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Public-private-peoples’ partnership: A long way to go

The public sector has had its hits and misses, which makes a case for public-private-peoples’ partnerships to ensure that projects are executed within the time frame and not subjected to pressures of any kind

The immediate post independence era saw the rise of the commanding heights of the public sector, primarily because of the lack of big-ticket private sector investments for projects with long gestation periods in remote backward areas like Koraput, Rourkela, Bhilai and Digboi et al. The Soviet-styled Planning Commission chaired by the then prime minister Jawaharlal Nehru committed public funds for large scale plants in the initial years of the country’s initial Five Year Plans.


Later on the private sector was incentivized by union and state government tax breaks and other sops like concessional land acquisitions, exemptions or holidays for income, sales tax and excise, subsidized water and power has came into its own. Thus enthused the private sector spread its wings still wider and moved all over the country, but essentially in the metro areas.


The funds requirements of both the public and private sectors still remain insatiable. They certainly cannot come out exclusively either from only the state exchequer or private individual or corporate equity and debt investments. There is a need for both to chip in together. The PPP (public-private-partnership) kicks in here.  


With need of time and changing circumstances, the governments raised funds from the investing public at large by issuing bonds. The liberalization brought in the continuing disinvestment process with the state gradually off-loading its holdings in PSUs selectively.  Many of these PSU Navratnas are today’s sizzling Sensex toppers sidelining the private sector giants.


At the same time the private sector also has been collecting funds in addition to public issues by drawing on governmental development finance institutions and commercial public sector banks for working capital. Now the Indian investor public has opportunities for equity participation in PSUs via listed shares. India Inc too has large equity investments from governmental institutions like Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). Undoubtedly the great deal of cross-holding and investment of both the public as well as private individuals and entities simply cannot be wished away or simply ignored for all practical purposes.


There is no doubting the success of the private sector participation in telecom and power where both the private and public sectors independently operate and co-exist in perfect harmony. India’s tele-density has attained 80% of the population primarily because of its private players while state-owned Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL) continue to operate successfully too.


 The private sector accounts for over half the power generation capacity added in the last two years. The record of transmission & distribution (T&D) losses of the state-owned power entities to say the list is dismal because of its much inefficiency. The massive July 2012 power outages in the entire North, East and North-East speaks for itself.


The record of PPPs has been mixed in highways projects. There is an urgent need to effectively utilize inland waterways for transportation under the PPP model as it is proven an inexpensive and efficient mode of transport. While  neighbouring Bangladesh transports 30% of its goods, Germany 20%, the US roughly 14% and China has demonstrated the success of inland waterways, India with a navigable length of 14,500 km only a third is being used by mechanized vessels making it just 0.15% domestic surface transport. Though there is a tremendous potential estimated by the National Waterways—even shifting just 1 billion tonne/km out of Ganga’s 50 billion/tonne km would reduce fuel cost by Rs25 crore and transportation costs by Rs45 crore and reduce pressure on rail and road as bulk carriers. There is an urgent need to fast track the Varanasi-Haldia stretch of the Ganga in Bengal, the Brahmaputra in Assam to transport coal, foodgrain and fertilizers and promote tourism in the inland stretch in Kerala. Inland waterway transportation can enhance tremendous fuel efficiencies; it is an eco-friendly and cost effective mode of transporting over dimensional hazardous and bulk cargoes


This makes for a strong case for kick-starting greater PPP in all sectors of the economy more particularly in the infrastructure projects involving large positive externalities or where capital expenditure costs take longer to recoup.  It is beyond any private sector operator on its own. The metro rail network not only enables people to travel, it also helps reduces congestion on roads and leads to less pollution and deaths due to accidents all of which cannot be quantified or priced. This holds true even for rural roads and irrigation that have natural public good factor that are positive externality-creation characteristics making them less suited for execution by the private sector alone thus making substantial public sector or joint sector/PPP investment inevitable.         


But it has been far from inspiring in the case of metro railways and airports where they face troubled existence culminating in ‘temporary’ suspension of services. Though the Kolkata and Delhi metros have done well, those of Bengaluru and Mumbai are still undergoing teething troubles. The Hyderabad Metro construction has just begun under a new promoter, four long years after it started. The move to handover the Chennai airport to private firms just after the Airport Authority of India spend over Rs2,100 crore on completing its revamp is being questioned. The other international airports across the country have had to hike user fees to defray the extremely high expenditure in modernization making them rather pricey.


The ideal situation for the success of the PPP-P—added with the fourth ‘P’ for people—means and includes dedicated individuals, professionals, retired experts and civil society groups to bring in an ideal match with the public sector or local bodies like municipal corporations who are found to be sitting on extensive real estate and premises, infrastructure like roads, empty building premises and facilities which they have already spent crores on development over the years on the one hand and the expert administrative and managerial capabilities of professional manager from the private sector by way of a dedicated band of managers chipping in with their talents .


Over the years the public sector acquiring near monopoly market conditions essentially in mining, telephones, airlines got mired in massive inefficiencies, indulged  in corrupt practices, got subjected to political pulls and pressures more particularly in the matters of procurement and personnel  appointments. The success of joint sector entities like the Delhi Metro and Konkan Railways are attributable more to the incorruptible personalities of veterans heading them like E Sridharan and Rajaram Bojji respectively that kept them out of the suffocating conditions suffered by the PSUs to effectively deliver quality systems on schedule and bring in home-grown innovations like the Konkan Railway’s Anti-Collision Device.


Not that everything is gung-ho with the capitalistic private sector. The financial meltdown that began in the US in 2008 has bared the chinks in the armour of the so-called free market economics which are now found to be everything but truly free coupled with regulatory failures all over. The post-IPO insider trading, siphoning funds by over-invoiced procurements, ghost employees a la Satyam, dubious transfer pricing for imports, questionable accounting practices are some of the common transgressions attributed to the private sector.


The PPPP model with the effective oversight of national watch dogs like the Central Information and Vigilance Commissions subjected to audit by the CAs and the Comptroller & Auditor General of India (CAG) can certainly help mitigate much of the shortcomings. The audit by independent statutory auditors also overseen by the CAG makes for an effective double check.


The public authorities, be it the municipal corporations, railways, airports, PSUs or defence cantonments are sitting on massive idle lands and structures. All these and related infrastructural facilities  can be put to effective use as public stake/contribution/equity participation with the people and private sector piping in with their superior intellectual and managerial talents in addition to agreed financial stakes. At the same time it should be ensured to safeguard the property and premises by taking care to see that they do not under any circumstances fall victim to scams. This was curbed to a great extent by Shailesh Gandhi when he was a Central Information Commissioner.


In October 2011, in their suggestions & comments on the National PPP Policy Moneylife Foundation had made a submission to the ministry of finance (MOF) that the entire PPP process should be placed on the website, the assets of the PPP should be held in the name of people/project, time frame for holding and revenue sharing on BOT, open to Right to Information (RTI) information scrutiny and CA/CAG audited.  


The success story of the multi-specialty hospital-cum-retirement home for senior citizens-orphanage Matru Chhaya, at Bengaluru run by the Canara Bank sponsored trust is a classic case of the good of PPPP in action.


Only last week the Mumbai Municipal Corporation has approved the proposal to hand over management and administration of its primary schools running from their vast premises across the city.  It is hoped that the drop-out rates will be brought down by better school management.


(Nagesh Kini is a Mumbai based chartered accountant turned activist.)



Life Exclusive
US presidential polls: Mitt Romney’s bet

Mitt Romney’s bet now is that the economy will be so bad that the American people will forgive him for anything to get a new start

Is Mitt Romney too rich to be elected the president of America? Is his enormous wealth a liability rather than an asset particularly when America is going through hard times? Is his money too in your face to Americans? This is a question worth pondering because if Mitt Romney becomes president he will be the richest man to be elected president of the United States. His wealth is estimated to be around $250 million. According to People magazine though he did not work in the last year he was making $50,000 a day. If you take the wealth of the last eight presidents from Richard Nixon to Barrack Obama and double their wealth then it adds up to something near Mitt Romney’s wealth.

Nelson Rockefeller from the storied Rockefeller family ran for president thrice seeking the Republican presidential nomination in 1960,1964 and 1968. He was the governor of New York between 1959 and 1973. He was selected by Gerald Ford to be his vice-president after he became president on Richard Nixon’s resignation. He never won the Republican nomination and never became the president of the United States .Was his wealth a barrier? Similarly Ross Perot a billionaire ran for presidency as an independent candidate in 1992 and 1996 but did not make much headway. He too failed.

Per se money should not be a problem to get elected. However it is what money seems to do to people and particularly what it seems to have done to Governor Mitt Romney which is the issue here. Mitt Romney seems to lack the common touch .He seems to be insensitive to people and doesn’t seem to understand that may have feelings, too. His comments about Jewish culture being superior recently riled the Palestinians. It is impossible to think of any president including Dubya (George Bush) saying something similar. On Governor Romney’s first trip abroad after he became the Republican candidate for president, Romney’s insensitivity was famously on display in London.

He took pot-shots at the organisers for mis-steps in organising the Olympic Games and bragged about his superior organising abilities when he helped to organise the Winter Olympic Games at Salt Lake City in Utah. David Cameron the British prime minister had to point out that organising Olympics in the middle of nowhere was different from organising the Olympics in one of the busiest cities in the world. The prime minister would have also done well to point out that Summer Olympics are slightly larger with probably twice as many events as the Winter Olympics. There was a famous gaffe of Mitt Romney where he said that if he became president the relations between Great Britain and the United States would improve because they were both Anglo Saxons. This was around about way of pointing out that President Obama was black. This also highlighted Romney’s insensitivity and being out of touch.

Then there is the famous Romney horse in the Olympics which is participating in an event called Dressage which is some sort of “Horse Ballet” but is a sport for the richest of the rich and it draws attention to Mitt Romney’s wealth. There is also the vexed question of the non-release of Mitt Romney’s tax returns beyond the year. His father famously released his tax returns for 12 years when he was running for president. Governor Romney is not releasing his tax returns beyond a year on the ground that the Democrats will distort them. Is is specious at best and is going to hurt Romney sooner or later. He might also be the first presidential candidate who had a Swiss bank account and funds in the Cayman Islands. Ordinary Americans I am quite sure do not understand all this. They probably regard all these things as petty alien.

Butt Mitt Romney was the head of Bain capital, a venture capital company, and venture capitalists by their very nature are betting men and Mitt Romney was obviously a pro. Mitt Romney’s bet now is that the economy will be so bad that the American people will forgive him for anything to get a new start, to get a second chance. For that very reason he discusses only the economy and does not dwell on other issues for too long. Judging by his recent speech on foreign policy he might not be too interested in other issues and his bet is that in the present circumstances neither are the Americans.

Mitt Romney bet big-time at Bain and won big-time but presidency may turn out to be a different cup of tea.

(Harsh Desai has done his BA in Political Science from St Xavier's College & Elphinstone College, Bombay and has done his Master's in Law from Columbia University in the city of New York. He is a practicing advocate at the Bombay High Court.)


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