Modi has been pitching for inclusion of another P in this model i.e., 'People'. The P4 model would an all inclusive model and can bring about a different perspective to the whole infrastructure development.
I had a dream of the different way of implementing this model. Only the financial wizards can explain whether it is feasible, economical, workable and all the others 'able's of this model, but it is really a wild thought.
Some of the follies in the PPP model are:
1) The infrastructure development goes into the hands of the Private with oversight by Public, but in many situations the implementation is fraught with delay or escalation or political wrangling due to change in policy makers etc.,
2) The BOT model started to squeeze the public by way of high user fees and make the fruits of the development not reachable to the low strata of the society
3) Only few of the top industrial houses get all the projects and thus we are moving the wealth mobilised from 'Many-to-few'.
4) Since only a few players are operating in this model, the corridors are power always knocked by them to get their favours done and in that process corruption becomes inevitable and in-built in the model.
5) On the operational side, the PPP model gets financed by a consortium of banks, who have not much wherewithal for managing the financial details, including the risk management of such large financial arrangements. The absence of technical knowledge of the projects and risk management framework are the primary reasons for such a huge proportion of the NPAs in the banks. The accountability is lost and expertise is lacking.
I can site many more inadequecies like the above , but my objective is not that. I am proposing a model that can have dedicated funding process, the all inclusive approach can be achieved, and spare the Govt from finding the resources in the budgetary allocation process.
I suggest to float a special purpose vehicle (SPV). Though this may not exactly a SPV, as it will be a continous process and can thus be called Special Purpose Bank (SPB).
Govt can set up an Infrastructure Development and Investment Aid (INDIA) Bank to start with. The objective of this set up is to have a Big Bank that can meet the Tier I capital requirements to reach out to the other global banks. We have had IDBI, ICICI, IFCI, NABARD etc., to fund the industrial growth of the nation during the earlier five year plans. The INDIA Bank could be a similar bank, but with greater financial outlay, with focus on financing the infrastructure development activities. The bank can be set up with capital contributions from the nationalised and private banks, SBI, Govt and through IPO to the public. Assuming that the banks contribute on an average 3,000 Cr per bank (which is not a big amount considering the investment portfolio of these banks and by divesting some of the investments) you get about 1.00 lakh crores, Govt (Central and State) chipping in matching amount and an IPO to ensure people participation, the capital contribution can exceed 2.00 lakh crores.
The capital of SBI as of Mar'14 is less than 750 crores and comparing to that the INDIA Bank will be a mammoth bank and can go to international market to borrow at competitive rates and start financing the infrastructure projects. The Central Govt, can expedite the projects completion as many projects can be started simultaneously and budgetary constraints and fiscal deficits etc, cannot be anymore restraining factors. Govt only need to define the policy and identify the areas for development. While the existing banks can concentrate on Large and SMEs, the MEGA project financing shall be through the INDIA Bank. This bank will be a 'too big to fail' establishment and thus can ensure stability of the financial sector. Unlike the earlier banks (IDBI, NABARD etc) this need not be a indirect bank engaging in refinancing activities only but can be a direct project financing bank.
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