1.1 India has had policies in favor of attracting private participation in the infrastructure sectors since economic reforms were introduced in 1991. These initiatives have met with varying degrees of success, but real progress has been made in some sectors, first in telecommunications, and now in ports and roads, and with individual projects in other sectors. The central government and the states are hoping to build on this progress, both in sectors where few private projects have been realized as well as scaling up their use in sectors where progress has already been made. Many of these projects will not be commercially viable on the basis of user fees alone and will require financial contributions from the public sector in addition to substantial amounts of risk bearing. In some cases the government will be the purchaser of the services.
1.2 These public private partnerships (PPPs) can help meet the infrastructure gap in India, but are not a panacea. They represent a claim on public resources that needs to be understood and assessed. They are often complex transactions, needing a clear specification of the services to be provided and an understanding of the way risks are allocated between the public and private sector. Their long-term nature means that the government has to develop and manage a relationship with the private providers to overcome unexpected events that over time can disrupt even well-designed contracts. And they all involve services for which, in the eyes of citizens, the government ultimately bears responsibility, even if service delivery has been contracted out.
1.3 Governments embarking on PPP programs have often developed new policy, legal and institutional frameworks to provide the required organizational and individual capacities. These go beyond that needed to originate and financially close PPP deals, as they must also ensure that these deals are affordable to users and the public sector and provide ex-post evaluation of the success of PPPs in meeting their objectives. This framework needs to be in place in India to ensure a robust and successful PPPs program.