PPP -
Private Plundering Public money
My
colleague tells a story of two brothers living in a small town of
Uttar Pradesh. Their old father on his death-bed summoned both of
them, Jai and John. Sadly, he told them: ‘Sons, as I may not
survive much, please divide my property equally and live amicably
happily.’ When he died, they divided all the property between them,
except a cow. Remembering father's advice to live harmoniously, the
elder John told Jai: “We cannot divide this cow - so I suggest you
take care of the front side of the cow and I will take care of the
rear side."
Jai
agreed and was busy feeding the cow with water and fodder, while John
prospered milking the cow, taking the cow-dung manure and humming
'Jai Ho!'. In this century, this is known as PPP (public private
partnership) - the public (Jai) slog and pay from their nose while
the private (John) make merry by looting public resources!
PPP
emerged in UK after the failure of complete privatisation of most
basic services undertaken by the neoliberal capitalist queen Margaret
Thatcher. Unemployment shot up, even 30% children went below poverty
line and inequality rose rapidly. The Conservative government of John
Major tried to camouflage the failure by launching the private
finance initiative (PFI) in 1992, the first systematic programme
aimed at encouraging public–private partnerships. This programme
focused on supposedly reducing the public sector borrowing
requirement. However it has since been found that many programs ran
dramatically over budget and have not presented value for money for
the taxpayer with some projects costing more to cancel than to
complete.
The UK
House of Commons Treasury Committee's 17th report on PFI dated 18th
July 2011 concludes that "the use of PFI has the effect of
increasing the cost of finance for public investments relative to
what would be available to the government if it borrowed on its own
account." It further emphasises that "some of the claimed
risk transfer may also be illusory—the government is ultimately
accountable for the delivery of public services. Therefore it would
not be able to allow a number of services provided under a PFI
contract to cease for any length of time."
After a
wave of massive movements against water privatisation in South
America, starting from Bolivia and spreading like wildfire to parts
of Asia and Europe; outright privatisation of basic services looked
like a taboo even to the neoliberal pundits heading the World Bank
and other international financial institutions. The water wars in
Bolivia, the Cochabamba protests of 2000, saw lakhs of people on the
streets. Not only were the water companies driven out of Bolivia,
this movement for reclaiming public water radically transformed
politics and brought the left into power with the trade unionist and
indigenous leader Evo Morales heading the country.
In India
too, we have seen massive protests against the privatisation of water
services in Delhi, Bangalore, Kolkata and many other cities and
towns. The neoliberal rulers and the pundits in the international
financial institutions took the cue from UK to continue to loot the
public resources and serve the corporates. The best way to avoid the
tide from reversal is by jumping on the PFI bandwagon. The public
services are anyway discredited and are known for their corruption.
So it's high-time this opportunity is seized to hand over the loot on
a platter to their private buddies.
UN
Economic Committee for Europe (UNECE) conducted a review with a
publication in 2007 on "Financing Innovative Development -
Comparative Review of the Experiences of UNECE Countries in
Early-Stage Financing." The review sets a trend for the days to
come by discussing the specific financing problems of so-called
innovative enterprises and the need for the emergence of specialized
types of financial intermediaries, namely 'business angels and
venture capitalists.' The report presents an overview of the major
trends in financing provided by these intermediaries.
UNECE
went overboard a year later in its GUIDEBOOK on promoting good
governance in Public-Private partnerships in 2008 by exclaiming:
"Public-private partnerships (PPPs) in the delivery of public
services have become a phenomenon which is spreading the globe and
generating great interest. But why is a concept, barely mentioned a
decade ago, now attracting such interest? Overall, the answer is that
PPPs avoid the often negative effects of either exclusive public
ownership and delivery of services, on the one hand, or outright
privatization, on the other. In contrast, PPPs combine the best of
both worlds: the private sector with its resources, management skills
and technology; and the public sector with its regulatory actions and
protection of the public interest. This balanced approach is
especially welcome in the delivery of public services which touch on
every human being’s basic needs."
In 2009,
an international conference on PPPs was organised in Geneva by World
Bank, Asian Development Bank (ADB), UNECE and several governments
including India. The conference resolved to create a global body to
promote PPPs and counter any public hostility.
The
current UPA government driven by two neoliberal drivers, Manmohan
Singh and Montek Singh Ahluwalia have been over-enthusiastically
promoting PPPs by dishing out key sectors to corporate gharanas and
driving public money into their coffers. The big corporates, the
Indian Oligarchs have fattened over the years thanks to the liberal
government and PPP. During the 11 years of PPP-regime till 31st July
2011 (most projects coming in line since UPA1 came in power), 758
projects have rolled costing about Rs. 383,332.02 crores. Karnataka
leads with 104 projects followed by 96 in AP, 86 in MP and 78 in
Maharashtra. Cost-wise AP led with Rs. 66,918.3 crores followed by
Rs.45,592 crores in Maharashtra, Rs. 44,658.9 crores in Karnataka and
Rs. 39,637.2 crores in Gujarat.
Sector-wise,
during the 11 years, road projects dominated with 405, followed by
urban development (152), energy (56) and tourism (50). Other sectors
include airports, education, health care, ports and railways. In
terms of the value of the contracts, roads took Rs. 176,724.9 crores
followed by Rs.81,038.2 crores in ports and Rs. 67,244.6 crores in
energy.
A study
publication by Manthan Adhyayan Kendra in Badwani, MP in 2010 titled
"Public Private Partnerships in water sector: partnerships or
privatisation?" exposes the myths promoted by the government and
the neoliberals. They argue giving a lot of case studies of water
projects around India and the world to illustrate that PPPs involve
higher costs - higher construction costs due to construction
deadlines, higher transaction costs due to longer gestation periods
and procurement processes, and cost escalation in implementation
phase due to unknown factors and changing political and economic
scenarios.
They
further explode the prevalent myth that 'private corporations are
more efficient." A major aspect related to efficiency and
incentives is the 'risk-averse' behaviour of private companies. Since
these guys do not want to risk their investments and returns, and
continue making profits to give back more and more to the investors
every year, they are not interested in taking risks on board while
executing a project. Since they avoid managing risks, the companies
will not be efficient and unable to improve service delivery, cut
costs and bring down prices. The study also blasts the myth spread by
the neoliberals that "PPPs bring in private investments"
and free public resources for policy priorities of the government.
Water projects like Tiruppur and Nagpur clearly show that public
sector resources are not freed but sucked into PPPs for private
profits due to private sector inefficiencies, unaccountability and
risk-averse behaviour.
The
writing on the wall is very clear - the international financial
institutions like the World Bank and ADB, neoliberal pundits and
their friends in government like the UPA drivers are all trying their
best to help the private corporations and the Indian Oligarchs to
suck public money at the cost of the majority of the toilers and the
Indian public. But the hunger of the corporates in insatiable. Look
at the current brouhaha in the Delhi airport metro PPP. Delhi Airport
Metro Express Private Ltd (DAMEPL), a Reliance Infrastructure
subsidary did not leave any stones unturned to snatch the bid to the
building and running of the 22.7 kms Delhi airport line.
Delhi
Airport Metro Express Private Limited (DAMEPL), is a Special Purpose
Vehicle (SPV) created to develop, operate and maintain India’s
first Airport Express Line in the country, on a PPP model. It is a
consortium formed by Reliance Infrastructure Limited and
Construcciones y Auxiliar de Ferrocarriles, S.A. (CAF) of Spain with
95% and 5% stake respectively. The Concessionaire has executed the
entire project except the civil works for viaduct, tunnel and
stations, which has been done by DMRC. Forgeting fundamental
economics and guided by ecomomic-miscalculations of real estate gains
and bloated passenger projections (earnings), Reliance Infra's
estimations on returns from the project were like holding the moon in
the palm! When Reliance saw it going rough and found it was not
getting any public money, it decided not only to pull out but
demanded it's pound of flesh. DAMEPL has claimed termination payment
from Delhi Metro Railway Corporation (DMRC) for 130% of Equity and
100% of Debt Due, amount to Rs. 2,800 crores. Now the public coffers
will be emptied to satisfy this important oligarch and son of India!
High time
the drivers of India, head of the government and the planning
commission dump their neoliberal recipes and reverse this loot of
public resources. Public services is best left with the State and
cannot be opened up for profit-hungry corporates. In the interests of
the Indian public, the PPP business has to be done away with at the
earliest before thousands of crores of precious public resources are
squandered away.
Published in EiSamay, Bengali newdaily of Times of India:
