concession Agreements across infrastructure sectors) documents.
• The sectoral break-up of PPP projects, we would find that almost all of the projects have come up in economic infrastructure (power, transport, and telecom) compared to social infrastructure.
• Social infrastructure (like water supply, solid waste management, health and education) have low cost-recovery and, consequently, face massive resource-crunch.

Way ahead:

• PPPs in power distribution and social infrastructure would be extremely challenging. It would entail careful crafting of sector-wise Model Concession Agreements with a balanced risk-return framework for the public and private sectors.
• Besides, there would be a clamour for autonomous regulation of social infrastructure sectors, once private investment comes in.

Conclusion:

• However, care should be taken that demand for autonomous regulation does not translate into setting up independent sectoral regulators.
• There are other regulatory options like ‘regulation by contract’ and multi-sectoral regulators to mitigate regulatory risks faced by infrastructure players.

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Prelims Questions:

Q1.  With reference to the “N.O.R.M.S. New Orientation for a Reformed Multilateral System”, consider the following statements:
1. It outlines India’s priorities for its forthcoming campaign to secure an elected seat in the UN Security Council.
2. India’s fresh tenure in the UN Security Council will be the eighth time India will occupy a non-permanent UNSC seat, with its last stint in 2011-2012.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: ..................................

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Mains Questions:
Q1.  How PPP projects can boost ......................................?