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Sunday , October 14 , 2012
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PPP: Poorly Planned Projects
- Invest model catches cold

Patna, Oct. 13: The government’s much-vaunted Private Public Partnership (PPP) programme to pump in investments is in urgent need of resuscitation.

Over the past few years, the Bihar government has been aggressively pursuing investment through the PPP mode, a model that has been followed with much success in states such as Maharashtra, Gujarat, Tamil Nadu and Karnakata in several key sectors — primarily infrastructure and health.

In Bihar, the government entered into PPP agreements in several areas such as road, health, real estate etc. Even the ambitious agriculture roadmap, which plans to pump in Rs 1.50 lakh crore over the next five years, talks about promoting PPP mode. But in most cases, investors have either backed out, gone to the court or are having second thoughts of going ahead in the state.

Industry captains say the reason for the lack of enthusiasm among investors is the state government’s tardy approach in going ahead full steam with the PPP mode. “The main reason for failure is the inability of the state government to understand the word partnership. It is approaching the issue in a bureaucratic manner — safeguarding its own interest first and leaving all the risk to the investor,” said Satyajit Kumar, industrialist and a top functionary of Confederation of Indian Industry (CII).

A negative perception, that the economy is not mature enough to handle PPP investment, is gaining currency among investors. “The PPP mode in Bihar at this stage is not viable due to under-development and rampant corruption. That is why it has virtually collapsed in the state. The right environment for PPP does not exist and investors are reluctant to pull in their money. Perhaps when the state’s economy is more developed and mature, we could have PPP,” said N.K. Choudhary, professor of economics at Patna University.

Some of the most ambitious projects in Bihar have got lost in files, delays and lack of trust. The financial bid for the ambitious Ganga driveway project in Patna has been postponed three times as investors remain undecided over pumping in over Rs 1,340 crore into the mega-project, which entails a total investment of Rs 2,000 crore.

“You cannot say there is some problem in PPP work in my department. The Ganga driveway is a big project and hence companies are taking time. We want them take their own time to smoothen things,” said road construction minister Nand Kishore Yadav, while pointing out that three mega road projects had already been awarded under the PPP mode.

However, experts feel that the situation in Bihar is still not conducive for investment in infrastructure under PPP mode. “Land acquisition is a major hassle. Investors are not confident if the process of land acquisition and other formalities can be completed in time. Delay means an increase in project cost. Most investors seek money from financial institutions for projects under PPP for which they offer equity. They are finding it difficult to convince the financial institutions that the projects are economically viable,” said a road construction consultant, stressing that the state needs to take steps to instil confidence among investors.

The health sector was among the first to introduce PPP mode in the state. Complaints of government hospitals not cleaned, security lapses and sub-standard food to patients are piling up. Such is the discontent that the health department now prefers to call it “outsourcing” instead of PPP.

Principal secretary, health, Vyasji said his department was taking a few steps to improve matters. “For effective implementation of the services, we are planning to introduce some new modules. For security at government hospitals, we plan to requisition the services of retired army personnel instead of private security guards,” he said. Similarly, in sanitation and hygiene, private firms have been told to hire professionals and use modern technology to ensure cleanliness of hospitals and timely and regular disposal of waste.

While PPP outside Patna is only visible in the road and health sectors, trying to get investment in the state capital under this mode has proved to be a major hurdle. There were no takers for the ambitious project of development of Veer Kunwar Singh Park in Patna. Later, the PPP mode of execution of this project was scrapped. The urban development department was forced to scale down the project cost from Rs 242.96 crore to Rs 35 crore.

There is no taker for the development of the amusement park in Sabalpur diara.

Similarly, over a year has gone by since the Bihar State Housing Board (BSHB) started working on an ambitious scheme of development of around 10,000 new flats in the city in PPP mode but no construction work has started till date. The corresponding file has been gathering dust with some department or the other and most firms that had submitted their proposals for this project have shied away. Sources in the housing board have claimed that in spite of a good initial response from developers, the project fizzled out. The developers, the sources said, have now even stopped responding to communication sent by the board.

In the transport sector, 16 of a total of 29 Mercedes and Volvo buses supplied by the Hyderabad-based Gireesh Infrastructure Private Limited to Bihar State Road Transport Corporation (BSRTC) under the PPP model are standing idle for over eight months at Sultan Palace (BSRTC’s headquarters) due to non-issuance of respective road permits. Gireesh Infrastructure had plans to invest Rs 1,000 crore in the public transport sector in Bihar, but sources in the transport sector say they are doubtful if all that would materialise.

Likewise, Eden Transport Private Limited entered into an agreement with BSRTC on March 14, 2011, for running 78 buses (70 non-AC and eight AC) on seven routes in the city. The buses were launched on May 15, 2011. Another agreement was signed between the two agencies in January 2011 for operating 40 buses under the inter-city express bus service on the Patna-Chhapra-Siwan route. The company is now engaged in arbitration over royalty to be paid to BSRTC and non-payment of subsidy.

Industrialists say PPP will not take off in Bihar unless the government changes its mindset.

“PPP investment has to be treated like a private business enterprise and not another government file. The investor has to be convinced that he will be able to make as much profit as he would have in developed states such as Gujarat and Maharashtra. The government must remove the bottlenecks and assure him that it was a partner even in risks,” said an industrialist, who did not wish to be named.

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