Issues associated with PPP model

  • Non-availability of capital and Regulatory hurdles related to Land Acquisition, are frequent associated issues
  • They have been used as tool of crony capitalism, and as a means of accumulating land by private companies
    • Many PPP projects in infrastructure sector are run by “politically connected firms” which have used political connections to win contracts
  • It is also argued that PPP is mere a ‘’language game” by governments who find it difficult to push privatization, or when politically it is difficult to contracting out
  • According to Economic Survey-2015, many companies have been “over-leveraging” i.e. bidding beyond capacity and expecting government to redraw contracts
  • The long term finance for PPP projects has dried up due to excessive dependence on banks and lack of proper corporate bond market in the country. Banks are further stressed due to high NPAs and governance issues
  • According to Economic Survey 2015, PPPs have certain inherent flaws in designsuch as:
    • no re-negotiation structures resulting in Project stalling
    • wrongful risk allocation
    • focus on fiscal benefits rather than efficient service provision; no measures to penalise the providers for poor service