Given the speed at which government departments function, and their bankrupt state, the new found emphasis on public private partnerships (PPP)—for the cleaning up of the Ganga, for constructing new railway lines for a bankrupt carrier, model railway stations, and a lot more—is not surprising. Indeed, it is reassuring since, if a new railway track has to be constructed by the private sector, it suggests the tariff setting will have to be rational—since most private firms will need to be given a 16% return on equity, presumably the tariffs will eventually need to reflect this; how else will the railways pay the private firm?
That is the theory, the reality can be quite different, as India has seen over the past few years. PPP cannot be the answer to everything, indeed it is very complex and can be heart-breaking; if the lessons of National Highways Authority of India (NHAI) are anything to go by, there seems to be a bit of a blowback in this critical PPP area.
There are, to begin with, very serious issues of gold-plating that need to be dealt with. In the case of Reliance Industries Limited’s (RIL) KG-D6 oil basin, the allegations of massive gold-plating of costs have not only jeopardised the project, they are threatening to derail India’s entire gas exploration programme. That there has, so far, been no outcry over giving international prices to local producers of crude oil—oil minister Dharmendra Pradhan has said this cannot be done for gas—is surely due to the perception that RIL has diddled the government of funds. As a result of the gas prices not rising, even the public sector ONGC is not going to be able to explore for more gas in the offshore blocks with it.
Dealing with this means, in the case of the petroleum sector, moving away from the current cost-recovery model to a revenue-share one. Even this, however, is not the end of the matter since there are allegations of contract-manipulation even here. In the case of the GMR airport in Delhi, the problem revolved around what was considered to be revenue as the group had won the bid by promising to share 46% of topline with the Airports Authority of India (AAI). As part of the deal, GMR was given 250 acres of land to develop commercial realty, to offset some of its costs. While asking for interest-free deposits on the advance rentals on