January 03, 2015

Turn the PPP model on its head

In this Business Standard article, Rajiv Lall, Executive Chairman of IDFC, says:

"Over the past three years, confidence has taken a beating and private infrastructure development has been set back by a combination of regulatory uncertainty, bureaucratic delay, and allegations of corruption. Investment in infrastructure has fallen drastically. But India still needs an additional $1 trillion in infrastructure investment over the next five years. Unless remedial action is taken, this will remain elusive. Before the next wave of infrastructure asset creation can be launched, we must learn from the lessons of the past... 

... Our recommendation is to turn the orthodox PPP model on its head. Instead of getting the private sector to build, own, operate, and then transfer the asset to government - in other words, to take the cost and high risk of green-field construction on to itself and then transfer an operating asset to government - our recommendation is to reverse the process. The government or a public sector entity should take on the cost and risk of green field construction. It should then sell down the project to private investors once the asset is generating operating cash flows."

Read the full article here.

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