Credibility Before Capital: Strengthening the Institutional and Governance Foundations in India’s PPP push
The success of India’s PPP strategy will be driven by strong institutional readiness, fiscal transparency, and execution certainty, alongside an ambitious project pipeline
A background note can be accessed here: DEA’s ₹17.15 Billion PPP Pipeline for Infrastructure
Krishnan Srinivasan: Senior Transport Consultant
Rashi Grover: Senior Transport Consultant
SDG 9: Industry, Innovation and Infrastructure
Ministry of Finance
The DEA initiative aims to reduce information asymmetry by signalling a forward pipeline of infrastructure and PPP projects to investors. What governance and transparency mechanisms are essential to ensure that this pipeline strengthens investor confidence rather than remaining an aspirational listing?
The DEA’s three-year PPP pipeline is an important signalling device, but its credibility depends on whether investors can distinguish near-term, investable projects from longer-horizon intent. This requires transparent classification by project readiness – conceptual, approved, bid-ready, or under implementation – alongside time-bound public disclosures on land availability, statutory clearances, approvals, and milestone achievement. Regular monitoring and rationalisation of the pipeline by the Private Investment Unit (PIU) within DEA would help reinforce this credibility.
Given that most projects are implemented at the state or sub-state level, governance mechanisms must also address local execution capacity. Investors assess not only project fundamentals – such as land acquisition status, demand assumptions, PPP model choice, and risk allocation – but also the broader investment climate of the state, and fairness toward non-incumbent operators. Proactive consultation and sustained stakeholder engagement can improve project design, incorporate end-user feedback, and strengthen accountability.
Policy certainty is equally central to investor confidence. Clear guidelines, robust institutional mandates, and adequate capacity to manage complex contracts are necessary to ensure follow-through. Where viability gap funding or annuity payments underpin bankability, fiscal commitments must be transparently budgeted and aligned with state-level fiscal capacity. Explicit disclosure of risk allocation and contingent liabilities – consistent with DEA’s risk allocation framework – further supports informed investment decisions.
A large share of proposed infrastructure projects are expected to be implemented at the state or sub-state level, even when aggregated or signalled centrally. What coordination challenges could undermine execution, and how should the Centre redesign incentives or accountability mechanisms to ensure state-level follow-through?
A central challenge lies in translating centrally signalled pipelines into state-level execution. Coordination failures often stem from uneven project preparation capacity across states, misaligned approval timelines, and bottlenecks in land acquisition, utility shifting, and environmental or forest clearances. In practice, such delays have frequently pushed construction start dates back by 12–18 months, increasing financing costs and reducing bid competitiveness – risks that are likely to be particularly acute in state-led social and commercial infrastructure projects.
To mitigate these challenges, central financial support – whether through viability gap funding, annuity commitments, or project development assistance – should be explicitly linked to clearly defined and publicly disclosed readiness milestones, such as minimum land availability and time-bound clearance plans. Portfolio-wide public tracking of project readiness, rather than project-by-project reporting, would improve accountability and help investors assess execution risk ex ante.
The PIU within DEA should be empowered with comprehensive information and coordination authority to resolve inter-agency bottlenecks when required. In parallel, state PPP units must be equipped with procurement and contract management capacity. Structured engagement platforms involving different tiers of government, private sector, financiers, and academia can support coordination, while peer learning from advanced states, and the use of innovative financing – such as green bonds or blended finance – can strengthen state-level follow-through.
The renewed emphasis on PPPs reflects lessons from earlier cycles marked by stalled projects and renegotiations. How should risk-allocation frameworks be redesigned to make projects bankable for long-term investors without recreating hidden contingent liabilities or moral hazard on the public balance sheet?
The renewed emphasis on PPPs reflects lessons from earlier cycles marked by stalled projects and renegotiations. Project selection must therefore be grounded in value-for-money analysis, with risks allocated to the parties best positioned to manage them. This requires transparent, deliberate design supported by standardised concession agreements that reduce ambiguity and transaction costs.
Bankability depends on clearly defining and disclosing public sector exposures. All fiscal commitments – annuities, guarantees, or termination payments – should be explicitly quantified and reflected in public accounts. Traffic and demand risks can be managed through structured sharing mechanisms that limit contingent liabilities, while policy and regulatory risks require stable concession frameworks, predictable tariff-setting, and clearly articulated renegotiation and dispute resolution protocols. Compensation formulas for early termination or force majeure should cap excessive public payouts.
Climate risk, in particular, should be treated as a distinct category rather than being subsumed under generic force-majeure clauses. Integrating climate screening, life-cycle costing, resilient design standards, and performance-based Operations and Maintenance(O&M) into project design, procurement and execution can address foreseeable risks. Layered mechanisms such as insurance and parametric instruments can manage high-impact events, with only truly non-modellable risks remaining sovereign. Blended finance structures can further enhance bankability, particularly for green and social infrastructure PPPs.
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