Private investment in infrastructure: a study of policies and process in road projects in India

Abstract

As in many other countries, India too has been actively pursuing policies to attract private sector participation (PSP) into the infrastructure sectors, to tap private capital, efficiencies and technology. Bridging the gap between the existing road capacities and demand, both in magnitude and quality, can only be possible thus. Infusing PSP in this capital intensive sector, fraught with the risks of high price elasticity, long payback periods, competition from free use alternate roads, political and policy instabilities (mostly in the states) is challenging. The stakeholders lenders, users, government functionaries and most of all, entrepreneurs - with divergent objectives have to agree on certain sustainable ground rules. The policy and institutional environment have to change from the pre-liberalisation mode of government as monopolistic provider to facilitator. New institutions like regulators, independent engineers and independent auditors have to be established in line with international best practices. Policies and capacities need to be proactively updated in keeping with changing market trends and innovations by the government, lenders and investors. The rewards for success can be substantial to all - boost to economic growth, increased investments (including FDI) and exports, creation of employment, profitable opportunities for entrepreneurs, lenders and the auto, construction inputs and equipment industry, reduction in financial obligations and transfer of some risks from the government, decreases in energy consumption and pollution and so on. The goal of this study is to evaluate through interviews with important stakeholder representatives and experts, case studies and records, the crucial policies, processes and institutions that enable this success. Integration of these (sometimes divergent) opinions, resulting from their experience and expertise is simpler when they are broadly similar, but in other cases, this necessitates the presentation of differing views, to be resolved by further studies. Recommendations are made at the end, to remove roadblocks and accelerate PSP in the unique Indian context.