2.4.5. Problems Faced by Private Builders Under PPP Leading to Inefficient Implementation

♤ Delay in land acquisition and institutional clearances like forest clearance, defense land handovers hampered pace of construction.

♤ Under PPP, capital completely or partly was to be raised by private player through issuing private equity bonds and borrowing from banks.

♤ But, due to delayed implementation, private players weren't able to pay back loan in time adding to NPA in banks, eventually instigating many banks to stop lending loans

♤ Delayed implementation also affected fund raising through private equities as they couldn't find investors for new ventures

♤ Another area where private players faced difficulty was in assessing the traffic on roads and subsequent designing of roads.

Above major problems over stretched the balance sheets of builders and led them exiting projects.

Global experience indicates that PPPs work well when they combine the efficiency and risk assessment of the private sector with the public purpose of the government sector. They work poorly when they rely on the efficiency and risk assessment of the government sector and the public purpose of the private sector.

India should be careful not to undertake PPPs that do not apportion risks and responsibilities sensibly. Moreover flexibility needs to be built into arrangements so that the contract can be withdrawn and put up for rebid when the private party underperforms. The government needs to study the PPP experience and build some central capacity to help ministries, authorities, and states structure contracts and renegotiate troubled ones.