While throwing light on private finance initiate model, critically examine its significance in Indian context.

Private Finance Initiative (PFI) is a way of financing public sector projects through the private sector. PFI helps decrease the immediate burden on government and taxpayers to come up with huge capital for major infrastructural projects.

In this, the upfront cost is handled by a private company, then it is leased to the government and the government makes annual payments. This model is widely used in developed countries like USA and UK.

Significance for India:

  • India’s huge requirement for capital for infrastructural development can be supplemented via resource mobilization from the private sector.
  • PFI is outcome-based instead of input-based public procurement. The uncertainties and risks during project development are borne by the private players. Therefore, there is an incentive for technological upgradation and timely completion.

Lessons for India:

  • Indian agencies should develop capacities for project management and contract negotiations.
  • Clearly report future liabilities and risks created with each PFI initiative.
  • Encourage PFI in social sectors like health and education infrastructure.

Various public-private partnership models in India are loosely based on PFI models. E.g: Build Operate Transfer, Hybrid Annuity Model, etc. Adequate data collection, analysis and building efficiencies of government Agencies is the need of the hour. In this regard, the National Project and Program Management Policy Framework by Niti Aayog and the Quality Council of India is a well-timed initiative.

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