Mandatory monitoring of PPP projects a good idea
Though India’s engagement with public private partnerships (PPP) hasn’t been that old, the cracks in it are already beginning to show. The most recent, and vivid, example of this is the ongoing spat between Reliance Infrastructure, the concessionaire for the Delhi Airport Metro Express and the Delhi Metro Rail Corporation which gave out the concession. While the latest is Delhi Metro accusing Reliance of allowing safety to worsen to such an extent that the services had to be suspended and indicating it was happy to do so since it wasn’t making money on the line, what’s lucky is no accident took place while the line’s safety was compromised. And while no one in authority seemed to be aware of just how bad things were on the airport line, of the 249 oil blocks awarded under NELP, the Prime Minister’s Office (PMO) is just learning, 73 have not been able to access the blocks as they haven’t got clearances from the navy, the air force, the DRDO, etc. In the case of ONGC’s KG Basin block, it took two years to get permission to drill six more exploration wells—in this case, the file was held up at the Directorate General of Hydrocarbons. One company, Cairn India, actually declared force majeure on four of the blocks it won in a bid conducted by the government of India. Over R10,000 crore of contractor funds are stuck with the National Highways Authority of India, though not all of this is PPP money. Similarly, in the case of the Nhava Sheva International Container Terminal (NSICT) where the CBI has just been given permission to prosecute ministry officials as well as those from the regulator, it seems NSICT was allowed to overcharge cargo for years, enabling it to earn a 100% return on equity as opposed to the 20% allowed by law.
It is to try and fix problems such as these—of PPPs getting stuck and PPPs ripping off users—that the Cabinet has cleared a mechanism to monitor PPP projects. Theoretically, line ministries should be monitoring such projects anyway, but the normal tendency has been to forget about the projects after they are awarded unless there is some major problem that necessitates monitoring them. Which is why, after various state governments had awarded contracts to firms to set up power projects, no one kept tabs on whether the projects were doing all right. It is only after matters reached crisis point that the PMO got to know that 30,000 MW of completed power projects (another 20,000 MW are being completed and will be in a similar situation in a couple of years) were hostage to Coal India’s inefficiencies. The PMO still hasn’t been able to come up with a solution, given how the problem has been allowed to magnify so dramatically, but if there is timely monitoring, the chances of success will be that much more.