With all manner of private infrastructure initiatives in litigation—the Delhi Airport Metro being the latest example—Rajiv Lall, vice chairman and managing director, IDFC, argues India is at the crossroads in the PPP space. While there is no rethinking in the sense of the private sector wanting out—the $1 trillion opportunity in the current Plan is too juicy—there has been a big setback with banks, for instance, not wanting to fund various projects. Lall spoke about this to Sunil Jain and Shobhana Subramanian. Lall also explains why he thinks infrastructure development funds, the latest innovation in the financing space, will find it difficult to take off.
With so many infrastructure projects in trouble, do we have a problem?
Generally speaking we’re at a crossroads with respect to private sector participation, not just PPPs but also, for instance, independent players in power generation. And this puts at risk all the gains we have made by actually getting the private sector involved in building infrastructure; the momentum could take a setback. One of the patterns we see is that, across the board where private sector has participated, government has very often either not been able to meet its obligations or there has been some amount of backtracking.
What kind of backtracking?
The power sector is the classic example where Coal India was to provide the fuel but the fuel is not there in sufficient quantities, and this has created its own problems. Roads are another example where land aggregation is not happening quite at the pace at which it was advertised and a lot of people have made mistakes on the basis of those promises.
So how serious is the problem?
The entire financial system went along with government, or NHAI or the line ministry, in the expectation that if 80% of the required land was available, the rest would be taken care of. So banks believed it was alright to do a financial closure. This may have been naďve on our part, but we believed the government. The reality is, in the case of land, the remaining 20% has become a big problem and has led to considerable delays and complications.
You claim there has been regulatory backtracking...
The Delhi airport is a great example of this, where there has been so much back and forth after the contract was signed. I know you don’t agree—your argument is that the concessionaire was reinterpreting the rules to alter the definition of