The rebalancing of risk in public-private partnership model will go a long way in meeting critical infrastructure, enabling higher economic growth in India. Examine (200 Words )
Refer - Business Line
Enrich the answer from other sources, if the question demands.
IAS Parliament 6 years
KEY POINTS
Flaws in risk sharing
· Actual recovery of user charges by private investors to make the necessary investments viable is not practically feasible, as private sector bears most of the risk.
· Unpredictability of profits by private sector, increase in cost of projects due to administrative delays obstruct the lenders taking risk (providing loans).
· Prevention of Corruption Act, 1988 which does not distinguish between genuine errors in decision-making and acts. So Public servants take less risk in decision making.
· Current model follows “One-size-fits- all” approach in risk allocation; this doesn’t fit effectively for all projects.
· The loss of bargaining power over time by private player in PPPs.
Outcomes of re-balancing risks
· If the state or, a public institution came in as an intermediary by agreeing to pay user charges after a transparent and fair bidding process, private investment could be brought into other sectors like railways, real estate.
· Amendment of the Prevention of Corruption Act 1988 will enable public servants to take fair decisions.
· Effective implementation of Commercial courts act 2016 will decrease the judicial delays and prevent increase in cost of projects.
· A rational allocation of risks can only be undertaken in sector and project-specific contexts while avoiding centralized approach.
· Increasing bargaining power of private players through independent sector regulators help them to secure their profits.
Tapasvi 6 years
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IAS Parliament 6 years
Try discussing the risks of various stakeholders like public servants, lenders, borrowers. Keep Writing.
