The Hindu Business Line : Track PPP's health

``Tube carries one billion passengers for first time,'' announces Transport for London (www.tfl.gov.uk), in a press release dated March 28. The number is the tally that London Underground (LU) or the tube could achieve in fiscal 2006-07; a record in its 144-year history. On this, the London Mayor Ken Livingstone has said that London is ``challenging New York as the world's most important financial centre'' and reinforced `the need for substantial investment to increase the capacity of the transport system', which is crucial to London's economic success. "On average, the Tube carries just over three million passengers each day, rising to 3.4 million passengers on weekdays," one learns from TFL's site.

Passenger density

In comparison, the `locals' of the Mumbai Suburban Railway carry more than six million commuters daily, accounting for almost half of the total daily passenger capacity of the Indian Railways. Mumbai, which is vying to become an international financial centre, `has the highest passenger density of any urban railway system in the world,' informs Wikipedia. Indian Railways is `one of the largest and busiest rail networks in the world, transporting just over six billion passengers and almost 750 million tonnes of freight annually,' says http://en.wikipedia.org. With the Tube betting on development using the PPP (public-private partnership), there are lessons in it for the Indian Railways to draw upon.

PPP Principle

On the Tube's PPP, there is useful discussion by Norman Flynn in the fifth edition of `Public Sector Management' from Sage (www.sagepublications.

com). "The PPP is based on a set of performance contracts that include measures of the time and cost of work done, but more importantly of the results, or `outcomes', of that work," explains the author. "The underlying principle of the PPP is that the companies should have incentives to produce the required outcomes for the travellers on the system, measured in the time spent in delays." TFL is Tube's regulator, and the book cites data from TFL's annual report (2004-05), the second year of the 30-year PPP.

Going back to the origin of the partnership in tube, Flynn recounts that TFL was opposed to the use of PPP as a vehicle for investment in the underground railway.

The risks

"Based on the experience of the privatised railway, the Mayor and his advisers thought that the complexity of the contractual arrangements and the leakage of public funds to the shareholders of the infracos (infrastructure companies) presented too great a risk." But the government argued that the risk of underperformance by the existing management of London Underground was greater than the risks from contracting. Eventually, the PPP was forced on TFL, and the payment of a subsidy of £1.1 billion annually `was conditional on a PPP being entered into'.

The latest PPP annual report on TFL's site is for 2005-06, a year that saw `terrorist atrocities' on 7/7. The report devotes about 20 pages to PPP contractual performance, with informative charts. "The Tube is too important to London for the PPP to be allowed to fail," declares the report.

"LU, the infracos, their shareholders, and government must all recognise their role in this. In the coming year we must all build on the successes and overcome the failures."

PPP was the focus of paragraph 45 of the Railways Minister, Mr Lalu Prasad's Budget Speech delivered on February 26. "I am not in favour of blind privatisation of the Railways nor is PPP a compulsion or fashion for us. We are seeking partnership with the private sector on the terms that are in the interest of Railways and our customers," averred the Minister. He spoke of the need for PPP schemes `where one and one make eleven and not two', as it happened in the case of `leasing out catering and parcel services', `wagon investment schemes and siding liberalisation schemes', and `running container trains'.

The options

Mr Lalu Prasad said that PPP options would be explored `with the aim of modernisation of metro and mini-metro stations with world class passenger amenities, development of agro retail outlets and supply chains, construction of multi-modal logistic parks, warehouses and budget hotels and expansion of network and increase in production capacity'. Recent weeks have seen the Railways talking of considering PPP in `locomotive manufacturing units', `high-speed trains to link metros', and `luxurious budget hotels at nearly 100 locations'.

Queerly, the site of Indian Railways www.indianrail.gov.in and that of the Ministry (www.indianrailways.gov.in) don't show any PPP tab. A search for PPP in the former yields strange results such as `purchasing power parity', `point-to-point protocol', and `Pakistan Peoples Party'; the first page of finds ends, though, with `public private partnerships' linking to www.hm-treasury.gov.uk.

A glaring lacuna, it may be, not to have a rigorous PPP monitoring and reporting system, as does the TFL, to ensure that the partnership is healthily on track.