3.25 The survey of state and central agencies revealed that, at present, they have 52 PPP projects at various stages of development prior to contract award. Roads, rail and ports are most prevalent, with 39 of the pipeline projects in these sectors (13, 14 and 12 PPPs, respectively). In urban infrastructure, there are 12 PPP projects in the pipeline, with 3 in water & sanitation, 6 bus terminals, one waste management, one light rail and one ferry project. Across states and central agencies, the leading developers of these pipeline projects are RVNL (12 rail), followed by Karnataka (9), Maharashtra (7), and Orissa (7).
3.26 PPPs have the potential to be used more widely in India for the delivery of basic infrastructure services. But a set of policy, regulatory and capacity issues will need to be addressed for this to happen.
3.27 As noted earlier, PPPs have been used more in situations where substantial capital investments are required, and where user fees can be accessed to defray much of the costs. This approach excludes projects where the government remains the purchaser of services but where efficiency gains can be achieved through going the PPP route relative to traditional public procurement. A clearer policy rationale, and one that does not rely largely on the "substitution" rationale and more on the role that PPPs can play in improving the efficiency and quality of service delivery will be important in broadening their usage where they lead to lower life-cycle costs.
3.28 Political and regulatory risks involved in PPPs are still perceived to be substantial by the private sector. These risks are likely to be perceived as lower where a state government or a particular agency has developed a track record of bringing well conceptualized PPPs to the market and honoring contractual commitments, particularly where state governments or state enterprises are not financially strong. Although there are differences within the country, these risks remain.
3.29 Some of these risks are manifested in slow and fragmented approval processes for infrastructure projects that successful bidders must negotiate. As well as increasing risks, the delays increase the overall cost to bidders, and hence the costs to taxpayers and consumers.
3.30 Finally, a broader, but successful PPP program will require the public sector to develop better capacities to identify possible PPPs, to develop bankable contracts and bid them out, and to monitor their performance and costs. Informal feedback from the private sector suggests that governments still float unrealistic PPPs, for example. Moreover, since PPPs are not a panacea and entail costs to the government, capacities must be strengthened if these programs are not, down the road, to lead to substantial costs for the governments concerned.