How PPP model can propel Punjab’s economic growth

Public-Private Partnerships (PPPs) have the potential to revolutionise infrastructure development and services delivery by blending private sector capital and expertise with public sector oversight. For Punjab, which has over 147 PPP projects worth Rs 59,358 crore in critical sectors like roads, bridges, healthcare and education, this model could be the key to unlocking sustained economic growth. However, despite the scale of these projects, systemic inefficiencies, governance issues and a narrow strategic focus have hindered their transformative potential. To fully leverage the power of the PPPs, Punjab must embrace a comprehensive reset, aligning these initiatives with the state’s long-term economic and social goals.

Punjab’s track record in executing PPP projects has often fallen short. High-profile failures, such as the Ludhiana-Talwandi NHAI (National Highways Authority of India) project and the stalled food storage silo initiatives, reveal deep-rooted inefficiencies. Even as demand for modernised grain storage facilities grows, no silos have been built since 2021. Similarly, three commercial complexes in Amritsar, Mohali and Ludhiana — requiring an investment of over Rs 500 crore — remain incomplete. These missed opportunities reflect a broader issue: the state is struggling to follow-through on significant infrastructure investments, resulting in wasted resources.

A fundamental problem lies in the skewed risk allocation. Private sector entities often shoulder the burdens of land acquisition delays, regulatory uncertainties and incomplete infrastructure, which discourages investment and delays projects. This imbalance undermines the core principle of risk-sharing in PPPs. Punjab’s focus on “showcase” projects has often diverted attention away from addressing critical systemic needs. For example, the proposed medical colleges in Gurdaspur and Pathankot have made little progress, reflecting a disconnect between investments and challenges faced by the healthcare sector. Punjab’s reliance on viability gap funding (VGF) further underscores a lack of financial confidence in the private sector’s ability to execute projects without subsidies, raising concerns about the sustainability of its PPP mode.

Moreover, the PPP landscape has focussed on traditional infrastructure projects like roads, bridges and silos, while emerging sectors such as renewable energy, education, food processing and circular economy remain underexplored. This narrow focus limits the potential of PPPs to address the socio-economic challenges. Governance bottlenecks, such as procedural delays, opaque decision-making and weak contract enforcement, exacerbate the issues, undermining investor confidence and outcomes.

To overcome these challenges, Punjab must adopt a more strategic, diversified and transparent approach. First, the state must recalibrate risk allocation. Risks must be distributed more equitably between the public and private sectors. Private entities should manage risks related to construction and service delivery, while the government should address land acquisition issues, regulatory challenges and policy alignment. This would ensure a fairer balance and encourage more private sector investment.

Second, Punjab must explore innovative revenue models to make projects financially viable and socially impactful. One such model is payment for environmental services (PES), successfully implemented in Costa Rica to incentivise forest conservation through revenue generated by carbon credits and biodiversity offsets. It could be adapted in Punjab’s Kandi belt for afforestation and environmental preservation, with potential revenue sources that align economic growth with sustainability. Further output/outcome-based payments (OBP), which link funding to improved healthcare or educational outcomes, could incentivise high-quality service delivery and ensure that projects produce measurable societal benefits.

Expanding the scope of PPPs into high-growth sectors is equally crucial. Renewable energy offers tremendous potential, as Punjab seeks to meet rising energy demands while reducing dependence on fossil fuels. Similarly, education-focused PPPs could help modernise schools and colleges, emphasising vocational training to address the skill gaps in the workforce. Circular economy initiatives in waste management, recycling and sustainable practices could provide both environmental and economic benefits. Moreover, the food processing industry, with its potential to add value to farmers’ produce, should be prioritised as a critical area for PPPs.

None of these initiatives can succeed without strengthening the governance and regulatory frameworks. Updating the Punjab Infrastructure Act is essential to modernise the state’s regulations, ensuring transparency, streamlined processes and rigorous enforcement of state support agreements. The Surat Municipal Corporation’s wastewater recycling project is an example of how robust governance, clear demand forecasting and innovative financing can ensure long-term sustainability and investor confidence.

Engaging citizens, private sector players and experts during the planning and execution stages will help ensure that projects meet public needs while delivering tangible, impactful results.

Recent Budget announcements indicate that Punjab recognises the importance of PPP in driving growth. The 2023 Budget emphasised developing tourist destinations through PPP, while the 2022 Budget highlighted sports infrastructure projects. However, these initiatives need to be integrated into Punjab’s long-term development strategy. For example, eco-tourism projects should prioritise sustainability and community participation, while sports infrastructure should balance grassroots development with high-performance facilities.

Punjab stands at a crossroads in its PPP journey. While it has recognised the transformative potential of these partnerships, inefficiencies, governance challenges and limited strategic focus continue to hold it back. Punjab must recalibrate its risk-sharing models, adopt innovative financing mechanisms, diversify into high-growth sectors and strengthen governance frameworks. By embracing these reforms, Punjab can modernise its infrastructure, foster sustainable economic growth and improve public welfare. A transparent and inclusive approach will set a new benchmark for PPP success, enabling Punjab to harness the transformative power of these partnerships and pave the way for a brighter, more sustainable future.