India@75: A nation in the making

Should PPPs Be Private?

Putting public private partnerships under the purview of RTI will bring in greater accountability

Published: Oct 4, 2010 06:37:36 AM IST
Updated: Sep 27, 2010 04:40:37 PM IST
Should PPPs Be Private?
Hyderabad International Airport

An audit by the Comptroller and Auditor General earlier this year on public private partnerships in the highways sector exposed several lapses in the manner in which projects were commissioned and executed.

The report said that the Jaipur-Kishangarh and Satara–Kagal highway projects were commissioned without a detailed project report (DPR), which is a prerequisite for any infrastructure project. In the Delhi–Gurgaon project, additional works to the tune of more than Rs. 140 crore were sanctioned without seeking any explanation from the DPR consultant on why they had not factored in these works while preparing the project report.

If the CAG had not published the report, such instances of mismanagement of PPP projects may not have come to light.

Why is this important? PPPs, today, are the preferred way of doing infrastructure development in the country. Until now PPP projects were in the twilight zone of accountability. They are not publicly listed so there’s no shareholder pressure on cost overruns or sub-optimal returns. They are not totally government operations either. “There is a problem with the PPP regime in India in terms of transparency. Information on concession agreements and other matters pertaining to these projects is hard to come by,” says Partho Mukhopadhyay, an expert with Centre for Policy Research, a think-tank based in Delhi.

Although India passed the Right to Information Act in 2005, it is powerless when it comes to acquiring information on projects executed by the private sector.

For instance, last year the Andhra Pradesh information commission had declared GMR Hyderabad International Airport Limited (GHIAL) a ‘public authority’, making the airport operator legally bound to answer requests for information. The government holds 26 percent stake in GHIAL. But, GMR, the private partner in GHIAL, has filed a writ petition in the Andhra Pradesh High Court challenging the information commission’s order.

According to officials with the Central Information Commission, over 500 cases are being heard on RTI related matters in high courts across the country. Officials say around ten percent of the cases may pertain to the private sector.

But an order by the Chennai High Court earlier this year has revived hopes of more disclosures from the private sector. It held that if a private company were to provide services that were hitherto provided by the government, it would come under the purview of the Act. “When a State Government instead of itself undertaking a work, if it allows an agency like the petitioner Company…it is very much a public activity over which public interest can generate,” the court said in its order.

This should encourage more requests for information on PPP projects. Wajahat Habibullah, Chief Information Commissioner, Central Information Commission, says that the Chennai order would definitely help commissions across the country order in favour of releasing information on private sector projects. “We cite the court’s observations in our orders and therefore this order would help information commissions to order more disclosures from the private sector,” he says.

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(This story appears in the 08 October, 2010 issue of Forbes India. To visit our Archives, click here.)

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  • Manoj

    This is a good move, and will help the high-quality players do a better job in PPP projects, and discourage players with poor internal processes. However, CAG needs to define these audits scope and objective properly. They cannot be done the same way as government tenders, or the 3rd P - partnership will be the casualty. Unfortunately, few in CAG appear to understand this. As a start point, the audits should focus on (a) validating the rationale for PPP, benchmark the real benefits to those envisaged (b) focus on construction and also the operations (c) examine whether pricing, costs and investment payback is on schedule. If not, they should alert the nodal agency to prepare for remedial actions.

    on Jan 15, 2013
  • Joseph

    Public part of PPP can be and should be audited and monitored; Private companies will not like to make their cost structures and their operations public for fear from competition. This might actually be a setback for private firms coming forward for PPP model.

    on Oct 4, 2010
  • Anjani Kumar Srivastava

    It is a very good article written by K.P.Narayana kumar, as it is general prevalence all over the country. Nobody can challenge the arbitrary policy distortions and implementations by Private players in the infrastructure development field. There are no clear cut laws stipulated in the constitution that when a Private company owner uses blatantly its power to suppress the information and involves in deep neck corruption efforts to mint the huge black money and wealth, and for this they need only those workers-employees with them who can work according to their whip and directions. India Inc. needs urgently strict laws and accountability rules for the private companies in infrastructures sectors, or any other field like Education, Health, Medicine, Power, Consumer durables, etc.

    on Oct 4, 2010