Economic Survey: PPP framework needs focus on market building

India’s public-private partnership (PPP) framework needs to move from transaction-centric execution toward system-level market building, with a sharper focus on reducing structural uncertainty, said the Economic Survey.

“Public sector efforts alone cannot meet India’s growing infrastructure requirements. A multi-pronged financing approach is essential to attract the requisite investments from the private sector and long-term institutional investors,” it said. “This strategy requires strengthening resource mobilisation across all levels through innovative measures, including viable user charges and empowering municipal bodies to float bonds for localised resource generation.”

Laying out a roadmap for more PPP projects in the country, the survey called for sectoral pipelines with multi-year visibility on bankable projects, predictable exit and restructuring pathways. It also recommended a renegotiation framework for complex cases to help sustain investor confidence and scale up PPPs, with a focus on emerging and socially critical sectors such as health, education, warehousing, sanitation, urban infrastructure and green hydrogen.

“The Economic Survey has rightly focused on the need to develop a wider array of PPP models with nuanced risk-sharing and right-price infrastructure services that can facilitate infrastructure development significantly,” said the Confederation of Indian Industry director general Chandrajit Banerjee, adding that strong and transparent dispute settlement mechanisms and predictability of policies would ensure certainty in returns.

As per the survey, the next challenge is to extend the PPP maturity seen in traditional infrastructure sectors to a new generation of PPPs in emerging and socially critical sectors where the conventional concession-style risk transfer is often insufficient.

Kuljit Singh, partner and national infrastructure leader, EY India, however, said that to ensure PPPs in health, education and other social sectors, the government needs to form a central agency charged with the exclusive responsibility for implementing PPP in these sectors.

“Further, the government needs to frame model bid documents and also provide budgetary support to kick-start the process of identifying and conceptualising new PPP projects,” Singh said.

Highlighting the challenges in PPP projects at the sub-national level, the survey said trust deficit and a limited understanding of risk–reward principles continue to constrain the uptake of PPPs in several states and urban local bodies.

“There is a need to professionalise PPP cells,” it said, suggesting expansion of construction-period risk mitigation tools, partial credit guarantees in social sectors, takeout financing and standardised refinancing frameworks as potential measures that can materially lower the cost of capital.