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Mumbai, Jun 25 (PTI) Rakesh Mohan, a former deputy governor of the Reserve Bank, today blamed the NPAs piles to the skewed public-private partnerships (PPPs), which have been heavily funded by banks.
In the way PPPs model, private sector cannot succeed unless either they have user charges or unless they have other ways of generating returns to finance, he said.
“The problem of non-performing assets have risen because the PPP model has been tried on public services/goods projects, where the returns are low in the way they are designed,” Mohan told a session at the annual meeting of the Asian Infrastructure Investment Bank (AIIB).
Emphasising on the need to go back to the theory of PPPs, he said, “public goods or services need public sector investments and you cannot do them with private partnerships”.
Mohan further said some problems that have risen in the country in financing infrastructure projects, including NPAs, is because we have tried PPPs even in public goods projects.
“Private goods/services like the telecom sector can be completely with the private sector and it is very successful.
It is the third-category that’s semi-public, semi-private in terms of goods and services where you need PPPs.
“We need to think clearly about the basics so that we structure the finances and projects accordingly keeping in mind the theory as well as the sources of finances we look at,” he said.
“Private sector brings in equity in the PPP model.
Therefore their resources demand higher returns. Thus we see some connection between private sector resources and higher efficiency in projects given the risks involved.
“We need to develop better project execution capabilities in public sector organisations as well,” Mohan concluded.
This is published unedited from the PTI feed.
