Gujarat shows the way in PPP model
Mar 06, 2014
Source : The Times of India


AHMEDABAD: Public Private Partnerships, better known as PPP, in infrastructure development are vital components for the rise and growth of any city in general and its property market in particular. Since, the government in most of the cases either lacks the funds or the expertise to develop the big ticket project, this model has been envisaged for fast track development. However, since its inception as a viable model of developing infra projects, it has been in the news for all the wrong reasons. Barring a few successful case studies, it has mostly ended up in blame game between the government agencies and the private parties.

“PPP in India is not about public and private partnership but an arrangement of client and vendor where the term ‘partnership’ is missing. The reason why the PPP model has not really taken off the way it has been envisaged is due to the fact that the developers have been treated as the vendors who have to supply and the government agencies are not willing to take the onus even where it is due, like in case of land acquisition or any other hurdle where the government can facilitate the private partner. Unless the government agencies are a willing partner with active participation to make the project viable for the private players, it will never be an attractive proposition for the developers,” says Neeraj Bansal, partner, Real Estate and Construction with KPMG India. Bansal’s take is very much a reality across the country but Gujarat shows the way how PPP projects can be a success story.

In fact, Gujarat’s success in developing projects under PPP model does not depend on a single factor but there are a combination of reasons that create the necessary ecosystem. First of all, in Gujarat, the state government has been an active partner and has efficiently utilised the PPP model for development of overall infrastructure of the state. In fact, Gujarat has garnered maximum share of about 36 per cent in the total number of completed projects put to service delivery under PPP model, as per a study conducted by ASSOCHAM. Also, of the total 227 PPP projects worth Rs 68,000 crore under operation in India as of December 2011, Gujarat accounted for about 31 completed PPP projects worth Rs 24000 crore.

Analysts believe that Gujarat, with its comprehensive and sustainable growth is rapidly emerging as a globally preferred place to live and make steady investments. Gujarat has directed all its efforts towards productive development in every possible manner. Be it infrastructure or economic capacities, this state is an ideal specimen of progress for all the states to emulate. Developers have also realised that the execution is much risk-free in this part of the world.

The climate of trust between the government and the private developers is the key in the private parties taking up more and more PPP projects. What makes the eco system conducive for the developers in this part of the world is the fact that there is a stable government in the state. Furthermore, the policies once laid out have not been rolled back or reviewed with retrospective effect. On the contrary, the state machinery has been an active partner in facilitating the execution in a fast track manner.

Revati Kasture, CGM and head- Research and Grading with CARE Ratings, seems to share the same sentiments. She explains, “Some of India’s first infrastructural development projects like expressway from Ahmedabad-Vadodara in 2004, Liquid Chemical Port Terminal at Dahej and state wise gas grid of 2500 km in Gujarat are through PPP model only. Currently 78 PPP projects are under implementation and 26 projects in pipeline. Gujarat government has also amended the GIDC Act to provide better assistance to players in PPP model.”

She adds further, “Gujarat government has already extended the PPP model to all the major infrastructural developments in the city including road, railways, ports, hospitals, educational system etc. Other prospective areas for implementation of PPP model could be conservation of heritage properties, development of leisure destinations and development of SEZs and SIRs. PPP projects help in building quality infrastructure and maintaining it in an efficient manner. With the overall development in the state, demand for both residential and commercial space is increasing, augmenting the real estate market in the state.”

While the developers in many other parts are cribbing over the inaction of their public partner, the developers in Gujarat are rather vouching for the state’s pro-active participation in rolling out the facilities that make PPP an attractive proposition in the state. This is what is making Gujarat a front-runner state in the successful execution of PPP projects. No wonder, today not only those developers who are Gujarat-based are advocating for the state government’s active role, but even the developers from Mumbai and many other markets are looking for PPP projects in the state.

Dhaval Ajmera, director, Ajmera Realty & Infra, who has entered the Gujarat market agrees that PPP model is beneficial for the state to upgrade its technology, quality infrastructure and government initiatives planned to proliferate accessibility. “The need to boost infrastructure projects is very crucial in both short and long run. The infrastructure enhancement and real estate development is the prime most concern for the progress of the developing economy. With the requisite initiatives taken from government’s end, this will augur tremendously for the real estate growth across the country. Focussed and timely implementation of various infrastructure projects will not only rebuild investor confidence, but also create mass employment opportunities nationwide, providing avenues for betterment of the weaker sections of the society,” says Ajmera.

In a nutshell, PPP has been a success story in Gujarat and it is an ideal market for the developers to enter into partnership projects with the government. This also shows to other states how PPP can be effectively executed without any shrugging off the responsibility to the private developers alone or get into a blame game. Till the time, this lesson is learnt in other markets of India, Gujarat will continue to be the front runner in PPP model of successful infra projects.

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