returnto an irresponsiblyrejected
past.
Onealternativeexperiment in in-
frastructure investing thathasbeen
pursued for sometimenowis the use
of public-private partnerships
(PPPs). Thatfinds mentionin this
Budget,too,especiallyin connection
withmodernisationandexpansion
of the Railways:“It is estimated that
railway infrastructure wouldneedan
investment of Rs.50 lakh crore
between 2018and2030.Giventhat
the capitalexpenditure outlaysof the
Railways are aroundRs.1.5-1.6lakh
croreperannum, completingeven
all sanctioned projectswouldtake
decades. It is thereforeproposedto
use public-private partnership to un-
leashfaster developmentandcom-
pletion of tracks, rolling stock
manufacturinganddelivery of pas-
sengerfreight services.”
Butas experience in Indiaand
elsewhere hasmadeit clear,in most
PPPprojectsthecostandriskare
largelyborne by thegovernment,
whilemuchof thesurplus,if anyis
generated,accruesto the private sec-
tor.It is notthatthegovernmentis
averseto suchan outcome.Butthe
purpose of the PPPis lostif the gov-
ernment must providethe bulkof the
finance. Withlimitsset on its own
finances, thiswouldnotresolve the
problemof inadequateinvestment in
the infrastructural sector. If the
strategyof relyingon privatefinanceis to work,privatecapitalmustflow
directlyintothe infrastructurefield.
During thehigh-growth years
priorto theglobalfinancialcrisisof
2008,wheninvestment ratesin In-
dia did risesharply, bankfinance was
usedto attractprivateplayers,witha
limitedamountof owncapital. Pub-
lic sectorbankswereencouragedto
increaselendingsubstantiallyto PPP
or privateinfrastructural projects.
Theshareof infrastructurein sched-
uledcommercialbanklendingto the
industrial sectorincreased from 3
percentto almost35 percentover
the 2000s. Bankscompliedbecause
theypresumedthattherewasan im-
plicitsovereignguaranteeattached
to suchlending. Theprivate sector,
on the other hand,obviouslysawthis
as a gift fromthe government,which
wasexpectedto maketheseprojects
remunerative enough to deliver
profits afterinterest andamortisa-
tioncostson debtweremet.Thatdid
nothappen,andsomeprivatepro-
motersevendiverted theresources
intotheirownpersonal fortunes.
This resulted in defaults, but
bankswere,for long,encouragedto
ignorethedefaults andkeep the
debtsongoingthrough“restructur-
ing”.However,the defaultscouldnot
be ignoredforever.When stricter as-
set qualityrecognition andclassifica-
tionguidelines wereissuedby the
ReserveBankof Indiain 2015, the
grossnon-performing assets(NPAs)
of scheduledcommercialbanksrose
fromRs.3,23,464 croreas on March
31, 2015,to Rs.10,36,187 crore as on
March31, 2018.
Enforcedwriteoffs havebeenre-
sortedto, butthatimpliesthatthe
governmentwould haveto under-
writethe lossesof the banks. Accord-
ing to a replyto a RajyaSabha
question, “overthe lastfourfinancial
years,PSBs[publicsectorbanks]
wererecapitalisedto theextentof
Rs.3.12lakhcrore,withinfusionof
Rs.2.46lakhcroreby thegovern-
ment and mobilisation of over
Rs.0.66 lakh crore by PSBs
themselves”.
Thisis not enoughto bringthe
banksbackintoinfrastructure lend-
ing,whichin anycasetheywould
preferto sidestep,having burnttheirFINANCEMINISTERNirmalaSitharaman and AnuragThakur,Minister of
Statefor Finance,leave NorthBlockto presentBudget2019,on July 5.
RAVICHOUDHARY/PTI