Foot-over-bridges or sky-walks are increasingly becoming commonplace in many metropolitan cities as a means of facilitating pedestrian crossings at busy traffic junctions. Apart from this functional utility, these bridges provide vantage locations to display advertisements, and advertisement agencies naturally find these bridges a good source of raising revenue.
The Mumbai Metropolitan Region Development Authority (MMRDA) proposes to erect 50 sky walks or foot-over-bridges with modern designs to facilitate pedestrian crossings at busy traffic junctions. These bridges will be built with its internal funds, at a cost of over Rs 600 Cr. The MMRDA will then bid out advertisement rights on them.
Cities like Hyderabad have opted to follow another business model to finance such bridges. They have bidded out the construction-cum-maintenance of these structures for a specific period of time (usually the bid parameter) to advertisement agencies who would finance them by raising revenues from advertisements.
The same two models are possible in other similar projects like construction of toilets and bus bays. In the MMRDA model, the construction risk is borne by the Government, while in the Hyderabad model the construction, operation and commercial risks are borne by the private agency.
It has been found from experience across the country that the later (Hyderabad model) is a better option for more mature markets where price discovery mechanisms are in place, while the former (MMRDA) is more suited to emerging and developing markets.
Apart from the strong possibility of not finding suitable bidders (as many cities who have followed it have found out, and Hyderabad itself found out with its failed experiment with bidding out toilets and bus bays), the Hyderabad model leaves the Government vulnerable to being left with a bad deal (both in financial terms and in terms of the concession period) as the private agency hedges its risks in an uncertain market. Given the state of the market, from both supply and demand side, in most Indian cities, the MMRDA model may be a more appropriate model.
3 comments:
You are right, in a way. The Mumbai model may be good but the local bodies should first be in a position to invest such money on the projects. Moreover, it becomes yet another source of corruption for government staff.
Under the PPP model, what all the government gets -- even if it is less -- is an additional income to the government agency. Profit without investment, isn't it?
There is a trade-off here. Even if the government entity borrows money and invests in the asset creation, I am inclined to believe that, net of the interest outgo, the local body will still make higher returns than the MMRDA model. This arises from the fact that the transaction costs and the costs of hedging the construction and commercial risks are likely to be much higher, thereby making the private developer quote less in the later model.
About the corruption dimension, I had assumed that I would be the Municipal Commissioner in either case!
Lately, governments are in a belief that PPP is a panacea for delivering public infrastructure in urban areas. The question is not about who is funding, it is about guaranteeing the contract. We still don't have rules and regulations to guarantee a contract.
We all know what happened with Bangalore Mysore Infrastructure Corridor. Government change can further delay the project and increase the cost to the citizens.
Well, where are we standing? It's like often repeated Indian story of frogs in the well, where the new government does all possible things to stall projects initiated by the previous government.
The success of PPPs in Indian context is heavily dependent on the guarantee a local body or the state government can offer on its commitments without actually dragging every matter to the courts.
This whole thing brings ethics, good governance and competent leadership which India hasn't seen in a long time.
Surya
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