No single model for urban PPPs

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: Public-private partnership, or PPP, is the new catchphrase that has caught the nation’s attention in several spheres. Nowhere is PPP looked upon with as much hope as in improving the quality of infrastructure. Infrastructure is truly the constraint to India sustaining a growth rate in excess of 8% over the long-run. While our cities play a major role in sustaining the GDP growth, they are under tremendous pressure of ever-increasing population and are unable to meet even the basic requirements of their residents.

To our dismay, PPPs have played a very limited role in the creation and delivery of urban services. The reasons for the poor response from the private sector are not difficult to understand. Firstly, services such as water supply, sewerage and sanitation have strong characteristics of public goods and there is often resistance (real or perceived) to raising user charges. Secondly, government institutions providing urban services (read: urban local bodies) are quite weak in most cases and do not have the capacity to manage private sector service providers.

The multiplicity of institutions involved in the urban sector further complicates the issue. Finally, the urban sector consists of multiple sub-sectors such as water supply, sewerage, and sanitation, which are different in their own right, and there is no single PPP model that can be applied to the urban sector, unlike the road sector, wherein BOT is by far the most common model.

There is still a lot that we can learn from the experience of other sectors. In power and roads, private players have come to accept demand and traffic risk, something that they were reluctant to take on in the initial years of PPP. Institutional and regulatory reforms in both sectors have transformed the role of government institutions. These changes have come about by building on initial steps and learning from past failures.

The urban sector has been afforded a tremendous opportunity to change the way it creates and delivers infrastructure services through the Jawaharlal National Urban Renewal Mission (JNNURM). The government has earmarked approximately Rs 50,000 crore over the mission period and a similar amount would be leveraged through contributions from state governments, ULBs and the private sector. Additionally, JNNURM requires participating cities to undertake certain mandatory reforms. Institutional capacity building is also an important component of the mission.