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Infrastructure projects — Policies still not conducive for pvt investments: Crisil

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MUMBAI, May 29

INDIA'S hopes of attracting substantial private investments in infrastructure have not materialised, according to Crisil Infrastructure Advisory. In a press release it says that successful public-private-partnership (PPP) formats have not emerged. This means that a large number of projects have been unable to attract private sector interest or financial closure.

However, the agency believes that large investments into infrastructure development through PPPs are possible if workable solutions are developed in the policy and legal environment, the governance structure, and project development. According to Crisil, the organisation has been advising Union and State Government agencies to create an environment that encourages private participation in infrastructure.

According to Crisil, a stable legal and policy environment is essential since many Indian statutes were formulated before PPPs emerged and hence, provisions for PPP are inferred from the absence of any restrictive clauses to the contrary rather than from any specific enabling provisions. It has quoted the Indian Ports Act, 1908, as an example.

The gaps in the India's complex governance structure often result in a lack of coherence in approaching PPPs and consequently, inordinate delays. This has been a cause of concern for both domestic private sector and foreign investors, who feel that the top leadership's efforts to invite private sector participation in their States are often diluted by the lack of responsiveness in the middle and lower rungs of the Government. Thus, it is necessary to evolve a process that minimises delays.

The third issue is the improper project development exercises undertaken by various government agencies. In the rush to divest full responsibility of BOT projects to the private sector, these agencies often overlook the lesser options of partial privatisation and management contracts, which are more workable for nascent sectors in the Indian context. The issue is further compounded by the lack of reliable baseline data, resulting in over-optimistic projections that have low probability of fructification.

The agency says that in its eagerness to privatise, government agencies overlook larger unresolved legal and policy issues that hang over PPP projects, which in the long run, delay and adversely affect their successful implementation and operation. It believes that gaps at all three levels need to be addressed in an integrated manner to ensure the long-term success of PPPs.

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