<b>Vinayak Chatterjee:</b> PuPuP - public-public partnership

In this phase of public expenditure-driven infra investments, PuPuP has replaced public-private partnership as the dominant model

It is well-known that when the National Democratic Alliance government assumed power, the public-private partnership model was comatose. The strategy was clear, therefore: if infra investments were to pump-prime economic growth then public expenditure would be the driving force. This has inevitably spawned the format of government entities partnering each other to access complementaries. We thus have PuPuP - public-public partnerships.

PuPuP makes sense for the following six reasons:

i) It allows cash-rich public sector undertakings to finance projects where another statal partner has the mandate and the expertise but is short of capital.

ii) It cuts project development time significantly because the system does not have to go through the lengthy grind of transparent procurement processes to award a project to a private sector player.
 

iii) It allows state governments to partner, thereby providing ready access to the most precious of commodities -land, and right of way.

iv) It still provides the flexibility to engage with the private sector where necessary - either for engineering and construction or life-cycle operations and maintenance.

v) It has the ability to garner the plethora of permissions required quicker, as the system is less suspicious of public sector intentions.

vi) It navigates civil society concerns and trade union fears better. There are no apprehensions about either the family silver being sold (privatisation) or job losses, predatory pricing of public goods by an excessively return-hungry private entity.

Clearly, these advantages are sought to be harnessed in the crop of recent PuPuPs. Consider the following:

• The Ministry of Railways has signed a memorandum of understanding for formation of 50:50 joint venture companies (JV) with six state governments - Odisha, Maharashtra, Andhra Pradesh, Kerala, Chhattisgarh and Telangana.
   
• The railway ministry has signed an agreement with Coal India Ltd (CIL) for procurement and supply of 2,000 high capacity wagons.
   
• The Atomic Energy (Amendment) Bill, 2015 seeks to widen the scope of a "government company" so as to enable the formation of JVs between the Nuclear Power Corporation of India and other PSUs for civil nuclear power projects.
  

 

National Thermal Power Corporation (NTPC) and Inland Waterways Authority of India have signed an agreement for transportation of coal from the east coast of India to NTPC's 2,100 Mw power plant in Farakka.
 

The Airports Authority of India (AAI) has identified several airports it plans to develop through JVs with state governments, including Kushinagar (Uttar Pradesh), Devgarh (Rajasthan), Jharsuguda (Odisha) and Shirdi (Maharashtra). In the newly-built Chandigarh International Airport, the Punjab government's Greater Mohali Area Development Authority and the Haryana Urban Development Authority are equity partners along with AAI.
 

The Indian Rail Port Company has been registered at the instance of the Union shipping ministry. This company would take up last-mile connectivity projects for ports. The first tranche of Rs 100-crore equity would be contributed by the major ports.

 

PuPuPs between the National Hydroelectric Power Corporation and state governments have been used to develop projects in Himachal Pradesh, Uttar Pradesh and the Northeast.
 

The erstwhile Enron-sponsored project, Dabhol, rechristened Ratnagiri Gas and Power Pvt Ltd is a JV owned by NTPC, GAIL and Maharashtra State Electricity Board.

PuPuPs are not restricted to the domestic sector alone. Recent examples in the international arena include:

• International Coal Ventures Private Limited has been set up to achieve the target of making steel PSUs self-reliant in the area of coking coal through a JV composed of SAIL, Rashtriya Ispat Nigam Limited and Coal India Limited.
  

 

"Bangladesh-India Friendship Power Company Pvt Ltd" has been incorporated as a 50:50 partnership between Bangladesh Power Development Board and NTPC.
 

Indian Ports Global Pvt Ltd will now develop the Chabahar Port in Iran. It is a JV between the Jawaharlal Nehru Port Trust and Kandla Port - both government-owned.

In a recent interview to The Wall Street Journal, Prime Minister Narendra Modi re-emphasised the role of PSUs in India's economy. He was quoted as saying: "… both the public sector and the private sector have a very important role to play. You can't suddenly get rid of the public sector… In a developing economy, state enterprises do have a role in some sectors".

Clearly, the times we live in necessitate a resurgent enthusiasm for public systems to deliver, and in partnership with each other. This is strangely reminiscent of the Nehruvian philosophy of "commanding heights" and "temples of modern India". But it does need contextualising; and the nation has to be cognisant that PuPuP, rightfully, can be a preferred delivery model only in the current phase of the economy. "Minimum government, maximum governance" clearly implies that in the ultimate analysis, government should not be in the business of being in business. Ambient conditions need to be urgently created for the revival of PPPs so that the large and available pools of private capital and private enterprise are re-engaged.

Till then, PuPuP is a convenient and useful handmaiden for the ongoing task of nation-building.

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The author is chairman, Feedback Infra. vinayak.chatterjee@feedbackinfra.com; Twitter: @Infra_VinayakCh