PPPs in Infrastructure Conference: Praful Patel's Closing Remarks

                                                   

Honorable Minister of Urban Development, Deputy Chairman Planning Commission, Mr. Arvind Mayaram, DEA, Mr. Pratyush Kumar, President and CEO General Electric, Mr. Dhanendra Kumar, Executive Director of the World Bank.

 

In my opening remarks yesterday, I started by saying that this should not just be another conference. I am glad to note that the intensive deliberations have thrown up quite a few takeaways in terms of both ideas and proposals that will help scale up India’s PPP program.

 

The Honorable Minister of Railways yesterday noted that PPPs are neither an obligation nor a fashion.  The public sector must continue to play a key role in providing infrastructure.  But PPPs must add to this, and spur efficiency through competition and transfer of best practices.

 

In his Keynote Address yesterday morning the Honorable Minister of Finance said that India needed a convergence between aspirations, opportunities, and finance to overcome the infrastructure deficit.

 

We have heard much at the last 2 days about the aspirations of accelerated and shared growth in India.  And this conference has reiterated that infrastructure is the pressing issue in India today if this is to happen. We are all aware of the size of the challenge facing India here.

 

Improved infrastructure is needed if all Indians are to share in this growth.  We, at the World Bank, are convinced of the imperative of inclusive growth because India’s infrastructure gaps are the greatest disadvantage to the poor and those in poorer regions of the country.

 

We’ve also heard a lot about the opportunities that PPPs present.  The center and the states are keen on partnering with the private sector in negotiating the infrastructure challenge.  The central government’s commitment to the PPP approach is evident in its decision to adopt it on the home stretch of NHDP and in the modernization and upgradation of ports and non-metro airports.  The enthusiasm at the state level can be seen by the presence of high level delegations.

 

The enthusiasm of the private sector is also evident.  We see it in the number of companies bidding for recent national highways projects.  We see it in the response to recent major PPP initiatives, such as the Delhi and Mumbai airports, and the ultra-mega power projects.  And we’ve seen it here in the response of the international private sector to this conference.

 

What are the binding constraints?  Policy and regulatory frameworks have developed a lot over the last 10 years – but still need strengthening substantially in many sectors to scale up PPPs to the levels we are looking for.  Some state governments have made considerable strides here, whereas others have not moved so fast.

 

Government is acutely aware that more effort needs to be put into developing credible and bankable PPP projects to match the growing appetite of investors.

 

Finance does not seem to be the binding constraint at the moment in scaling up PPPs.  The strong interest in investors, for example in setting up infrastructure equity funds in India suggests that, if the terms are acceptable, PPPs will find finance.

 

And, as the Honorable Finance Minister mentioned, the capacities to manage PPP contracts need to be strengthened at all levels.  These are long-term arrangements for services for which the government has ultimate responsibility.   Over the course of their life time, issues may arise which need close attention by the government for their efficient resolution for all concerned.

 

The international experience we’ve heard shows that while there are different institutional approaches, there are some common themes.  One is the development of robust capacities within the government, and sustaining these over time.  Often this has required new institutions or agencies to be created.

 

In India, too, we need to examine the need for and efficacy of specialized PPP institutions. If they are indeed needed, we should not shy away from fostering them. They can help by:

• imparting greater visibility and commitment to the PPP program
• help quicker assimilation and dissemination of best practices to various levels of government
• preserve institutional memory and facilitate cross-sectoral pollination of good ideas.

Now, let me turn to the action points so that this conference can put its talk into action. Clearly, getting PPPs to substantially meet the infrastructure gap requires a step change in the approach taken. We are talking of five-fold or more increases in private investment in transport, water and sanitation and energy if PPPs are to come close to the government’s aspirations.

 

Our takeaways are the following:

• The center has a key role to play in promoting the PPP agenda.  Expanding the resources and role of a central government PPP unit will be important. I’d say also that it would be smart to vest it with a clear mandate to implement the Government of India’s PPP strategy in a time-bound manner.
  
• It will be important to strengthen select central and state level institutions that are already engaged in significant PPP activities. The idea here would be to scale up their capacity to implement much larger size programs in a more effective manner.
  
• Fiscal management of PPPs, particularly at the state government level, needs a lot of attention.  Even well-designed PPP contracts see substantial risks being borne by the government.
  
• Scaling up the resources provided to state governments to develop PPP units is a smart – and proven – idea – such as a project development facility (as has been done in South Africa) with resources to allow state governments to undertake due diligence on developing PPP projects before bidding them out to the private sector.  Money spent here can have an enormous pay-back in better designed projects.

From the side of the World Bank, we are keen to build on the momentum that India is generating. We will work with the central government and interested state governments to identify areas where we can help in developing institutions and capacities for PPPs.  This would include support to PPP units at both the center and state level as well as support for the identification, preparation, procurement and oversight of PPPs.   We are also keen to continue working with the government to look at our lending to support PPPs, for example through the VGF, IIFC or other modalities.

 

I mentioned earlier that many useful ideas have been brought up over the last 2 days.  The Bank would be happy to provide resources to assist in this follow-up.  I would like to propose that the main actors in this conference meet in six months time – let’s hold our feet to the fire – to take stock of the conference follow-up. Let’s meet to assess whether new ideas are being implemented, and good practices scaled up. Let’s meet to look at what else can be done to increase the role that PPPs can play in the country.

 

On behalf of the World Bank Group, I thank the government for the opportunity to work with them on this conference, and we look forward to scaling up our engagement in the PPP agenda. Thank you. Until we meet again. Six months!