The aim is to boost growth by providing affordable infrastructure.
Karnataka, which offered a red carpet welcome to the private sector by starting the country’s first private bank and first private education institute, is now luring the private sector for “state building”. The state, which houses the leaders of the global market, is utilising the public-private partnership (PPP) model to create infrastructure — the much-needed component for the growth it envisions by 2020.
The state has a department headed by an Indian Administrative Service officer to formulate plans for this purpose. It is planning a special infrastructure policy to drive development.
The department was established in 1996 to play a significant role in developing air, rail and maritime connectivity for the state and also encourage increased private investment in public infrastructure through public-private partnerships.
Raj Kumar Khatri, secretary to the Infrastructure Development Department, Karnataka, believes the state is on a vibrant growth path and the vision of the government for 2020 specifies high growth through the provision of infrastructure that is affordable, safe and secure. Karnataka, the leader in software exports from India, is planning to increase its rail density, because the railways provide a major part of the state’s logistics.
Presently, the state’s rail density is around 16 km per 1,000 sq km; with an investment of Rs 25,000 crore the state intends to increase this to 41 km per 1,000 sq km. It also has rail projects involving an investment of Rs 24,000 crore under implementation, which will add 2,137 km of new railway lines. Apart from laying new rail tracks, the government has projects for gauge conversion and doubling of tracks.
The state is also investing heavily in increasing connectivity to various locations by road and air. The expansion of the terminal and runway is in progress at the Bangalore International Airport (BIAL) as part of Vision 2020.
“We have a vision for 2020 to make Karnataka a favourable destination for investors, industry and best state for common people to live. Keeping this in mind we are developing various projects in sectors like the railways, road infrastructure, energy, airports, seaports and water supply, among others. We need to invest more than Rs 30,000 crore annually for the next nine years to do this,” said Khatri.
The state is a pioneer in adopting the new PPP model. Currently, the state has a portfolio of around 105 projects in the PPP model. Government sources said that of the PPP projects, 23 are in various stages of implementation, bids have been closed for around 30 projects and 52 others are in the development stages.
Karnataka is also in the process of enhancing state highways 23, 20 and 25 through private partnerships as toll-based build operate transfer (BOT). The tenders for the projects are already in progress. In addition to this, there are 10 projects where feasibility studies have been undertaken.
“The state government understands the need for and importance of private players in creating infrastructure for the state. Other than roads, in the aviation sector we are sorting out ways to include the private sector in the development of airports in the state,” Khatri said.
One of the key reasons for inviting the private sector to partner the state government for infrastructure was the constraint of availability of financial aid from the Centre for projects of utmost importance to the state. Various sectors in Karnataka are witnessing exponential growth and traditional ways of fund allocation from the Union government through various projects and plans were inappropriate.
According to the government, the PPP mode helps in facilitating investment and speeds up project execution. There are a few success stories in the infrastructure sector through PPP, but the model also poses challenges. The challenges dogging project delivery are at the pre-tendering stage, the execution stage and the financing stage.
“Poor planning and engineering at the pre-bid stage, low risk assessment capabilities, land acquisition issues and weak institutional capability of nodal agencies are some examples,” says Khatri. To overcome these issues in the rail sector, which the state government considers vital for growth, it is planning to approach the Railways as a private partner in rail development projects in the state. This is the first of its kind in the country, where a state bids as a private partner.
