The UN is wrong

Can governments effectively control over the private sector and ensure foolproof PPP project planning and delivery?

The environment community has a reason to say I-told-you-so. More people (estimated over 5,500) have died in the Uttarakhand disaster than in the 9/11 attacks. Questions have been raised in the media about whether this was as manmade a disaster waiting to happen-the same media that has repeatedly decried environment barriers to infrastructure projects. Is this, as the United Nations (UN) fears, the fallout of involving private, profit-oriented companies in public projects?

In theory, this could be true. On more than one occasion, Infrastructure Today on its various platforms has raised the uncomfortable question of the efficacy of PPP projects in the current system. After all, governments are liable to be held accountable for disasters such as the recent one in Uttarakhand, yet have lower levels of control in projects where private companies are stakeholders-i.e., in the PPP mode. The UN’s recent Global Assessment Report (GAR) coordinated by the UN’s Office for Disaster Risk Reduction (UNISDR) suggests that the private party has little accountability to public safety as compared to the government. In many ways, this is true: Industry lobbies have been strong enough to persuade governments to allot land, mines and projects.

A look at our alarmingly bad control over development of real estate, mines and water tells a sordid tale. Allotments through competitive bidding should-again, in theory-offset that problem. This means that the government takes primary responsibility for the use of the land and the project. Even in case of approvals, it is the government that must assume that responsibility. Yet when the government rejects a project for environmental reasons, the industry and the media promptly brand it as anti-development since the concerned departments have evidently not been transparent in their guidelines. Clarity with the right intention would have ensured that developers bring projects satisfying norms for the sake of an expeditious clearance.

Planning to avoid disasters should be a tangible part of project management. But environmentally safe projects cost more money, and this is where a combination of corrupt government officials and profit-maximising entrepreneurs can cut corners, sometimes to lethal consequences. Unacceptable quality of construction, non-compliance of R&R and other environmental norms, and encroachment routinely obtain permissions. So, while the UN’s sage inference-that governments should wrest more control over public projects-seems, ironically enough, practical. The UN recommends "building public-private risk governance and disclosing disaster risks and costs on balance sheets of companies".

The other side of the argument, however, is about finance and expertise. High-growth developing countries like India need to galvanise private funding for development projects-and the government has been aiming at a 50 per cent private equity in PPP projects, up from the current target of 36 per cent or so. But on the one hand, the requisite financing will come from keen commercial interest among private players, and there is a crying need to balance the commercial and social interests. Success stories in power distribution, airport development and road-building should be guiding forces in project implementation, and yet an increasing concern remains that large(-budget) projects find themselves being less rosy in viability than earlier projected: The airport regulator questioned why Delhi airport’s Terminal 3 needed to be so lavish; several developers have pulled out of highway PPP projects.

So, while the UN recommendation seems somewhat impractical to implement, it may be more practicable for our governments-central, state and local-to define and ensure stringency in control and monitoring projects. Leaving critical controls to private players could be in conflict of (social) interest. Even after providing clearances, the government must continue to monitor projects on their continued commitment to areas which relate to public safety and good.