Two things stand out. First, Mr Gadkari has reiterated his commitment to the public-private partnership (PPP) model and has indicated that funds for his many projects would not be a problem, which is remarkable given that infrastructure accounts for a high proportion of the bad loans weighing down the Indian banking system and the government’s own fiscal situation. Mr Gadkari promises that the problem of PPP projects worth Rs 3.8 lakh crore being stuck for lack of bank loans would be solved in a month. How? First, by taking on the responsibility of land acquisition and environmental clearances, so the risks for private investors are reduced. Second, by issuing bonds to “pension and insurance funds of the world”, guaranteeing a minimum return. He plans to open an escrow account so that they can access the money per-day since the roads will be earning revenues through toll. He also says that annual earnings from tolls is Rs 8,000 crore and he can easily securitise this money for Rs 1.5 lakh crore. Given that both land acquisition activity functions through the temporary expedient of an ordinance rather than settled law and political opposition to the changes is growing, it is doubtful if acquiring land would be an easy task. Besides, the guaranteed investment instrument is a risky path and it is worth wondering whether bond-holders will have an appetite for such loans in the current climate, unless the incentives are lavish. In general, there are dangers to a PPP system in which the private player is excessively insulated from risks unrelated to government action; the purpose of the rewards of profit is to reward the risks of capital. The government should not find itself at the end of a slew of expensive projects that help nobody but the private promoters.
This apart, Mr Gadkari plans to put in place a mechanism so that investors with investments in multiple infrastructure projects can sell them – at the moment there is no mechanism for selling projects that are non-starters – with the proviso that the money so earned is reinvested in one selected project. This sounds sensible in theory were it not for the question of who will buy such projects and where prospective investors will get the money in the first place. None of this is to belittle Mr Gadkari’s drive and commitment: if he achieves even half of what he has set out to do, India will be the better for it. But, as his government is realising as it completes a year in power, the risks of raising expectations are always high. Pragmatism, therefore, may be the better part of valour.