A spurt in the cancellation of public-private partnership projects in recent times can be attributted to macroeconomic crises, inherent problems in the water sector projects, and foreign sponsorship of these projects. Since giving the renegotiation relief to many of these projects seems to be problematic, cancellation is probably the only way for the government to elicit more realistic bidding from the private sector.
Good quality infrastructure services have to be paid for, either by the users as user charges or by the government through explicit subsidies. The recent dismantling of toll booths in the country is increasing the political and regulatory risks in public-private partnership projects, as user fees as a revenue source dry up and there is no commensurate increase in government subsidy.
While the global financial crisis appears to have had little impact on the flow of funds to South Asia’s power sector, the sector still needs up to $150 billion in additional investments to meet its growing electricity demand by 2015 says this report by World Bank’s Energy Sector Management Assistance Program (ESMAP).
