Wednesday, July 1, 2009

Private Public Partnerships : Who is the boss ?

The most preferred model of building infrastructure today has become the public –private partnership. It is almost as if the government has somewhat shamefacedly admitted that their attempts to create infrastructure of any kind has not kept pace with the demands of the growing population and its requirements. But since complete privatization is still considered taboo, the state attempts to keep a foothold under the guise of a partnership with the private sector. But the word partnership is more or less a sham as the government , intentionally or otherwise is really a sleeping partner, having more or less abdicated key decision making powers, even when there is a key public interest involved and the government has on occasion a stake as high as 49 percent in the company’s equity holding.

Witness Delhi’s current power woes. The electricity distribution companies have lost all control over the situation and the electricity situation is as bad or worse as when power was supplied by the government run Delhi Vidyut Board. The government is not doing any thing more than having “stock taking” meetings and the chief minister is wringing her hands more or less expressing her helplessness to do any thing in the matter. Now of course, we all know that the fundamental issue is a shortage of power and of course we know that Delhi produces less than 50 percent of its power requirements. We also know that power plants can not come up in a day or even in a year and there are limitations on how much any one can immediately do. But surely, the situation can be managed a lot more tidily ?

Electricity is not the only field. Take airports for instance. In most of the airports that are being modernized today, the government is a stakeholder along with the private developers. Yet here too, the government remains a sleeping partner, appearing to rubber stamp decisions made by the private players involved. The user development fees charged at airports were mostly rubber stamped by the ministry of civil aviation , even though a an industry body as respected as the IATA recently commented that the charging of fees in lieu of amenities that would only be provided in the future after the airport is fully modernized is unethical.

Then look at schools and hospitals. Again after acknowledging that the government has on its own been unable to provide quality education , it has roped in the private sector as a partner. Private institutions got land at throw away prices and a host of other exemptions, with the proviso that in lieu of this , the public=private partnership based institutions would offer concessions and facilities to the poorer sections of society.

Have we noted the inherent flaws in the PP model ? It is essential to take note of the fact that the private sector will only penetrate sectors that are fairly certain to be money-spinning. Private investment will be ready to move into communications), but the same eagerness will not be seen in the case of rural sanitation. The distinction between the public and private sectors is not primarily in terms of operational efficiency as is often maintained (favoring the latter, often considered to be self-evident too), but in the manner in which the two recognize public need and respond to it. From this perspective, the private sector ought to be only be the junior partner in PPP, and the public sector must retain considerable powers to intervene when the acknowledged service obligations are not being met. But will it happen ? Not likely in the near future, by the looks of it.

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