Between fiscals 2008 and 2017, private investments in infrastructure was estimated to be ~Rs 20 lakh crore, or nearly a third of all infrastructure spending during the period. This had transformational impact in several sectors.
And by 2012, India’s public-private partnership (PPP) programme also acquired significant scale. So much so, the World Bank’s Private Participation in Infrastructure (PPI) database ranked India on top among developing nations between fiscals 2008 and 2012.
However, since then, a raft of risks manifested, exposing lacunae in the PPP architecture, leading to a spike in stalled projects and stressed debt, which muted risk appetite in the private sector.
But there are some bright spots, too. To wit, a step-up in public spending has hastened the construction of highways, while proactive policies have unclogged stalled projects. Recalibrated PPP models, including the hybrid annuity and toll-operate-transfer, have helped draw some private investments.
Similarly, in renewables, largely favourable policies and market conditions have led to 18 GW capacity being added in fiscal 2018 alone. Today, the private sector also has a dominant share of airport and port traffic management.
On the other hand, thermal generation is in distress, with ~35 GW of capacity stranded on account of slow demand growth, domestic fuel constraints and delay in pass-through of charges in duties and taxes. As pressure builds to push stressed assets through the NationalCompany Law Tribunal (NCLT) process, sharp haircuts loom. Here, policy actions, including centralised procurement, improving coal availability,decommissioning of old projects and pass-through of costs can alleviate pain.
Also, private investments remain concentrated. Critical sectors such as railways and urban infrastructure have not been able to make fast-enough progress to attract private monies despite their size and potential, while viability of power distribution remains critical to the sector value chain.