PPP push: FinMin asks infra depts to identify projects for private partnership

The finance ministry has asked infrastructure departments to identify projects that can be executed with private partnership, a person aware of the details said.

The move is aimed at drawing greater private capital into public infrastructure and reducing delays in project implementation, according to the person, who said the focus will also be on improving the fund flow into sectors such as urban infrastructure, railways and roads, where private participation remains either minimal or far from impressive.

The ministry is planning to roll out in this financial year a new public-private partnership (PPP) architecture and a standard model concession agreement (MCA) framework for various infrastructure sectors.


"While the government has walked the extra mile to boost capital spending in recent years, it's also desirable to increase the participation of private players, as the funding requirements in infrastructure remain large," the person told ET on condition of anonymity.

The planned MCA framework will serve as a standard reference document for various infrastructure departments and state-run entities. It will offer enough flexibility to them to suitably build in clauses peculiar to their sectors. The focus will be on making the projects bankable and viable to woo private investors, said the person.

The move comes at a time when broader private investments have started picking up, with senior industry executives expecting a broad-based resurgence in 2023-24.

The government is also nudging central public sector enterprises (CPSEs) to boost capital expenditure without delay, said the person.

In April 2020, a government task force on the National Infrastructure Pipeline (NIP) had envisaged capital investments of ₹111 lakh crore until 2024-25. The Centre (39%) and the states (40%) were expected to have almost an equal share in the NIP implementation, followed by the private sector (21%).

However, the pandemic delayed a revival in private investments, as companies deferred expansion plans. This forced the government to sharply raise its capital spending to prop up economic growth, betting on its high multiplier effect.

The Centre's budgetary capital spending more than doubled to ₹7.28 lakh crore in 2022-23 from the pre-Covid-19 (2019-20) levels, reflecting the hefty increases in allocations in recent years. The capex outlay has again been raised 37.4% for 2023-24 to a record ₹10 lakh crore.

At the same time, the Centre has nudged various infrastructure departments to spend on time, exhausting a bulk of the full-year allocation in the first half itself.

The central government's capital spending surged 59% year-on-year in the June quarter to ₹2.78 lakh crore. It spent 28% of its budgeted capex for the entire year in the June quarter, the highest in five years.

Roads and railways, which have been allocated half of the total budgetary capex outlay for this fiscal, led the spending in the first quarter as well. As much as 38% of this fiscal's allocation for roads and 33% for railways were utilised in the first quarter, according to a Crisil report.